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Press Release Index


VA Software Reports Fourth Quarter and Fiscal Year 2003 Results

Fourth Quarter Fiscal 2003 Revenue Increases 42% Compared To Fourth Quarter Fiscal 2002

FREMONT, CA August 27, 2003 VA Software Corporation (Nasdaq: LNUX), provider of the awardwinning SourceForge™ collaborative application development platform, and parent company of OSDN™ , the leading network of media and commerce sites serving the Open Source, developer and IT communities, today announced financial results for its fourth quarter and fiscal year 2003, ended July 31, 2003.

Total fourth quarter fiscal 2003 revenue grew 42% to $6.6 million, compared to fourth quarter fiscal 2002 total revenue of $4.6 million. Total revenue for the year ended July 31, 2003 was $24.2 million, compared to $20.4 million for the year ended July 27, 2002. Revenue associated with the exited hardware business was $0.2 million in both the fourth quarters of fiscal 2003 and fiscal 2002; revenue associated with the exited hardware business declined to $0.7 million for the year ended July 31, 2003 compared to $3.3 million for the year ended July 27, 2002. Revenue from the ongoing software and online businesses increased 47% to $6.4 million in the fourth quarter of fiscal 2003 from $4.4 million in the fourth quarter of fiscal 2002. Revenue from the ongoing software and online businesses grew 38% to $23.5 million for fiscal 2003 from $17.1 million for fiscal 2002.

On a GAAP basis, the fourth quarter fiscal 2003 net loss was $2.4 million, or $0.04 per share, compared to last year's fourth quarter fiscal 2002 GAAP net loss of $18.8 million, or $0.35 per share. The fourth quarter fiscal 2003 GAAP net loss includes $0.2 million in restructuring credits and a $0.5 million charge for amortization of intangible assets and deferred stock compensation and impairment of long-term assets. For the year ended July 31, 2003, the company's GAAP net loss was $13.8 million, or $0.25 per share, compared to $91.0 million, or $1.72 per share, for the year ended July 27, 2002.

The fourth quarter fiscal 2003 net loss before nonrecurring charges, which excludes restructuring and other special charges, amortization of intangible assets and deferred stock compensation and impairment of long-term assets, improved to $2.1 million, or $0.04 per share, compared to last year's fourth quarter fiscal 2002 net loss, before nonrecurring charges, of $3.7 million, or $0.07 per share. Cash and investments remain strong at $39.7 million as of July 31, 2003.

"We have made great progress as a company during fiscal 2003. Sales of SourceForge Enterprise Edition increased by over 150% compared to fiscal 2002 as we added 31 new customers to bring our installed base to 55 customers. Our recently announced sale to IBM for their internal use is one of many customer validations of the value of our product," said Ali Jenab, President and CEO. "Fourth quarter financial results exceeded our expectations on all counts. Our software revenue increased by 56% and online revenue grew a strong 45% compared to last year's fourth quarter. Advertising revenue achieved record levels during July. As we enter fiscal 2004, we are well positioned to continue the significant progress we have made as a company."

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 (800) 450-0785 or (612) 332-0632. A replay of the call will be available for 30 days by dialing (800) 475-6701 or (320) 365-3844; passcode 692527.

Recent Highlights

  • IBM Selects SourceForge. On August 5, 2003, VA Software announced that IBM will use SourceForge Enterprise Edition 3.3 for its internal open source community, supporting more than 2,000 registered IBM open source developers. The software from VA Software will help IBM coordinate internal, community-based development activity in its labs around the world to increase developer productivity and performance.
  • Customers. During the fourth quarter, VA Software added 14 new SourceForge Enterprise Edition accounts, including IBM, Fujitsu, Sun Microsystems, Pratt & Whitney, Enbridge Pipelines, Infravio, Myrio, Spawar, CGI Atlantic, Planet Group, Emic Networks, Osaka Gas Information System and Dataline to its installed base. In addition, existing customers including Detroit Edison, General Atomics and Lockheed-Martin purchased additional SourceForge licenses and services.
  • OSDN. OSDN continues to grow and delivers more than 185 million page views, reaching 10 million unique visitors, per month. Nielsen//NetRatings' Summer 2003 @plan advertising report consistently ranked OSDN in the number one spot among ALL reported networks for key technology categories. The Summer 2003 release shows OSDN ranking #1 for these categories as well as others (based on composition):
    • #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
    Advertising on OSDN has continued to experience strong growth, exceeding the relatively modest growth recently reported by the online advertising industry generally. Advertisers and sponsors of the network include Intel, Oracle, Google, IBM, Microsoft, Hewlett-Packard, Dell, Legato, eBay, Interland and Rackspace.
  • Slashdot Games. Launched in April 2003, the Games section on Slashdot (http://games.slashdot.org/) is a new information section of the site aimed at serving the fast-growing gaming community. The new section of the site provides Slashdot-style editorial to console and PC gamers, developers and designers and features the same level of dynamic content the Slashdot community has come to expect-daily articles, new product announcements, development and programming discussions, interviews, reviews, and open commentary from site visitors. Because Slashdot site visitors are consummate gamers, active in the gaming community and likely to purchase new games, and/or gaming hardware, online advertisers have already begun to take note of this opportunity. Slashdot games traffic has already reached 1.5 million unique visitors a month, with 2 million visitors projected within the first six months.

