2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999
36% YEAR-OVER-YEAR INCREASE IN REVENUE
FREMONT, CA — November 28, 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 first quarterof fiscal 2007, which ended October 31, 2006.
“We are pleased that each of our divisions experienced year-over-yeargrowth in revenue,” said Ali Jenab, president and CEO. “The Open Sourcemarket continues to grow as more and more companies are announcing theiradoption and support of Open Source initiatives. Our businesses arecore to this market. The momentum of the Open Source marketplace is furtherhighlighted by our OSTG media business which continues to see growth in keyareas such as unique visitors and downloads from our SourceForge.net site.”
Total first quarter 2007 revenue from continuing operations grew 36% to $10.3million, compared to the first fiscal quarter 2006 revenue from continuing operations of $7.6 million.
On a GAAP basis, the first quarter fiscal 2007 net loss from continuingoperations was ($0.3) million, or ($0.01) per share, compared to first quarterfiscal 2006 GAAP net loss from continuing operations of ($1.5) million or($0.02) per share. First quarter fiscal 2006 net loss from continuingoperations excludes the results of Animation Factory, Inc., which was sold inDecember 2005.
As specified in the attached reconciliation of net loss as reported to proforma income from continuing operations, the first quarter fiscal 2007 netincome was $0.3 million, or $0.00 per share, compared to the first quarterfiscal 2006 net loss of ($1.3) million, or ($0.02) per share. Cash andinvestments remain strong at $52.8 million as of October 31, 2006.
A conference call and audio webcast will be held at 2:00 p.m. PT or 5:00 p.m.ET on November 28, 2006 and may be accessed by calling (877) 407-0782 or (201)689-8567. Replays of both the telephonic audio and audio webcasts will beavailable for 60 days on the company’s corporate web site atwww.vasoftware.com. To access an audio replay of the conference call, dial(877) 660-6853 or (201) 612-7415 referencing Replay Account: 286 – ID: 220053.
Recent Highlights
The OSTG network of web sites continues to attract a growing global visitorbase. During October 2006, the network, as a whole, served a record 32 millionunique visitors (* Source: Google Analytics and Omniture, October 2006),compared to 22 million unique visitors during October 2005 (* Source: InternalMetrics, October 2005).
In October, Slashdot®, the web’s largest IT and technology news sitefeaturing user-generated content, launched a beta version of a new feature thatallows subscribers a view into the Slashdot submissions bin that previously wasonly viewable by the Slashdot editors. This new feature, known as “TheFirehose,” will allow all Slashdot community members to vote on stories inthe submissions queue and provide them with the ability to choose their owncustom view of Slashdot.
SourceForge.net®, the world’s largest destination for Open Source,continues to grow at a record pace and is the world’s largest distributionplatform for Open Source projects and applications. The site set records fornumber of downloads, serving an average of 66 million downloads per monthduring the first quarter of fiscal 2007 which represents a 53% increase ascompared to the first quarter of fiscal 2006. Fueling the interest in the siteand to Open Source, the site added 7,650 new projects during the quarter.
The growth of SourceForge.net and the global adoption of Open Source supportsOSTG’s strategy of developing and launching a marketplace around the site,which will allow registered project developers to sell third party support andservices to companies wishing to adopt Open Source projects and applications.
Our OSTG sites continue to service major technology companies wishing topresent their brands to and influence the IT and development professionalsthat frequent the sites. Companies such as IBM, Microsoft, Oracle, AMD, HP,CDW, Rackspace, and Intel continue to purchase advertising programs that meettheir marketing needs and support their product launch initiatives. During thefirst quarter of fiscal 2007, Oracle utilized the SourceForge.net siteexclusively to support Larry Ellison’s announcement of Oracle providingfull enterprise support of Linux.
VA Software has entered into a relationship with The FUTURE GROUP, based in theNetherlands, to be an authorized reseller of SourceForge Enterprise Edition.
Through the first quarter of fiscal 2007, we sold our SourceForge EnterpriseEdition solution to a total of 178 customers. During the quarter 14 newcustomers had purchased SourceForge Enterprise Edition, including EQ Bank,NuTech Solutions, Indus, Progressive Gaming, Persistent Systems, RideauRecognition and Siemens Enterprise Communications GmbH Co. and were added tothe installed base. In addition, existing customers including CapGeminiServices S.A.S, Lawrence Livermore National Laboratories, Lockheed MartinCorporation, Pfizer, Inc., and US Air Force purchased additional SourceForgeEnterprise Edition licenses or services.
