2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999
Q4 06 EPS REPORTED AT $0.01; REVENUE GROWTH LED BY 78% YEAR-OVER-YEAR GROWTH IN MEDIA REVENUE
FREMONT, CA — August 29, 2006 — VA Software Corporation (Nasdaq:LNUX), the online media, software and e-commerce leader in community-drivenOpen Source innovation, today announced financial results for its fourthquarter and fiscal year ended July 31, 2006.
“We are pleased to report our third consecutive quarter and first full fiscalyear of profitability, while executing ambitious site architecture initiativeswithin OSTG and collaborative development capabilities within our SourceForgeEnterprise Edition software business,” said Ali Jenab, president and CEO.“With our third quarter of profitability, we clearly have reached momentum as aprofitable and growing enterprise committed to serving the needs of our onlinemedia clients through site enhancements for the user community as well asinnovative marketing programs for the advertisers reaching out to thatcommunity, and to expanding the customer base of SourceForge EnterpriseEdition.”
Total fourth quarter fiscal 2006 revenue from continuing operations grew 35% to$10.5 million, compared to fourth quarter fiscal 2005 total revenue of $7.8million. For the year ended July 31, 2006, total revenue grew 43% to $43.6million, compared to $30.6 million for the year ended July 31, 2005.
On a GAAP basis, the fourth quarter fiscal 2006 net income from continuingoperations was $0.7 million, or $0.01 per share, compared to the fourth quarterof fiscal 2005 GAAP net loss of ($1.2) million, or ($0.02) per share. For theyear ended July 31, 2006, the company’s net income on a GAAP basis was$11.0 million, or $0.17 per diluted share, compared to a net loss of ($4.7)million, or ($0.08) per diluted share, for the year ended July 31, 2005. Forthe year ended July 31, 2006, excluding the gain on the sale of AnimationFactory, Inc., which was completed during the second quarter of fiscal 2006,the company’s net income on a GAAP basis was $1.3 million, or $0.02 pershare, compared to a net loss of ($5.6) million, or ($0.09) per share, for theyear ended July 31, 2005. During the fourth quarter of fiscal 2006, thecompany’s cash and investment balances grew by $4.4 million to $54.0million as of July 31, 2006.
As specified in the attached reconciliation of net income (loss) as reported topro forma net income (loss), the fourth quarter fiscal 2006 net income was $1.0million, or $0.01 per share, compared to the fourth quarter fiscal 2005 netloss of ($1.2) million, or ($0.02) per share. The fiscal 2006 net incomebefore non-cash charges was $2.0 million, or $0.03 per share, compared tofiscal 2005 net loss before non-cash charges of ($5.7) million, or ($0.09) pershare.
A conference call to review results will be held at 5:00 pm (ET) today. Thelive call may be accessed via webcast on the company’s investor relations pageat http://www.vasoftware.com or by dialing (877) 407-0782 or (201) 689-8567.Archives of the webcast and telephonic replay will be available for 60 days andmay be accessed by dialing (877) 660-6853 or (201) 612-7415 (Replay 286; ID210594) or via the company’s web site.
Recent Highlights
Use of Non–GAAP Financial Information
In addition to reporting financial results in accordance with generallyaccepted accounting principles, or GAAP, VA Software uses non-GAAP financialresults. Non-GAAP net loss and loss per share exclude amortization ofintangible assets and deferred stock compensation, as well as restructuringcosts and other special charges. These non-GAAP adjustments are provided toenhance the user’s overall understanding of current financial performanceand prospects for the future. Specifically, VA Software believes the non-GAAPresults provide useful information to both management and investors byexcluding certain unusual expenses that VA Software believes are not indicativeof core operating results. In addition, because VA Software has historicallyreported non-GAAP results to the investment community, VA Software believes theinclusion of non-GAAP numbers provides consistency in financial reporting.Further, these non-GAAP results are one of the primary indicators managementuses for planning and forecasting in future periods. The method VA Softwareuses to produce non-GAAP results is not computed according to GAAP, is likelyto differ from the methods used by other companies and should not be regardedas a substitute for results prepared in accordance with accounting principlesgenerally accepted in the United States.
