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Press Release Index


VA Software Reports Third Quarter Fiscal Year 2003 Results

Third Quarter Fiscal 2003 Revenue Increases 17% Compared To Third Quarter Fiscal 2002

FREMONT, CA May 22, 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 third quarter of fiscal year 2003, ended April 26, 2003.

Total third quarter fiscal 2003 revenue grew 17% to $6.0 million, compared to third quarter fiscal 2002 total revenue of $5.1 million. Total revenue for the nine months ended April 26, 2003 was $17.7 million, compared to $15.8 million in the nine months ended April 27, 2002. Revenue associated with the exited hardware business was $0.2 million in the third quarter of fiscal 2003, compared to $0.7 million in the third quarter of fiscal 2002; hardware revenue declined to $0.6 million for the nine months ended April 26, 2003 compared to $3.1 million for the nine months ended April 27, 2002. Revenue from the ongoing software and online businesses increased 32% to $5.8 million in the third quarter of fiscal 2003 from $4.4 million in the third quarter of fiscal 2002. The ongoing software and online businesses grew 34% to $17.1 million for the nine months ended April 26, 2003 from $12.7 million for the nine months ended April 27, 2002.

On a GAAP basis, the third quarter fiscal 2003 net loss was $3.6 million, or $0.07 per share, compared to last year's third quarter fiscal 2002 GAAP net loss of $7.7 million, or $0.15 per share. The third quarter fiscal 2003 GAAP net loss includes $0.1 million in restructuring charges and a $0.7 million charge for amortization of intangible assets and deferred stock compensation. For the nine months ended April 26, 2003, the company's GAAP net loss was $11.4 million, or $0.21 per share, compared to $72.3 million, or $1.37 per share, for the nine months ended April 27, 2002.

The third quarter fiscal 2003 net loss before non-recurring charges, which excludes restructuring and other special charges and amortization of intangible assets and deferred stock compensation, improved to $2.8 million, or $0.05 per share, as compared to last year's third quarter fiscal 2002 net loss, before non-recurring charges, of $4.7 million, or $0.09 per share. Cash and investments remain strong at $42.8 million.

"I am very pleased with the financial results for our third quarter. Our software revenue more than tripled and online revenue grew a strong 22% compared to last year's third quarter. Our financial results exceeded our expectations," said Ali Jenab, President and CEO. "More importantly, we added ten new SourceForge accounts to our installed base during the quarter and OSDN reached a milestone by reaching 10 million unique visitors per month."

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) 332-0345. A replay of the call will be available for 30 days by dialing (800) 475-6701 or (320) 365-3844; passcode 683044.

Recent Highlights

  • Products.SourceForge Enterprise Edition 3.3 was announced for shipment during the fourth quarter. SourceForge 3.3 introduces integration with PVCS Version Manager from Merant as well as integration with other leading software configuration management tools such as Rational® ClearCase® and CVS. Also new in SourceForge 3.3 are "gated communities" the ability for organizations to more closely manage outsourced development by restricting external user access to specific project workspaces.
  • Customers.During the third quarter, VA Software added ten new accounts, including Advanced Reservation Systems, CNA Trust, Cometa Networks, Diversa, Global Grid Forum, Harris Corporation, Montage DMC, RSA Security, National Singapore University and the USDA Forest Service to its installed base. In addition, existing customers including Los Alamos National Labs, Pfizer and Spirent purchased additional SourceForge licenses and services.
  • OSDN. OSDN continues to grow and delivers more than 180 million page views, reaching 10 million unique visitors, per month. Nielsen//NetRatings' Spring 2003 @plan advertising report consistently ranked OSDN in the number one spot among ALL reported networks for key technology categories. The Spring 2003 release shows OSDN ranking #1 for these categories as well as others:
    • #1 for delivering people who have Purchased Hardware Online in the past 6 months
    • #1 for delivering people who have Purchased Software Online in the past 6 months
    • #1 for delivering people who have Purchased Home Electronics Online in the past 6 months
    • #1 for delivering people who Look for News of Any Type Online
  • Animation Factory. Animation Factory, the leading imagecontent Web site for business, education, and consumer users, began shipping Templates to Go, an unparalleled collection of more than 500 highquality presentation templates for Microsoft® PowerPoint® users. Many of the presentation templates include 3D animations featuring the designstudio quality and style that has made Animation Factory a popular Internet resource for graphic artists and designers.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, VA Software uses nonGAAP financial results. NonGAAP net income and earnings per share exclude amortization of intangible assets and deferred stock compensation, as well as restructuring costs and other special charges. These nonGAAP adjustments are provided to enhance the user's overall understanding of current financial performance and prospects for the future. Specifically, VA believes the nonGAAP results provide useful information to both management and investors by excluding certain expenses that VA believes are not indicative of core operating results. In addition, because VA has historically reported nonGAAP results to the investment community, VA believes the inclusion of nonGAAP numbers provides consistency in financial reporting. Further, these nonGAAP results are one of the primary indicators management uses for planning and forecasting in future periods. The method VA uses to produce nonGAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