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 stock-based compensation expense. These non-GAAPadjustments are provided to enhance the user’s overall understanding ofcurrent financial performance and prospects for the future. Specifically, VASoftware believes the non-GAAP results provide useful information to bothmanagement and investors by excluding certain unusual expenses that VA Softwarebelieves are not indicative of core operating results. In addition, because VASoftware has historically reported non-GAAP results to the investmentcommunity, VA Software believes the inclusion of non-GAAP numbers providesconsistency in financial reporting. Further, these non-GAAP results are one ofthe primary indicators management uses for planning and forecasting in futureperiods. The method VA Software uses to produce non-GAAP results is notcomputed according to GAAP, is likely to differ from the methods used by othercompanies and should not be regarded as a substitute for results prepared inaccordance with accounting principles generally 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 internet 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 over 32 million uniquevisitors a month*. For more information or to view the media kit online, visitwww.ostg.com. (* Source: Google Analytics and Omniture, October 2006.)
SourceForge Enterprise Edition is the world’s leading collaborative developmentapplication and is used by many Global 1000 companies for optimizing andmanaging distributed development within the IT and software developmentorganizations. 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, 2006, for furtherinformation regarding these and other risks of VA Software’s business. Allforward looking statements included in this press release are based uponinformation available to VA Software as of the date hereof, and VA Softwaredoes not assume any obligations to update such statements or the reasons whyactual results could differ materially 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)
(Unaudited)
| Three Months Ended October 31, | ||
| 2006 | 2005 | |
| Online Media revenues | 3,703 | 2,581 |
| E-commerce revenues | 4,461 | 3,586 |
| Software Revenue | 2,136 | 1,421 |
| Net Revenue | 10,300 | 7,588 |
| Online Media cost of revenue | 1,116 | 863 |
| E-Commerce cost of revenue | 3,543 | 2,842 |
| Software cost of revenue | 370 | 276 |
| Cost of revenue | 5,029 | 3,981 |
| Gross margin | 5,271 | 3,607 |
| Operating Expenses: | ||
| Sales and marketing | 2,664 | 2,231 |
| Research and development | 1,585 | 1,514 |
| General and administrative | 2,060 | 1,612 |
| Amortization of intangible assets | 1 | 1 |
| Total operating expenses | 6,310 | 5,358 |
| Loss from continuing operations | (1,039) | (1,751) |
| Interest and other income, net | 703 | 278 |
| Loss from continuing operations | (336) | (1,473) |
| Income from discontinued operations | – | 239 |
| Net (loss) | $ (336) | $ (1,234) |
| Loss per share from continuing operations: | ||
| Basic and diluted | $ (0.01) | $ (0.02) |
| Earnings per share from discontinued operations: | ||
| Basic and diluted | $ 0.00 | $ 0.00 |
| Loss per share: | ||
| Basic and diluted | $ (0.01) | $ (0.02) |
| Shares used in computing earnings (loss) per share: | ||
| Basic and diluted | 65,286 | 61,667 |
Reconciliation of Net loss as reported to pro forma net loss:
| Three Months Ended October 31, | ||
| 2006 | 2006 | |
| Loss from continuing operations – as reported | $ (336) | $ (1,473) |
| Non cash charges: | ||
| Stock-based compensation expense included in COGS | 35 | 14 |
| Stock-based compensation expense included in Op Ex. | 563 | 205 |
| Amortization of intangible assets | 1 | 1 |
| Income (loss) from continuing operations before non cash charges | $ 263 | $ (1,253) |
| Pro-forma earnings (loss) per share amounts: | ||
| Basic and diluted | $ 0.00 | $ (0.02) |
| Shares used in computing pro-forma per share amounts: | ||
| Basic | 65,286 | 61,667 |
| Diluted | 68,051 | 61,667 |
VA Software Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 31, 2006 | July 31, 2006 | |
| ASSETS | ||
| Current Assets: | ||
| Cash, cash equivalents, and short-term investments | $ 47,175 | $ 51,891 |
| Accounts receivable, net | 5,574 | 5,398 |
| Inventories | 3,570 | 1,091 |
| Prepaid expenses and other current assets | 1,732 | 1,026 |
| Total current assets | 58,051 | 59,406 |
| Property and equipment, net | 884 | 627 |
| Long-term investments, including long-term restricted cash | 5,612 | 2,152 |
| Other assets | 1,017 | 1,027 |
| Total assets | $ 65,564 | $ 63,212 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 2,710 | $ 1,172 |
| Accrued restructuring liabilities | 1,592 | 1,592 |
| Deferred revenue, current portion | 2,154 | 2,320 |
| Accrued liabilities and other | 3,160 | 3,057 |
| Total current liabilities | 9,616 | 8,141 |
| Accrued restructuring liabilities, net of current portion | 4,117 | 4,515 |
| Other long-term liabilities | 1,162 | 1,178 |
| Total liabilities | 14,895 | 13,834 |
| Stockholders’ equity: | ||
| Common stock | 66 | 65 |
| Additional paid-in capital | 792,049 | 790,433 |
| Accumulated other comprehensive gain | (15) | (25) |
| Accumulated deficit | (741,431) | (741,095) |
| Total stockholders’ equity | 50,669 | 49,378 |
| Total liabilities and stockholders’ equity | $ 65,564 | $ 63,212 |