SOURCE: VA Software

August 30, 2005 16:15 ET

VA Software Reports Fourth Quarter and Fiscal Year 2005 Results

Fiscal Year Software Revenue Grows 51% Year-Over-Year

FREMONT, CA -- (MARKET WIRE) -- August 30, 2005 -- VA Software Corporation (NASDAQ: LNUX), a leading provider of software, information and community support for IT and development professionals, today announced financial results for its fourth quarter and fiscal year 2005, ended July 31, 2005.

Total fourth quarter fiscal 2005 revenue grew to $8.4 million, compared to fourth quarter fiscal 2004 total revenue of $7.3 million. Software revenue increased 34% to $2.2 million in fourth quarter fiscal 2005 from $1.6 million in fourth quarter fiscal 2004. For the year ending July 31, 2005, total revenue grew to $32.9 million, compared to $29.3 million for the year ending July 31, 2004, while software revenue grew 51% to $7.6 million for the year ending July 31, 2005 compared to $5.0 million for the year ending July 31, 2004.

On a GAAP basis, the fourth quarter fiscal 2005 net loss was $1.0 million, or $0.02 per share, compared to last year's fourth quarter fiscal 2004 GAAP net loss of $0.9 million, or $0.01 per share. For the year ended July 31, 2005, the company's GAAP net loss was $4.7 million, or $0.08 per share, compared to $7.6 million, or $0.13 per share, for the year ended July 31, 2004.

As specified in the attached reconciliation of net loss as reported to pro forma net loss, the fourth quarter fiscal 2005 net loss was $0.9 million, or $0.01 per share, compared to the fourth quarter fiscal 2004 net loss of $0.9 million, or $0.01 per share. The fiscal 2005 net loss before non-recurring charges was $4.7 million, or $0.08 per share, compared to fiscal 2004 net loss before non-recurring charges of $6.0 million, or $0.10 per share. Cash and investments remain strong at $39.4 million as of July 31, 2005.

"We are pleased with our performance this quarter. Our software revenue grew by 34% year-over-year as we saw new and current customers purchase more seats. Our media sales team is fully staffed as we enter the first quarter of FY 06. Our gross margin improved and our reported loss was comparable to last year despite an expense of $0.9 million for Sarbanes Oxley compliance-related expense that impacted the quarter," said Ali Jenab, president and CEO. "We are excited about our prospects for FY 06. The new version of SourceForge Enterprise Edition released in April 2005 is a much stronger collaborative tool that meets the needs of enterprises. We are making significant improvements to that will benefit both the user community as well as the advertisers reaching out to that community. Our other media properties offer solutions that meld advertiser branding with site editorial. We enter fiscal 2006 with these product improvements and strong sales pipelines."

A conference call to review results will be held at 5:00 pm (Eastern) today. The call may be accessed via webcast at or by dialing (800) 862-9098 or (785) 424-1051. A replay of the call will be available for 30 days by dialing (888) 562-0857 or (402) 220-7341.