About VA Software Corporation
VA Software Corporation is the online media, software and e-commerce leader incommunity-driven Open Source innovation. VA Software is the parent company ofOSTG, Inc. (Open Source Technology Group) and the creator of SourceForge. Forcompany information, visit www.vasoftware.com.
OSTG, Inc. (Open Source Technology Group) is the cornerstone of the Open Sourcemovement and the leading online network for IT managers and developmentprofessionals. OSTG’s technology-focused sites include Slashdot.org,SourceForge.net, ITManagersJournal.com, NewsForge.com, Linux.com andfreshmeat.net. OSTG also owns ThinkGeek, Inc., the leading retailer forinnovative technology products. The OSTG network serves nearly 30 millionunique visitors a month*. For more information or to view the media kit online,visit www.ostg.com. (* Source: Google Analytics and Omniture, July 2006.)
SourceForge Enterprise Edition is the world’s leading collaborative developmentapplication in use by many Global 1000 companies for optimizing and managingdistributed development within the IT and software development organizations.For more information, visit www.vasoftware.com/sourceforge/index.php.
Slashdot, freshmeat, ThinkGeek, and SouceForge.net are registered trademarks ortrademarks of OSTG, Inc., in the United States and other countries. VASoftware, SourceForge, and OSTG are trademarks or registered trademarks of VASoftware Corporation in the United States and other countries. All othertrademarks or product names are property of their respective owners.
NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release containsforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. These statements are based on management’scurrent expectations, and involve risks and uncertainties. Forward-lookingstatements, include statements regarding VA Software’s business and salespipeline, the acceptance of VA Software’s online advertising programs,growth prospects for VA Software’s media and software businesses, andongoing improvements to SourceForge.net and any expected benefits therefrom.Actual results may differ materially from those expressed or implied in suchforward-looking statements due to various factors, including: VA Software’ssuccess in expanding its SourceForge enterprise software business; customeradoption of SourceForge solutions; the size and timing in executingenterprise-level licenses; VA Software’s success in designing and offeringinnovative online advertising programs; decreases or delays in onlineadvertising spending; VA Software’s ability to achieve and sustain higherlevels of revenue; VA Software’s ability to protect and defend its intellectualproperty rights; rapid technological and market change; future guidelines andinterpretations regarding software revenue recognition; unforeseen expensesthat VA Software may incur in future quarters; and competition with, andpricing pressures from larger and/or more established competitors. Investorsshould consult VA Software’s filings with the Securities and ExchangeCommission, www.sec.gov, including the risk factors sections of its AnnualReport on Form 10-K for the fiscal year ended July 31, 2005 and Form 10-Q forthe fiscal quarter ended April 30, 2006, for further information regardingthese and other risks of VA Software’s business. All forward looking statementsincluded in this press release are based upon information available to VASoftware as of the date hereof, and VA Software does not assume any obligationsto update such statements or the reasons why actual results could differmaterially from those projected in such statements.
Contact:
Patty Moris
Chief Financial Officer
VA Software Corporation
(510) 687–7125
[email protected]
VA Software Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended July 31, | Year Ended July 31, | |||
| 2006 | 2005 | 2006 | 2005 | |
| Software revenues | $ 2,658 | $ 2,175 | $ 9,974 | $ 7,555 |
| Online Media revenues | 3,953 | 2,221 | 13,242 | 8,130 |
| E-commerce revenues | 3,881 | 3,383 | 20,416 | 14,918 |
