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Press Release Index


VA Software Reports Second Quarter Fiscal Year 2004 Results

Second quarter revenue increases 35% and net loss decreases 61% yearoveryear

FREMONT, CA February 24, 2004 VA Software Corporation (Nasdaq: LNUX), provider of the award-winning SourceForge™ global 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 second quarter of fiscal year 2004, ended January 31, 2004.

Total second quarter fiscal 2004 revenue grew 35% to $8.9 million, compared to second quarter fiscal 2003 total revenue of $6.6 million. Revenue from the ongoing software and online businesses increased 39% to $8.8 million in second quarter fiscal 2004 from $6.3 million in second quarter fiscal 2003. Total revenue for the six months ended January 31, 2004 was $14.7 million, up 26% compared to $11.6 million for the six months ended January 25, 2003.

On a GAAP basis, the second quarter fiscal 2004 net loss was $1.4 million, or $0.02 per share, compared to last year's second quarter fiscal 2003 GAAP net loss of $3.7 million, or $0.07 per share. The second quarter fiscal 2004 GAAP net loss includes a $641,000 remeasurement of warrant liability credit, $18,000 in restructuring credits and a $3,000 charge for amortization of intangible assets. For the six months ended January 31, 2004, the company's GAAP net loss was $2.7 million, or $0.05 per share, compared to $7.8 million, or $0.15 per share, for the six months ended January 25, 2003.

As specified in the attached reconciliation of net loss as reported to pro forma net loss, the second quarter fiscal 2004 net loss before non-recurring charges was $2.1 million, or $0.03 per share, compared to last year's second quarter fiscal 2003 net loss before non-recurring charges of $3.4 million, or $0.06 per share. Cash and investments remain strong at $50.3 million as of January 31, 2004.

"We are very pleased with second quarter results. Software revenue grew by 71% over last year's second quarter as we increased our SourceForge Enterprise Edition installed base to 75 customers. OSDN posted record revenues at $7.7 million, up 35% yearoveryear in the seasonally strong second fiscal quarter," said Ali Jenab, President and CEO. "In addition to improving our financial results, we continue to enhance and add new functionality to our products. We released SourceForge Enterprise Edition 3.5 to address key challenges related to offshore application development, which we believe is a megatrend. The newly introduced subscription program for OSDN's SourceForge.net provides powerful premium services and enhanced functionality to deliver more manageability and control for development projects on the site."

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) 428-4470 or (612) 332-0923. A replay of the call will be available for 30 days by dialing (800) 475-6701 or (320) 365-3844; passcode 718795.

Recent Highlights

  • Products. SourceForge Enterprise Edition 3.5, announced for shipment during the second quarter of fiscal 2004, incorporates powerful management features to improve visibility and control over multisite development projects while providing a secure, webbased platform for global team collaboration, coordination, and efficiency. SourceForge 3.5 also includes the SourceForge Collaborative Development Process™, a set of collaborative software development best practices and materials that help multisite teams improve development process maturity and repeatability.
  • Customers. During the second quarter of fiscal 2004, VA Software added nine new SourceForge Enterprise Edition accounts, including JP Morgan, Nortel, Pitney Bowes, Verisign, the US Navy Fleet Numerical Meteorology and Oceanography Center, Eaton, SyncEssentials, The Foundry and 3Soft to its installed base. In addition, existing customers including Pfizer, Lockheed Martin, General Atomics, Sandia National Laboratory and the USDA Forest Service purchased additional SourceForge licenses and services.
  • OSDN. For the seventhconsecutive quarter, based on composition, OSDN has been named the Number One network for delivering visitors who look for technology news online and for delivering visitors who make software purchases online, according to the Nielsen//NetRatings @Plan Winter 2004 Report. With the recent launch of ITManagersJournal, a new site aimed at toplevel IT managers, the relaunch of Linux.com with an enterprise editorial focus, and other site upgrades, OSDN continues to experience steady traffic growth and increased advertising revenue while maintaining its commitment to a communitybased technology audience working with a range of platforms and technologies. Traffic to the network has reached an alltime high of 225 million page views, and 12 million unique visitors, every month. This ranks OSDN among the top technology networks both in terms of size and purchasing power. Advertisers and sponsors of the network include Microsoft, IBM, Google, HewlettPackard, Intel, Red Hat, Legato, AMD, Interland, Rackspace and Speakeasy.

