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Press Release Index


VA Software Reports Second Quarter Fiscal Year 2003 Results

Second Quarter Fiscal Year 2003 Revenue Increases 30% Compared to Prior Year

FREMONT, CA February 20, 2003 VA Software Corporation (Nasdaq: LNUX), provider of SourceForge™, the leading Development Intelligence application, and parent company of OSDN™, a network of media and commerce sites that serve the IT and software development communities, today announced financial results for its second quarter of fiscal year 2003, ended January 25, 2003.

Second quarter fiscal 2003 revenue grew 30% to $6.6 million, compared to second quarter fiscal 2002 total revenue of $5.1 million. Revenue from the software and online businesses increased 41% to $6.3 million in the second quarter of fiscal 2003 from $4.5 million in the second quarter of fiscal 2002. Revenue from the exited hardware business was $0.2 million in the second quarter of fiscal 2003 and $0.6 million in the second quarter of fiscal 2002. Total revenue for the six months ended January 25, 2003 was $11.6 million, compared to $10.6 million in the six months ended January 26, 2002. The yearoveryear growth was driven by the growth in the company’s software and online businesses which increased 36% to $11.2 million for the six months ended January 25, 2003 from $8.3 million for the six months ended January 26, 2002.

On a total reported basis, the second quarter fiscal 2003 loss was $3.7 million, or $0.07 per share, compared to last year’s second fiscal quarter total reported loss of $9.7 million, or $0.18 per share. The second quarter fiscal year 2003 total reported loss includes a credit of $0.4 million associated with adjustments to previously recorded restructuring reserves, and a $0.7 million charge for amortization of intangible assets and deferred stock compensation. For the six months ended January 25, 2003, the company’s total reported net loss was $7.8 million, or $0.15 per share, compared to $64.5 million, or $1.22 per share, for the six months ended January 26, 2002.

The second quarter fiscal 2003 pro forma net loss, excluding restructuring and other special charges, amortization of intangible assets and deferred stock compensation, improved to $3.4 million, or $0.06 per share, as compared to last year’s second quarter fiscal 2002 pro forma net loss of $6.9 million, or $0.13 per share. Cash and investments remain strong at $46.3 million.

“I am very pleased with the financial results for our second quarter. Our software revenue more than tripled and online revenue grew a spectacular 32% compared to last year’s second quarter. Our pro forma financial results were in line with our expectations and our $2.4 million cash usage was nearly half of what we had expected,” said Ali Jenab, President and CEO. “We continue to collect additional validation that our products meet the needs of our customers. We added a number of impressive new SourceForge customers to our installed base during the quarter, we had significant renewals, and we are conducting trials at a number of additional accounts. We had record levels of sales in our online business as holiday season business far exceeded our expectations.”

A conference call to review results will be held at 5:00 pm (Eastern) today. The call may be accessed via webcast at http://www.vasoftware.com or by dialing (888) 273-9885 or (612) 332-0820. A replay of the call will be available for 30 days by dialing (800) 475-6701 or (320) 365-3844; passcode 673285.