| Net Revenues | 10,492 | 7,779 | 43,632 | 30,603 |
| Software cost of revenues | 341 | 254 | 1,334 | 1,028 |
| Online Media cost of revenues | 990 | 811 | 3,732 | 3,320 |
| E-Commerce cost of revenues | 3,072 | 2,548 | 15,605 | 11,591 |
| Cost of revenues | 4,403 | 3,613 | 20,671 | 15,939 |
| Gross margin | 6,089 | 4,166 | 22,961 | 14,664 |
| Operating Expenses: | ||||
| Sales and marketing | 2,538 | 2,445 | 9,968 | 9,828 |
| Research and development | 1,474 | 1,403 | 6,197 | 5,759 |
| General and administrative | 2,058 | 1,720 | 7,115 | 5,686 |
| Impairment of Long Lived Assets | – | 87 | – | 87 |
| Restructuring costs and other special charges | – | – | – | (101) |
| Amortization of intangible assets | 1 | 1 | 4 | 12 |
| Total operating expenses | 6,071 | 5,656 | 23,284 | 21,271 |
| Income (loss) from operations | 18 | (1,490) | (323) | (6,607) |
| Interest and other income, net | 701 | 246 | 1,638 | 958 |
| Income/(loss) from continuing operations | 719 | (1,244) | 1,315 | (5,649) |
| Income from discontinued operations | (23) | 244 | 9,647 | 955 |
| Net Income/(loss) | $ 696 | $ (1,000) | $ 10,962 | $ (4,694) |
| Income(loss) per share from continuing operations: | ||||
| Basic | $ 0.01 | $ (0.02) | $ 0.02 | $ (0.09) |
| Diluted | $ 0.01 | $ (0.02) | $ 0.02 | $ (0.09) |
| Income per share from discontinued operations: | ||||
| Basic | $ (0.00) | $ 0.00 | $ 0.16 | $ 0.01 |
| Diluted | $ (0.00) | $ 0.00 | $ 0.15 | $ 0.01 |
| Net income(loss) per share: | ||||
| Basic | $ 0.01 | $ (0.02) | $ 0.18 | $ (0.08) |
| Diluted | $ 0.01 | $ (0.02) | $ 0.17 | $ (0.08) |
| Shares used in computing income (loss) per share: | ||||
| Basic | 63,634 | 61,586 | 62,328 | 61,454 |
| Diluted | 67,166 | 61,586 | 64,704 | 61,454 |
Reconciliation of net income/(loss) as reported to pro forma net income/(loss):
| Three Months Ended July 31, | Year Ended July 31, | |||
| 2006 | 2005 | 2006 | 2005 | |
| Income (loss) from continuing operations – as reported | $ 719 | $ (1,244) | $ 1,315 | $ (5,649) |
| Non cash charges: | ||||
| Stock-based compensation expense included in COGS | 5 | – | 31 | – |
| Stock-based compensation expense included in Op Ex. | 227 | – | 700 | – |
| Restructuring cost and other special charges | – | – | – | (101) |
| Amortization of intangible assets | 1 | 1 | 4 | 12 |
| Income (loss) from continuing operations before non cash charges | $ 952 | $ (1,243) | $ 2,050 | $ (5,738) |
| Basic and diluted pro-forma per share amounts | ||||
| Basic | $ 0.01 | $ (0.02) | $ 0.03 | $ (0.09) |
| Diluted | $ 0.01 | $ (0.02) | $ 0.03 | $ (0.09) |
| Shares used in computing pro-forma per share amounts: | Basic | 63,634 | 61,586 | 62,328 | 61,454 | Diluted | 67,166 | 61,586 | 64,704 | 61,454 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| July 31, 2006 | July 31, 2005 | |
| ASSETS | ||
| Current Assets: | ||
| Cash, cash equivalents and short-term investments | $ 51,891 | $ 36,614 |
| Accounts receivable, net | 5,398 | 4,306 |
| Inventories | 1,091 | 773 |
| Prepaid expenses and other current assets | 1,026 | 1,014 |
| Total current assets | 59,406 | 42,707 |
| Property and equipment, net | 627 | 736 |
| Long-term investments, including long-term restricted cash | 2,152 | 2,806 |
| Other assets | 1,027 | 1,132 |
| Total assets | $ 63,212 | $ 47,381 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 1,172 | $ 1,574 |
| Accrued restructuring liabilities | 1,592 | 1,748 |
| Deferred revenue, current portion | 2,320 | 2,134 |
| Accrued liabilities and other | 3,057 | 2,882 |
| Total current liabilities | 8,141 | 8,338 |
| Accrued restructuring liabilities, net of current portion | 4,515 | 6,107 |
| Other long-term liabilities | 1,178 | 1,271 |
| Total liabilities | 13,834 | 15,716 |
| Stockholders’ equity: | ||
| Common stock | 65 | 62 |
| Additional paid-in capital | 790,433 | 783,891 |
| Accumulated other comprehensive gain | (25) | (231) |
| Accumulated deficit | (741,095) | (752,057) |
| Total stockholders’ equity | 49,378 | 31,665 |
| Total liabilities and stockholders’ equity | $ 63,212 | $ 47,381 |