CIMdata PLM Industry Summary Online Archive

29 July 2009

Financial News

Virage Logic Reports Third Quarter Fiscal 2009 Results

Virage Logic Corporation reported its financial results for the third fiscal quarter ended June 30, 2009.

Total revenue for the third quarter of fiscal 2009 was $11.9 million, compared with $11.0 million for the second quarter and $15.1 million for the third quarter of fiscal 2008. License revenue for the third quarter of fiscal 2009 was $10.7 million, compared with $9.1 million for the prior quarter and $12.3 million for the same period a year ago. Royalties for the third quarter of fiscal 2009 were $1.2 million, compared with $1.9 million for the second quarter and $2.8 million for the third quarter of fiscal 2008.

As reported under U.S. GAAP, net loss for the third quarter of fiscal 2009 was $1.9 million, or ($0.08) per share, compared with a net loss of $26.3 million or ($1.15) per share for the second quarter of fiscal 2009 and a net loss of $1.1 million, or ($0.05) per share for the third quarter of fiscal 2008.

Excluding the effects of FAS123R expenses, acquisition related expenses, restructuring charges and amortization of intangibles, the Company would have reported a net loss of $0.7 million, or ($0.03) per share. The reconciliation of GAAP to Non-GAAP financial results includes $0.5 million of stock-based compensation expense, $0.2 million of amortization of intangibles and a net tax effect of $0.5 million for a total of $1.2 million.

Virage Logic President and CEO, Dr. Alex Shubat said, "In our third fiscal quarter, we grew our license revenues by 18% over the second fiscal quarter 2009. This is encouraging in light of the continued challenging global economic environment. As anticipated, royalty revenue came in below the previous quarter due to low foundry wafer shipments occurring in the first calendar quarter of 2009.

"Over two years ago, we embarked on a transformation process which included several operating and product initiatives. We are in the final stages of altering our engineering and marketing organizations to accommodate the company's transition to a predominately standard product versus custom product IP provider. This transition will result in a highly scalable business model for Virage Logic, a model that can accommodate increased creation and/or acquisition of new IP products with a minimum of additional operating costs. Key initiatives that we made particularly significant progress against in the third quarter include:

Broadening our product portfolio. Through our ongoing R&D efforts and inorganic growth initiatives, we have significantly increased our product offerings. In the third fiscal quarter, we reaped the benefits of this strategy with our Intelli™ DDR and Intelli™ LPDDR memory controller product lines which made a strong contribution to our overall bookings in the quarter. These products offer a full range of both high performance and low power solutions and are being adopted by FPGA and SoC developers worldwide.

Being first-to-market with next generation advanced technology products. As a result of our early leadership at 40nm, we believe our SiWare™ Memory and SiWare™ Logic products offer the industry's broadest portfolio of silicon proven IP on this technology node. As a result, more than ten customers have adopted our 40nm products and our 40nm royalty revenues are growing. During the quarter, we announced availability of our AEON® non-volatile embedded memory on TSMC's 65nm Low Power (LP) process, making it the industry's first multi-time programmable (MTP) logic NVM solution that is commercially available on a 65nm process.

During this quarter, we have seen a strong increase in our sales pipeline in terms of both dollar value and individual deal size. This increase was the result of both internal and external factors. Internally, we saw success in activity as a result of the company's execution on our stated initiatives, particularly with regard to our new product families. Externally, the movement of the large semiconductor IDMs toward a 'fabless' or 'fab-lite' business model is a positive factor and plays to our strengths.

This increase in opportunities resulted in a very strong bookings for the company during the third quarter, as well as in the first four weeks of the fourth quarter. As a result, our license backlog moved up significantly."

Dr. Shubat concluded, "With the positive trend affecting our business the Company should be able to post sequential quarterly license growth in the fourth fiscal quarter. As foundry utilization continues to recover, royalty performance for the fourth quarter, which is based on June ending quarter wafer shipments, should also improve."

"For the fourth quarter fiscal 2009, we are projecting revenues of $13.75 million to $14.75 million and non-GAAP EPS results of $0.01 to $0.04 per share. The Company expects to realize, before tax, approximately $3.0 million to $3.2 million in non-GAAP adjustments comprised primarily of FAS123R stock compensation and acquisition-related expenses."

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.

Use of Non-GAAP Information

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 charges 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 goodwill impairment charges, valuation allowance on deferred tax assets, restructuring charges, acquisition-related charges and stock-based compensation 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 goodwill impairment charges, valuation allowance on deferred tax assets, restructuring charges, acquisition-related charges, 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 goodwill impairment, valuation allowance on deferred tax assets and restructuring charges as these are non-recurring charges which are not expected to occur on a regular basis. 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 third quarter fiscal 2009 results at 1:30 p.m. PACIFIC / 4:30 p.m. EASTERN today, July 29, 2009. A replay of the call will be available at (800) 406-7325 (domestic) or (303) 590-3030 (international), access number 4117030 through August 3, 2009; and the webcast can be accessed at http://www.viragelogic.com for 30 days.

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