Virage Logic Reports Second-Quarter Fiscal 2006 Results; Revenues up 11% and Royalties up 46% Sequentially; GAAP EPS of $0.01, Including $0.05 Per Share of After-Tax Stock-Based Compensation Expense

FREMONT, Calif.—(BUSINESS WIRE)—May 3, 2006— Virage Logic Corporation (Nasdaq: VIRL), a pioneer in Silicon Aware IP(TM) and leading provider of semiconductor intellectual property (IP) platforms, today reported its financial results for the second fiscal quarter ended March 31, 2006.

Revenues for the second quarter of fiscal 2006 were $15.2 million, compared with $12.8 million for the second quarter of fiscal 2005 and $13.7 million for the first quarter of fiscal 2006. License revenue for the second quarter of fiscal 2006 was $10.4 million, compared with $10.1 million for the second quarter of fiscal 2005 and $10.4 million for the previous quarter. Royalties for the second quarter of fiscal 2006 were $4.8 million, up 81 percent from $2.7 million for the second quarter of fiscal 2005 and up 46 percent from $3.3 million for the first quarter of fiscal 2006.

As reported under U.S. generally accepted accounting principles (GAAP), net income for the second quarter of fiscal 2006 was $176,000, or $0.01 per share, compared with a net loss of $(988,000), or $(0.04) per share for the same period a year ago and with a net loss of $(242,000) or $(0.01) per share for the first quarter of fiscal 2006.

Net income for the second quarter of fiscal 2006 included $1.9 million of stock-based compensation expense per the adoption of FAS123R. Excluding the effects of FAS123R, the company would have reported net income of $1.3 million, or $0.06 per share. The exclusion of FAS123R from our net income represents a non-GAAP measure provided by the company to allow comparability to prior fiscal periods.

"Our historical emphasis on developing semiconductor intellectual property for advanced process nodes allowed us to post strong, profitable royalty growth, moving us to the next level in royalty revenues as designs based on these nodes continued to ramp in volume," said Adam Kablanian, CEO and President. "Our future success demands the efficient development of performance optimized semiconductor IP at the advanced process nodes. During the quarter, we have taken first steps toward the expansion of our engineering development capacity and the build out of scalable infrastructure around our business processes to further improve our ability to drive leadership at the advanced process nodes of 90-nanometer and below."

Virage Logic also announced today its business outlook for the third quarter of fiscal 2006 ending June 30, 2006. The company currently anticipates total revenues of approximately $15.2 million to $15.7 million, including royalties of approximately $4.3 million to $4.6 million. The company expects to report GAAP net income of approximately $0.00 to $0.01 per share. The company also expects $1.8 million of stock-based compensation expense per FAS123R. Without the impact of stock-based compensation expense, the company would expect earnings per diluted share of $0.06 to $0.07 for the third fiscal quarter. 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.

Virage Logic's management plans to hold a teleconference on second-quarter 2006 results at 1:30 p.m. PT / 4:30 p.m. ET today. A live webcast of management's teleconference regarding second-quarter results will be available to all investors, and an archived webcast will be available from May 3, 2006 until May 3, 2007 on the Investor Relations page of Virage Logic's website at In addition, a telephonic replay will be available through May 10, 2006 at (719) 457-0820, access code 2005940.

About Virage Logic

Founded in 1996, Virage Logic Corporation (Nasdaq: VIRL) rapidly established itself as a technology and market leader in providing advanced embedded memory intellectual property (IP) for the design of complex integrated circuits. Now, as the company celebrates its 10th anniversary, it is a global leader in semiconductor IP platforms comprising embedded memories, logic, and I/Os and is pioneering the development of a new class of IP called Silicon Aware IP. Silicon Aware IP tightly integrates Physical IP (memory, logic and I/Os) with the embedded test, diagnostic, and repair capabilities of Infrastructure IP to help ensure manufacturability and optimized yield at the advanced process nodes. Virage Logic's highly differentiated product portfolio provides higher performance, lower power, higher density and optimal yield to foundries, integrated device manufacturers (IDMs) and fabless customers who develop products for the consumer, communications and networking, hand-held and portable, and computer and graphics markets. The company uses its FirstPass-Silicon(TM) Characterization Lab for certain products to help ensure high quality, reliable IP across a wide range of foundries and process technologies. Headquartered in Fremont, California, Virage Logic has R&D, sales and support offices worldwide. For more information, visit