About VA Software

VA Software (Nasdaq: LNUX), provider of SourceForge Enterprise Edition, is the leader in Development Intelligence. SourceForge is an integrated web-based 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 community-driven 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 forward-looking statements that involve risks and uncertainties, including statements regarding the anticipated customer benefits from SourceForge Enterprise Edition 3.3. 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 success in meeting scheduled product availability dates; 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 ability to protect and defend its intellectual property rights; the size and timing of execution of enterprise-level licenses; rapid technological and market change; future guidelines and interpretations regarding software revenue recognition; unforeseen expenses that VA may incur in future quarters; and 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 January 25, 2003, 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 is a registered trademark 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 Corp.
(510) 6878731

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

  Three Months Ended Nine Months Ended
  April 26, 2003 April 27, 2002 April 26, 2003 April 27, 2002
   
Software Revenues $ 671 $ 205 $ 2,072 $ 545
Online Revenues 5,185 4,236 14,996 12,148
Other Revenues 181 699 604 3,077
Net Revenues 6,037 5,140 17,672 15,770
Software Cost of Revenues 450 561 1,513 1,825
Online Cost of Revenues 2,658 2,458 8,392 7,547
Other Cost of Revenues (14) (240) (377) (340)
Cost of Revenues 3,094 2,779 9,528 9,032
Gross Margin 2,943 2,361 8,144 6,738
 
Operating Expenses
Sales and Marketing 2,614 2,961 7,260 10,453
Research and Development 1,987 1,349 5,987 6,192
General and Administrative 1,422 2,619 5,113 9,521
Restructuring Costs and other Special Charges 101 35 (34) 44,991
Amortization of Deferred Stock Compensation 37 89 116 1,633
Amortization of Intangible Assets 644 3,214 1,932 8,518
Total Operating Expenses 6,805 10,267 20,374 81,308
Loss from Operations (3,862) (7,906) (12,230) (74,570)
Interest and other income, net 252 177 815 2,304
Net Loss $ (3,610) $ (7,729) $ (11,415) $ (72,266)
   
Basic and diluted net loss per share $ (0.07) $ (0.15) $ (0.21) $ (1.37)
 
Weighted-average shares outstanding: basic and diluted 53,935 53,210 53,835 52,889
 

Reconciliation of Net loss as reported to net loss before nonrecurring charges:

  Three Months Ended Nine Months Ended
  April 26, 2003 April 27, 2002 April 26, 2003 April 27, 2002
   
Net Loss as Reported $ (3,610) $ (7,729) $ (11,415) $ (72,266)
Non recurring charges:        
Restructuring Costs and other special charges 101 (35) (87) 44,098
Restructuring Costs classified as cost of goods (14) (240) (426) (3,383)
Amortization of Deferred Stock Compensation 37 89 116 1,633
Amortization of Intangible Assets 644 3,214 1,932 8,518
Net loss before nonrecurring charges $ (2,842) $ (4,701) $ (9,880) $ (21,400)
Basic and diluted net loss per share pro forma $ (0.05) $ (0.09) $ (0.18) $ (0.40)
Weightedaverage shares outstanding Basic and diluted 53,935 53,210 53,835 52,889
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  April 26, 2003
(unaudited)
July 27, 2002
Assets
Current Assets
Cash, cash equivalents, & marketable securities $ 13,539 $ 41,056
Accounts receivable, net 1,275 764
Inventories 358 300
Prepaid expenses and other current assets 1,221 887
Total current assets 16,393 42,997
Long-term marketable securities 29,284 13,340
Property and equipment, net 4,765 7,223
Goodwill and intangible assets, net 238 2,169
Other assets 1,156 1,239
   
Total assets $ 51,836 $ 66,968
   
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of loans and notes payable $ $ 42
Accounts payable $ 1,308 $ 2,075
Accrued restructuring liabilities 4,277 3,397
Accrued liabilities and other 5,089 6,491
Total current liabilities 10,674 12,005
Accrued restructuring liabilities, net of current portion 11,567 14,597
Other long-term liabilities 1,154 978
 
Total Liabilities 23,395 27,580
 
Stockholders' Equity:
Common stock 55 54
Additional paid-in capital 765,598 765,418
Deferred stock compensation (61) (245)
Accumulated other comprehensive loss 189 86
Accumulated deficit (737,340) (725,925)
Total stockholders' equity 28,441 39,388
   
Total Liabilities and Stockholders' Equity $ 51,836 $ 66,968
   



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