Recent Highlights

--  Customers. Through the fourth quarter of fiscal 2005, VA Software has
    sold the SourceForge solution to a total of 130 customers. During the
    quarter, Applied Biosystems, British Telecom, Aeroflex, Doner Advertising
    and E*Trade were added to the installed base. In addition, existing
    customers including Los Alamos National Laboratories, ETAS, Eli Lilly,
    Hewlett-Packard and Metasolv purchased additional SourceForge licenses or
--  SourceForge® Enterprise Edition added in-depth, out-of-the-box
    integration with Perforce, the Fast Software Configuration Management
    System, as well as a new, simplified SCM Adapter that enables other
    Software Configuration Management (SCM) tools to be rapidly integrated with
    SourceForge Enterprise Edition. SourceForge Enterprise Edition also
    supports out-of-the-box integration with CVS and Subversion.
-- In order to improve the user experience on and offer new opportunities to advertisers, OSTG commenced
    a re-architecture of, the world's leading development and
    download repository of open source code and applications.  OSTG also
    launched, a community site focused on the Eclipse
    Open Source platform, plug-ins and associated technology from TechForge channels provide IT professionals and developers
    with in-depth resources and information about specific vertical
    technologies. now offers "Real time Statistics," which
    allows site subscribers to view traffic statistics with hourly granularity
    for the past 48 hours.'s new Advanced Search service
    includes Boolean searching, pervasive search and near-real time search data
--  OSTG. In an effort to better meet the needs of advertisers and provide
    the community with better navigation, OSTG introduced a new and innovative
    marketing program that provides advertisers and visitors with a
    contextually relevant content integration program. OSTG's latest Integrated
    Marketing Solutions include category sponsorships.
    Integrated into site navigation, this program enables vendors to create
    awareness, consideration and adoption of their products and services in a
    targeted environment. Limited to three sponsors per category, this program
    provides significant share of voice for advertisers in their desired
    technology category.
--  The OSTG network as a whole serves more than 290 million page views
    and nearly 19 million unique visitors monthly.* This ranks OSTG among the
    top technology networks both in terms of size and purchasing power.
    Advertisers and sponsors of the network include Microsoft, Vonage, AMD,
    Rackspace, IBM, HP and Sun Microsystems.
Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, VA Software uses non-GAAP financial results. Non-GAAP net loss and loss per share exclude amortization of intangible assets and deferred stock compensation, as well as restructuring costs and other special charges. These non-GAAP adjustments are provided to enhance the user's overall understanding of current financial performance and prospects for the future. Specifically, VA believes the non-GAAP results provide useful information to both management and investors by excluding certain unusual expenses that VA believes are not indicative of core operating results. In addition, because VA has historically reported non-GAAP results to the investment community, VA believes the inclusion of non-GAAP numbers provides consistency in financial reporting. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. The method VA uses to produce non-GAAP 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 at the center of today's technology revolution and incites innovation by empowering the IT and developer communities with information, community support and software. VA Software is the parent company of OSTG (Open Source Technology Group), and the creator of SourceForge. is the global nexus for the Open Source community with more than 100,000 Open Source projects and over 1 million registered users. SourceForge Enterprise Edition optimizes distributed development for Fortune 500 companies.

OSTG, the cornerstone of the Open Source movement, is the leading online network for IT managers and development professionals. OSTG technology-focused sites include,,,, and OSTG also runs, an online retailer of technology products, and the MediaBuilder network, featuring OSTG receives more than 290 million page views and nearly 19 million unique visitors monthly.

For more information about VA Software, visit For more information about OSTG, visit

Note Regarding Forward-Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our business and sales pipeline, our prospects for our fiscal year 2006, expected benefits of the latest version of SourceForge Enterprise Edition, and the ongoing improvements to, with expected benefits therefrom. Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including: VA's success in expanding its SourceForge enterprise software business; the size and timing of execution of enterprise-level licenses; VA's reliance upon strategic relationships with other companies; VA's success in designing and offering inovative online advertising programs; decreases or delays in online advertising spending; VA's ability to achieve and sustain higher levels of revenue; VA's ability to protect and defend its intellectual property rights; 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 10-K for the fiscal year ended July 31, 2004, and Form 10-Q for the fiscal quarter ended April 30, 2005, for further information regarding these and the other risks of the Company's business. These documents are available at the SEC Web site: VA assumes no obligation to update the forward-looking information contained in this news release.

Note to editors: VA Software, SourceForge and OSTG are trademarks or registered trademarks of VA Software Corporation in the United States and other countries., Slashdot and freshmeat are registered trademarks of OSTG, Inc., in the United States and other countries. ThinkGeek is a registered trademark of ThinkGeek, Inc., in the United States and other countries. All other trademarks are property of their respective owners.

* Publisher's own data based on internal traffic audits.

                     VA Software Corporation
               (In thousands, except per share data)

                             Three Months Ended           Year Ended
                            July 31,    July 31,      July 31,    July 31,
                              2005        2004          2005        2004
                           ---------   ---------     ---------   ---------

Software revenues          $   2,175   $   1,618     $   7,555   $   4,995
Online Media revenues          2,221       2,666         8,130       9,728
E-Commerce revenues            3,383       2,527        14,918      12,567
Online Images revenues           572         506         2,284       1,922
Other revenues                     -           -             -          49
                           ---------   ---------     ---------   ---------
    Net revenues               8,351       7,317        32,887      29,261

