CIMdata PLM Industry Summary Online Archive
30 April 2008
Financial News
Virage Logic Reports Second Quarter Fiscal Year 2008 Results
Virage Logic Corporation reported its financial results for the second fiscal quarter ended March 31, 2008.
Revenues for the second quarter of fiscal 2008 were $14.7 million, compared with $10.6 million for the second quarter of fiscal 2007 and $14.1 million for the first quarter of fiscal 2008. License revenue for the second quarter of fiscal 2008 was $12.1 million, compared with $7.8 million for the same period a year ago and $10.8 million for the prior quarter. Royalties for the second quarter of fiscal 2008 were $2.6 million, compared with $2.8 million for the second quarter of fiscal 2007 and $3.3 million for the first quarter of fiscal 2008.
As reported under U.S. generally accepted accounting principles (GAAP), net income for the second quarter of fiscal 2008 was $0.6 million, or $0.03 per share, compared with net loss of $1.8 million, or ($0.08) per share for the second quarter of fiscal 2007 and net income of $1.1 million or $0.05 per share for the first quarter of fiscal 2008.
Excluding the effects of FAS123R stock compensation expense and acquisition related charges, the company would have reported a net income of $1.0 million, or $0.04 per share for the quarter ended March 31, 2008. The reconciliation of GAAP to non GAAP includes $1.0 million of stock-based compensation expense and approximately $143,000 of acquisition related charges and other reduced by $0.8 million tax effect for a net total of $1.0 million.
Dan McCranie, president, chief executive officer and chairman of Virage Logic, said, "License revenue increased 13% sequentially, and 55% year-over-year. This is the highest license revenue the company has posted in 12 quarters. Total revenue, which includes royalties, increased 4% sequentially and 39% year-over-year. The growth in license revenue is a direct result of our efforts in the past year on two key initiatives:
-- Being first to market with next generation advanced technology products. Our recent introduction of 40nm SiWare™ memory compilers and logic libraries underscores our ability to develop and bring to the semiconductor market our feature-rich products at the most advanced foundry nodes.
-- Broadening our product portfolio. Examples of this include the 'productization' of our enhanced memory compiler and yield analysis tools for sales to our IDM customers, the expansion of our product portfolio to include advanced DDR memory interface IP, and the availability of our compiler and library offerings at all the major semiconductor foundries.
Mr. McCranie continued, "As we mentioned in last quarter's press release, we believe that the semiconductor industry in general continues to outsource building-block IP to third-party providers. We believe that we can benefit from this secular trend. In order to be successful, we must continue to define, develop and execute new business structures, processes and product portfolios to enable deeper, strategic partnerships with our customers."
Mr. McCranie concluded, "We enjoyed strong license bookings in this most recent quarter, including substantial orders from major foundries. In addition, our opportunity pipeline remains strong, particularly in advanced physical IP, as well as our DDR memory interface IP product family. As a result of these two Virage Logic-specific parameters, we continue to be optimistic with regard to our future license revenue growth for our current product portfolio. With regard to royalties, I believe our company will enjoy increased royalty revenue in future quarters, as our customers move their advanced node SoC products into full production. Royalty revenue in current quarters, however, is a reflection of wafer fabrication production at older process nodes. As such, we have seen soft royalty revenues in the first half of fiscal 2008, and we are forecasting continued soft royalty revenues for the third fiscal quarter ending June 30, 2008. However, royalty revenues should increase in the second half of calendar 2008, as our major customers move into production with products on the advanced process nodes."
Virage Logic also announced today its business outlook for the third quarter of fiscal 2008 ending June 30, 2008. The company currently anticipates total license revenues to be in the $12.4 to $13.0M range, or up 3 to 7 percent over the previous quarter. Royalty revenues for third fiscal quarter are projected to be $2.2 to $2.5M. The company expects to report a non-GAAP earnings per diluted share excluding FAS123R stock compensation expense and acquisition related expenses are expected to be in the range of $0.04 to $0.06 for the third fiscal quarter. The company expects $1.0 million of FAS123R stock compensation expense and $1.9 million acquisition related expenses that include $1.8 million of acquisition related performance based payments linked to predefined sales and technology goals for the third quarter of fiscal 2008. Although this news release will be available on the company's website, the company disclaims any duty or intention to update these or any other forward-looking statements.
GAAP reconciliation
We believe the financial figures we include that are not presented in accordance with GAAP assist investors in understanding our business and operating results. This information is intended to provide investors with useful supplemental data regarding the underlying economics of our business operations because operating results presented under GAAP may include items that are nonrecurring or not necessarily relevant to ongoing operations, or are difficult to forecast for future periods. The Company's management evaluates and makes operating decisions about its business operations primarily based on revenue and the core costs of those business operations. Management believes that the amortization and impairment of intangible assets, stock-based compensation and restructuring charges are not part of its core business operations. Therefore, management presents non-GAAP financial measures, along with GAAP measures, in this earnings release by excluding these items from the period expenses. The income statement line items involved in the adjustment from GAAP to non-GAAP presentation in this earnings release are amortization and impairment of intangible assets and stock-based compensation that are included in cost of revenues, research and development, general and administrative and sales and marketing expenses. To determine our non-GAAP tax provision, the Company recalculates tax based on non-GAAP income before taxes and adjusts accordingly.
For each such non-GAAP measure, the adjustment provides management with information about the Company's underlying operating performance that enables a more meaningful comparison of our finance results in different reporting periods. For example, since the Company does not acquire businesses on a predictable cycle, management excludes acquisition-related charges in order to provide a more consistent and meaningful evaluation of the Company's operating expenses. Management also excludes the impact of stock-based compensation to help it compare current period operating expenses against the operating expenses for prior periods. In addition, the availability of non-GAAP information helps management track actual performance relative to financial targets. This information also helps investors compare the Company's performance with other companies in the industry, which use similar financial measures to supplement their GAAP financial information.
Management recognizes that the use of these non-GAAP measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the non-GAAP financial information. Management believes that providing this non-GAAP financial information, in addition to GAAP information, facilitates consistent comparison of the Company's financial performance over time. The Company has historically provided non-GAAP information to the investment community, not as an alternative but as an important supplement to GAAP information, to enable investors to evaluate the Company's core operating performance in the way that management does.
Our non-GAAP financial measures are not intended to be performance measures that should be regarded as alternatives to, or more meaningful than, our GAAP financial measures. Non-GAAP financial measures have limitations as they do not include all items of income and expense that affect our operations, and accordingly should always be considered as supplemental to our financial results presented in accordance with GAAP.
Conference Call
Virage Logic's management will hold a teleconference on second-quarter fiscal year 2008 results at 1:30 p.m. PACIFIC / 4:30 p.m. EASTERN today, April 30, 2008. A replay of the call will be available at (800) 642-1687 (domestic) or (706) 645-9291 (international), access number 42100059 through May 3, 2008; and the webcast can be accessed at http://www.viragelogic.com for 30 days.
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