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, impairment of goodwill, intangible assets and other longterm assets, 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) is the provider of SourceForge Enterprise Edition, the awardwinning collaborative application development and project management platform. SourceForge is an integrated webbased application that enables IT and software engineering organizations to reduce risk and costs by managing application development more effectively. SourceForge centralizes project information into a searchable database while integrating software development and collaboration tools with the ability to track, measure, and report on software project activity in realtime. With SourceForge, organizations with distributed teams and offshore development centers realize improved productivity, communication, coordination, collaboration, project clarity and insight. The result is significantly improved project manageability and operational efficiency. Today, SourceForge technology is at work in major Fortune 1000 companies in financial services, defense and aerospace, manufacturing, transportation, communications and government, and is in use by over 700,000 developers worldwide. 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 forward-looking statements that involve risks and uncertainties, including statements regarding VA's anticipated financial performance and continued progress as a company (as described, without limitation, in a quotation from management contained in this press release) and the benefits of our products to our customers. 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 enterpriselevel licenses; decreases or delays in online advertising spending; 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 10-Q for the fiscal quarter ended April 26, 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)

  Three Months Ended Twelve Months Ended
  July 31, 2003 July 27, 2002 July 31, 2003 July 27, 2002
   
Software Revenues $ 845 $ 541 $ 2,917 $ 1,086
Online Revenues 5,555 3,819 20,551 15,967
Other Revenues 156 255 760 3,332
Net Revenues 6,556 4,615 24,228 20,385
Software Cost of Revenues 484 562 1,997 2,387
Online Cost of Revenues 2,774 2,846 11,166 10,393
Other Cost of Revenues (6) (2,779) (383) (3,119)
Cost of Revenues 3,252 629 12,780 9,661
Gross Margin 3,304 3,986 11,448 10,724
 
Operating Expenses
Sales and Marketing 2,531 2,060 9,791 12,513
Research and Development 1,828 1,930 7,815 8,122
General and Administrative 1,342 1,329 6,455 10,850
Restructuring Costs and other Special Charges (229) 1,945 (263) 46,936
Amortization of Deferred Stock Compensation 28 38 144 1,671
Amortization of Intangible Assets 217 3,212 2,149 11,730
Impairment of goodwill and Intangible Assets - 12,150 - 12,150
Total Operating Expenses 5,717 22,664 26,091 103,972
Loss from Operations (2,413) (18,678) (14,643) (93,248)
Interest and other income, net 30 (94) 845 2,210
Net Loss $ (2,383) $ (18,772) $ (13,798) $ (91,038)
   
Basic and diluted net loss per share $ (0.04) $ (0.35) $ (0.25) $ (1.72)
 
Weighted-average shares outstanding: basic and diluted 54,895 53,487 54,110 53,064
 

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

  Three Months Ended Twelve Months Ended
  July 31, 2003 July 27, 2002 July 31, 2003 July 27, 2002
   
Net Loss as Reported $ (2,383) $ (18,772) $ (13,798) $ (91,038)
Non recurring charges:        
Restructuring Costs and other special charges (229) 1,865 (316) 45,963
Restructuring Costs classified as cost of goods (6) (2,423) (432) (5,806)
Amortization of Deferred Stock Compensation 28 38 144 1,671
Amortization of Intangible Assets 217 3,212 2,149 11,730
Impairment of goodwill and Intangible Assets - 12,150 - 12,150
Net loss before nonrecurring charges $ (2,134) $ (3,738) $ (12,014) $ (25,138)
Basic and diluted net loss per share pro forma $ (0.04) $ (0.07) $ (0.22) $ (0.47)
Weightedaverage shares outstanding Basic and diluted 54,895 53,487 54,110 53,064
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  July 31, 2003 July 27, 2002
Assets
Current Assets
Cash, cash equivalents, & marketable securities $ 34,617 $ 43,550
Accounts receivable, net 1,928 764
Inventories 388 300
Prepaid expenses and other current assets 1,231 877
Total current assets 38,164 45,491
Long-term marketable securities 5,130 10,846
Property and equipment, net 4,267 7,223
Goodwill and intangible assets, net 21 2,169
Other assets 913 1,239
   
Total assets $ 48,495 $ 66,968
   
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of loans and notes payable $ $ 42
Accounts payable $ 863 $ 2,075
Accrued restructuring liabilities 4,117 3,397
Accrued liabilities and other 4,360 6,491
Total current liabilities 9,340 12,005
Accrued restructuring liabilities, net of current portion 10,772 14,597
Other long-term liabilities 1,181 978
 
Total Liabilities 21,293 27,580
 
Stockholders' Equity:
Common stock 56 54
Additional paid-in capital 766,761 765,418
Deferred stock compensation (20) (245)
Accumulated other comprehensive loss 128 86
Accumulated deficit (739,723) (725,925)
Total stockholders' equity 27,202 39,388
   
Total Liabilities and Stockholders' Equity $ 48,495 $ 66,968
   



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