Recent Highlights

  • Products. SourceForge Enterprise Edition 3.2, featuring the SourceForge Project Management Console, was shipped to customers during the quarter. The Project Management Console delivers Development Intelligence by providing realtime metrics and tools to help identify, track and resolve potential problems in software development projects before they impact schedules and budgets.
  • IBM Relationship. In January, VA Software announced the successful integration of SourceForge Enterprise Edition with IBM’s DB2 Universal database, WebSphere Studio Application Developer and Tivoli management software. In addition, SourceForge is optimized to run on IBM eServer xSeries Linux servers.
  • NASA SEWP III Contract. As a byproduct of the commercial agreement with IBM, VA Software was added to the NASA SEWP III contract vehicle. SEWP is a GovernmentWide Acquisition Contract (GWAC) that makes it easy for all federal agencies, including the Department of Defense and their authorized contractors, to acquire the SourceForge Enterprise Edition Development Intelligence application.
  • Customers. During the second quarter, VA Software added several new accounts, including Cadence Design Systems, the Bluetooth Special Interest Group, Detroit Edison and U. S. Army Research Lab, to its installed base. In addition, existing customers including General Atomics, Persist Technologies, Agilent and HewlettPackard purchased additional SourceForge licenses or services.
  • OSDN. OSDN continues to grow and delivers more than 170 million page views, reaching 8.8 million unique visitors, per month. According to Nielsen//NetRatings’ Winter 2003 @plan advertising report, OSDN ranked No. 1 in eight technology categories, including No. 1 network for delivering people who look for technology news online and the No. 1 network for delivering people who shop for and buy software online, against all other network sites. Advertisers and sponsors of the network include Intel, IBM, Microsoft, Xerox, Oracle, HewlettPackard, Handspring, Vonage, Verizon, Interland, Rackspace and Sprint.
  • ThinkGeek®. OSDN’s online retailer, ThinkGeek.com, had a strong holiday season as traffic, sales and sales conversions all increased. This strong acrosstheboard performance was driven by a site redesign, a customer loyalty program, new affiliate merchandising relationships with publisher O’Reilly & Associates, Inc. and online comic Megatokyo.com, overall OSDN network growth, better merchandising and successful PR resulting from exciting new products.

About VA Software

VA Software (Nasdaq: LNUX), provider of SourceForge Enterprise Edition, is the leader in Development Intelligence. SourceForge is an integrated webbased application that combines software development tools with the ability to track, measure and report on software project activity in realtime. IT and software engineering organizations use SourceForge to manage application development more effectively, improve operational efficiency and build better quality software. Development Intelligence with SourceForge provides the information and infrastructure required to make software development a key driver of competitive advantage. VA Software customers currently using SourceForge include major organizations in financial services, defense and aerospace, manufacturing, communications and government. Information on how SourceForge aligns IT and business is available at www.vasoftware.com.

OSDN, the Open Source Development Network, Inc., a subsidiary of VA Software, is the most dynamic communitydriven IT media network on the web. The cornerstone of the Open Source community, OSDN attracts every level of IT decision maker and buyer, from CTOs to project managers. Technologists, developers and system administrators turn to OSDN sites to create, debate, and make or break IT news, tools, technologies and techniques. OSDN is the home of several popular web sites, including the award winning news discussion site, Slashdot.org, and the world’s largest collaborative software development site, SourceForge.net.

 

Note Regarding ForwardLooking Statements: This press release contains forwardlooking statements that involve risks and uncertainties, including statements regarding the anticipated customer benefits from SourceForge Enterprise Edition 3.2. Actual results may differ materially from those expressed or implied in such forwardlooking statements due to various factors, including: VA's success in expanding its SourceForge enterprise software business; VA's ability to successfully attract, retain and motivate employees; the possibility of further deterioration in the general economy; VA’s ability to achieve and sustain higher levels of revenue; VA's reliance upon strategic relationships with other companies; VA’s success in meeting scheduled product availability dates; VA's ability to protect and defend its intellectual property rights; the size and timing of execution of enterpriselevel licenses; rapid technological and market change; future guidelines and interpretations regarding software revenue recognition; unforeseen expenses that VA may incur in future quarters; competition with, and pricing pressures from, more established competitors. Investors should consult VA's filings with the Securities and Exchange Commission, including its Annual Report on Form 10K for the fiscal year ended July 27, 2002 and Form 10Q for the fiscal quarter ended October 26, 2002, for further information regarding these and the other risks of the Company's business. These documents are available at the SEC Web site: www.sec.gov. VA assumes no obligation to update the forwardlooking information contained in this news release.

Note to editors: VA Software, SourceForge and OSDN are trademarks or registered trademarks of VA Software Corporation in the United States and other countries. Slashdot and ThinkGeek are registered trademarks of the Open Source Development Network, Inc., in the United States and other countries. All other trademarks are property of their respective owners.