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Statements made in this news release, other than statements of historical fact, are forward-looking statements, including, for example, statements relating to industry and company trends, business outlook and products. Forward-looking statements are subject to a number of known and unknown risks and uncertainties, which might cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include Virage Logic's ability to improve its operations; its ability to forecast its business, including its revenue, income and order flow outlook; Virage Logic's ability to execute on its strategy to become a provider of semiconductor IP platforms; Virage Logic's ability to continue to develop new products and maintain and develop new relationships with third-party foundries and integrated device manufacturers; adoption of Virage Logic's technologies by semiconductor companies and increases or fluctuations in the demand for their products; the company's ability to overcome the challenges associated with establishing licensing relationships with semiconductor companies; the company's ability to obtain royalty revenues from customers in addition to license fees, to receive accurate information necessary for calculating royalty revenues and to collect royalty revenues from customers; business and economic conditions generally and in the semiconductor industry in particular; competition in the market for semiconductor IP platforms; and other risks including those described in the company's Annual Report on Form 10-K for the period ended September 30, 2005, and in Virage Logic's other periodic reports filed with the SEC, all of which are available from Virage Logic's website ( or from the SEC's website (, and in news releases and other communications. Virage Logic disclaims any intention or duty to update any forward-looking statements made in this news release.

All trademarks are the property of their respective owners and are protected herein.

                       Virage Logic Corporation
            Unaudited Consolidated Statements of Operations
               (In thousands, except per-share amounts)

                                  Three Months Ended Six Months Ended
                                  ------------------ -----------------
                                       March 31,          March 31,
                                     2006      2005     2006     2005
                                   -------   -------  -------  -------
  License                         $10,358   $10,109  $20,768  $23,171
  Royalties                         4,838     2,675    8,153    5,472
                                   -------   -------  -------  -------
    Total revenues                 15,196    12,784   28,921   28,643
Cost and expenses:
  Cost of revenues                                 3,500          3,102        7,215        6,139
    Research  and  development                    5,328          5,089      10,956        9,862
    Sales  and  marketing                              4,299          4,170        8,559        7,983
    General  and  administrative                2,709          2,109        5,465        4,043
    Stock-based  compensation                            -              339                -            339
                                                                      -------      -------  --------    -------
        Total  cost  and  expenses                15,836        14,809      32,195      28,366
                                                                      -------      -------    -------    -------
Operating  income  (loss)                            (640)      (2,025)    (3,274)          277
Interest  income  and  other,  net                665              444        1,284            738
                                                                      -------      -------    -------    -------
Income  (loss)  before  taxes                          25        (1,581)    (1,990)      1,015
Income  tax  provision  (benefit)              (151)          (593)    (1,924)          264
                                                                      -------      -------    -------    -------

Net  income  (loss)                                  $      176      $    (988)  $      (66)  $      751
                                                                      =======      =======    =======    =======

Earnings  (loss)  per  share:
        Basic                                                      $0.01        $(0.04)    $(0.00)      $0.03
        Diluted                                                  $0.01        $(0.04)    $(0.00)      $0.03

Shares  used  in  computing  per  share  amounts:
        Basic                                                    22,302        22,140      22,314      21,959
        Diluted                                                23,011        22,140      22,314      23,252

                                              Virage  Logic  Corporation
                                  Unaudited  Consolidated  Balance  Sheets
                                                        (In  thousands)

                                                                                            March  31,    September  30,
                                                                                                2006                  2005
                                                                                        ------------  -------------

Current  assets:
    Cash  and  cash  equivalents                                  $        28,225    $          26,841
    Short-term  investments                                                  38,747                34,410
    Accounts  receivable,  net                                              16,814                14,201
    Costs  in  excess  of  related  billings  on
      uncompleted  contracts                                                        760                      896
    Prepaid  expenses  and  other  current  assets              3,943                  4,517
    Taxes  receivable                                                                    430                      493
                                                                                          -----------    ------------
        Total  current  assets                                                  88,919                81,358

    Property,  equipment  and  leasehold
      improvements,  net                                                            4,366                  5,093
    Goodwill                                                                                9,782                  9,782
    Other  intangible  assets,  net                                        2,183                  2,375
    Deferred  tax  assets                                                        10,788                  8,604
    Long-term  investments                                                      4,681                  6,587
    Other  long  term  assets                                                        254                      695
                                                                                          -----------    ------------

        Total  assets                                                        $      120,973    $        114,494
                                                                                          ===========    ============

Current  liabilities:
    Accounts  payable                                                    $          1,111    $                770
    Accrued  expenses                                                                4,402                  3,623
    Deferred  revenue                                                                8,422                  8,440
    Income  taxes  payable                                                        1,373                  1,441
                                                                                          -----------    ------------
        Total  current  liabilities                                        15,308                14,274
    Deferred  tax  liabilities                                                    852                      852
                                                                                          -----------    ------------
        Total  liabilities                                                        16,160                15,126

  Stockholders'  equity:
    Common  stock                                                                              23                        23
    Additional  paid-in  capital                                        126,053              120,548
    Accumulated  other  comprehensive  income
      (loss)                                                                                        58                        52
    Accumulated  deficit                                                      (21,321)            (21,255)
                                                                                          -----------    ------------
        Total  stockholders'  equity                                    104,813                99,368
                                                                                          -----------    ------------

            Total  liabilities  and  stockholders'
              equity                                                              $      120,973    $        114,494
                                                                                          ===========    ============

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