Software cost of revenues        254         364         1,028       1,860
Online Media cost
 of revenues                     811         780         3,320       2,969
E-commerce cost of revenues    2,548       2,197        11,591      10,225
Online Images cost
 of revenues                     109         131           495         495
Other cost of revenues             -         (12)            -         (12)
                           ---------   ---------     ---------   ---------
    Cost of revenues           3,722       3,460        16,434      15,537
                           ---------   ---------     ---------   ---------
    Gross margin               4,629       3,857        16,453      13,724

Operating Expenses:
    Sales and marketing        2,514       2,470        10,060      10,093
    Research and
     development               1,481       1,522         6,122       6,732
    General and
     administrative            1,792         893         5,925       4,665
    Restructuring costs and
     other special charges         -           -          (101)      3,209
    Amortization of deferred
     stock compensation            -           -             -          20
    Amortization of
     intangible assets             1           3            12          12
                           ---------   ---------     ---------   ---------
        Total operating
         expenses              5,788       4,888        22,018      24,731
                           ---------   ---------     ---------   ---------
Loss from operations          (1,159)     (1,031)       (5,565)    (11,007)
Remeasurement of
 warrant liability                 -           -             -       1,566
Interest and other, net          159         170           871       1,801
                           ---------   ---------     ---------   ---------
Net loss                   $  (1,000)  $    (861)    $  (4,694)  $  (7,640)
                           =========   =========     =========   =========
Basic and diluted net
 loss per share            $   (0.02)  $   (0.01)    $   (0.08)  $   (0.13)
                           =========   =========     =========   =========
Weighted-average shares
Basic and diluted             61,586      61,141        61,454      59,684
                           =========   =========     =========   =========

Reconciliation of net loss as reported
to pro forma net loss:
                             Three Months Ended           Year Ended
                            July 31,    July 31,      July 31,    July 31,
                              2005        2004          2005        2004
                           ---------   ---------     ---------   ---------

Net loss as reported       $  (1,000)  $    (861)    $  (4,694)  $  (7,640)
Non recurring charges:
    Restructuring cost
     and other special
     charges                       -         (12)         (101)      3,197
    Amortization of
     deferred stock
     compensation                  -           -             -          20
    Amortization of
     intangible assets             1           3            12          12
    Impairment of
     goodwill and
     intangible assets
     and other long-term
     assets                       87           -            87           -
    Remeasurement of
     warrant liability             -           -             -      (1,566)
                           ---------   ---------     ---------   ---------
Pro forma net loss         $    (912)  $    (870)    $  (4,696)  $  (5,977)
                           =========   =========     =========   =========
Basic and diluted net loss
 per share - pro forma     $   (0.01)  $   (0.01)    $   (0.08)  $   (0.10)
                           =========   =========     =========   =========
Weighted-average shares
Basic and diluted             61,586      61,141        61,454      59,684
                           =========   =========     =========   =========

                  VA Software Corporation
                      (In thousands)

                                         July 31,      July 31,
                                           2005          2004
                                         --------      --------

Current assets:

  Cash, cash equivalents and
   short-term investments                $ 36,614      $ 28,559
  Accounts receivable, net                  4,306         3,909
  Inventories                                 773         1,069
  Prepaid expenses and other assets         1,014         1,046
                                         --------      --------
      Total current assets                 42,707        34,583
Long-term investments and long-term
 restricted cash                            2,806        16,933
Property and equipment, net                   736         1,208
Other assets                                1,132           955
                                         --------      --------
Total assets                             $ 47,381      $ 53,679
                                         ========      ========


Current liabilities:
  Accounts payable                       $  1,574      $  1,674
  Accrued restructuring liabilities         1,748         3,440
  Deferred revenue                          2,134         1,750
  Accrued liabilities and other             2,882         1,853
                                         --------      --------
      Total current liabilities             8,338         8,717
Accrued restructuring liabilities, net
 of current portion                         6,107         7,843
Other long-term liabilities                 1,271         1,349
                                         --------      --------
Total liabilities                          15,716        17,909
                                         --------      --------

Stockholders' equity:
  Common stock                                 62            62
  Additional paid-in capital              783,891       783,242
  Accumulated other comprehensive gain       (231)         (171)
  Accumulated deficit                    (752,057)     (747,363)
                                         --------      --------
      Total stockholders' equity           31,665        35,770
                                         --------      --------
Total liabilities and stockholders'
 equity                                  $ 47,381      $ 53,679
                                         ========      ========

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