Contact:

Investor Relations
VA Software Corporation
(510) 687-8731

Eureka Endo, Media Relations
VA Software Corporation
(510) 687-6754

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

  Three Months Ended Six Months Ended
  January 25, 2003 January 26, 2002 January 25, 2003 January 26, 2002
   
Software Revenues $ 690 $ 222 $ 1,401 $ 340
Online Revenues 5,656 4,279 9,811 7,912
Other Revenues 214 551 423 2,378
Net Revenues 6,560 5,052 11,635 10,630
Software Cost of Revenues 470 668 1,063 1,264
Online Cost of Revenues 3,423 2,852 5,734 5,089
Other Cost of Revenues (206) 290 (363) (100)
Cost of Revenues 3,687 3,810 6,434 6,253
Gross Margin 2,873 1,242 5,201 4,377
 
Operating Expenses
Sales and Marketing 2,325 3,199 4,646 7,492
Research and Development 1,956 1,940 4,000 4,843
General and Administrative 1,936 4,027 3,691 6,902
Restructuring Costs and other Special Charges (120) (135) 44,956
Amortization of Deferred Stock Compensation 41 (440) 79 1,544
Amortization of Intangible Assets 644 3,217 1,288 5,304
Total Operating Expenses 6,782 11,943 13,569 71,041
Loss from Operations (3,909) (10,701) (8,368) (66,664)
Interest and other income, net 237 1,045 563 2,127
Net Loss $ (3,672) $ (9,656) $ (7,805) $ (64,537)
   
Basic and diluted net loss per share $ (0.07) $ (0.18) $ (0.15) $ (1.22)
 
Weighted-average shares outstanding: basic and diluted 53,859 53,005 53,786 52,789
 

Reconciliation of Net loss as reported to pro forma net loss

  Three Months Ended Six Months Ended
  January 25, 2003 January 26, 2002 January 25, 2003 January 26, 2002
   
Net Loss as Reported $ (3,672) $ (9,656) $ (7,805) $ (64,537)
Non recurring charges:        
Restructuring Costs and other special charges (171) (188) 44,132
Restructuring Costs classified as cost of goods (231) (412) (3,143)
Amortization of Deferred Stock Compensation 41 (440) 79 1,544
Amortization of Intangible Assets 644 3,217 1,288 5,304
Net loss before non cash charges $ (3,389) $ (6,879) $ (7,038) $ (16,699)
Basic and diluted net loss per share pro forma $ (0.06) $ (0.13) $ (0.13) $ (0.32)
Weightedaverage shares outstanding Basic and diluted 53,859 53,005 53,786 52,789
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  January 25, 2003
(unaudited)
July 27, 2002
Assets
Current Assets
Cash, cash equivalents, & marketable securities $ 19,197 $ 41,056
Accounts receivable, net 1,192 764
Inventories 416 300
Prepaid expenses and other current assets 1,105 887
Total current assets 21,910 42,997
Long-term marketable securities 27,115 13,340
Property and equipment, net 5,442 7,223
Goodwill and intangible assets, net 882 2,169
Other assets 1,243 1,239
   
Total assets $ 56,592 $ 66,968
   
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of loans and notes payable $ $ 42
Accounts payable $ 1,375 $ 2,075
Accrued restructuring liabilities 3,931 3,397
Accrued liabilities and other 5,852 6,491
Total current liabilities 11,158 12,005
Accrued restructuring liabilities, net of current portion 12,410 14,597
Other long-term liabilities 1,068 978
 
Total Liabilities 24,636 27,580
 
Stockholders' Equity:
Common stock 55 54
Additional paid-in capital 765,548 765,418
Deferred stock compensation (98) (245)
Accumulated other comprehensive loss 181 86
Accumulated deficit (733,730) (725,925)
Total stockholders' equity 31,956 39,388
   
Total Liabilities and Stockholders' Equity $ 56,592 $ 66,968
   



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