Use of NonGAAP 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, remeasurement of warrant liability, 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 webbased application that significantly increases a company's return on its investment in software development. SourceForge improves communication, collaboration, and synchronization amongst multisite team members and gives managers realtime visibility and control over their projects, regardless of location. SourceForge enables higher developer productivity and faster project completion whether teams are inhouse, outsourced, onshore or offshore. Major Fortune 1000 firms and more than 750,000 developers use SourceForge technology to power their global development efforts.

About OSDN

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 VA's anticipated financial performance and continued progress as a company as well as future trends in software application development (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; 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 31, 2003 and Form 10Q for the fiscal quarter ended October 31, 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 Corporation
(510) 687-8731

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

  Three Months Ended Six Months Ended
  January 31, 2004 January 25, 2003 January 31, 2004 January 25, 2003
   
Software Revenues $ 1,183 $ 690 $ 1,998 $ 1,401
Online Revenues 7,658 5,656 12,609 9,811
Other Revenues 15 214 46 423
Net Revenues 8,856 6,560 14,653 11,635
Software Cost of Revenues 541 470 1,136 1,063
Online Cost of Revenues 4,773 3,423 7,428 5,734
Other Cost of Revenues (206) (363)
Cost of Revenues 5,314 3,687 8,564 6,434
Gross Margin 3,542 2,873 6,089 5,201
 
Operating Expenses
Sales and Marketing 2,592 2,325 4,984 4,646
Research and Development 1,716 1,956 3,543 4,000
General and Administrative 1,558 1,936 2,282 3,691
Restructuring Costs and other Special Charges (18) (120) (35) (135)
Amortization of Deferred Stock Compensation 41 20 79
Amortization of Intangible Assets 3 644 6 1,288
Total Operating Expenses 5,851 6,782 10,800 13,569
Loss from Operations (2,309) (3,909) (4,711) (8,368)
Remeasurement of warrant liability 641 641
Interest and other, net 237 237 1,416 563
Net Loss $ (1,431) $ (3,672) $ (2,654) $ (7,805)
   
Basic and diluted net loss per share $ (0.02) $ (0.07) $ (0.05) $ (0.15)
 
Weightedaverage shares outstanding: basic and diluted 60,355 53,859 58,357 53,786
 

Reconciliation of net loss as reported to pro forma net loss

  Three Months Ended Six Months Ended
  January 31, 2004 January 25, 2003 January 31, 2004 January 25, 2003
   
Net Loss as Reported $ (1,431) $ (3,672) $ (2,654) $ (7,805)
Non recurring charges:        
Restructuring Costs and other special charges (18) (171) (35) (188)
Restructuring Costs classified as cost of goods (231) (412)
Amortization of Deferred Stock Compensation 41 20 79
Amortization of Intangible Assets 3 644 6 1,288
Remeasurement of warrant liability (641) (641)
Net loss before non cash charges $ (2,087) $ (3,389) $ (3,304) $ (7,038)
Basic and diluted net loss per share pro forma $ (0.03) $ (0.06) $ (0.06) $ (0.13)
Weightedaverage shares outstanding Basic and diluted 60,355 53,859 58,357 53,786
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  January 31, 2004 July 31, 2003
Assets
Current Assets
Cash, cash equivalents, and current marketable securities $ 36,611 $ 34,617
Accounts receivable, net 2,932 1,928
Inventories 677 388
Prepaid expenses and other assets 1,447 1,232
Total current assets 41,667 38,165
Longterm marketable securities 13,639 5,130
Property and equipment, net 3,833 4,267
Goodwill and intangible assets, net 15 21
Other assets 1,015 912
   
Total assets $ 60,169 $ 48,495
   
 
Liabilities, Common Stock Subject To Registration Rights And Stockholders' Equity
Current liabilities:
Accounts payable $ 822 $ 863
Accrued restructuring liabilities 3,383 4,117
Warrants 1,665
Accrued liabilities and other 4,173 4,360
Total current liabilities 10,043 9,340
Accrued restructuring liabilities, net of current portion 9,472 10,772
Other longterm liabilities 1,212 1,181
 
Total Liabilities 20,727 21,293
 
Common stock subject to registration rights 12,185
 
Stockholders' Equity:
Common stock 57 56
Additional paidin capital 769,544 766,761
Deferred stock compensation (20)
Accumulated other comprehensive gain 33 128
Accumulated deficit (742,377) (739,723)
Total stockholders' equity 27,257 27,202
   
Total Liabilities, common stock subject to registration rights and stockholders' equity $ 60,169 $ 48,495
   



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