Total revenue for the second quarter of fiscal 2009 was $11.0 million, compared with $11.3 million for the first quarter and $14.7 million for the second quarter of fiscal 2008. License revenue for the second quarter of fiscal 2009 was $9.1 million, compared with $8.5 million for the prior quarter and $12.1 million for the same period a year ago. Royalties for the second quarter of fiscal 2009 were $1.9 million, compared with $2.8 million for the first quarter and $2.6 million for the second quarter of fiscal 2008.
As reported under U.S. GAAP, net loss for the second quarter of fiscal 2009 which included $24.3 million of non-recurring charges for restructuring, goodwill impairment and a valuation allowance on deferred tax assets was $26.3 million, or ($1.15) per share, compared with a net loss of $2.6 million or ($0.11) per share for the first quarter of fiscal 2009 and net income of $0.6 million, or $0.03 per share for the second quarter of fiscal 2008.
Excluding the effects of the restructuring charges, goodwill impairment, valuation allowance on deferred tax assets, FAS123R expenses, and amortization of intangibles, the Company would have reported a net loss of $1.8 million, or ($0.08) per share. The reconciliation of GAAP to Non-GAAP financial results includes $11.8 million for goodwill impairment, $11.0 million valuation allowance on deferred tax assets, $1.5 million of restructuring charges, $0.8 million of stock-based compensation expense and $0.3 million of amortization of intangibles offset by a net tax effect of $0.9 million for a total of $24.5 million. The origination of the goodwill balance was primarily from the InChip acquisition completed in 2002. In addition, by realizing a valuation allowance on deferred tax assets at this time, the Company believes that its tax provisions are better aligned with its operating outlook.
Virage Logic President and CEO, Dr. Alex Shubat said, “In our second fiscal quarter, we were able to grow license bookings significantly and license revenue by 7.4% over first fiscal quarter 2009 in a very challenging environment. Additionally, we captured several delayed orders in the first weeks of the third fiscal quarter. As anticipated, royalty revenue declined substantially from the previous quarter, as the semiconductor industry continues to experience record low foundry utilization.
“During this unprecedented global economic downturn, we continue to scrutinize all aspects of our operations. In the quarter we restructured our organization, consolidated two smaller research and development (R&D) sites into four existing major R&D centers and aligned our sales resources to address market opportunities. We expect to realize an 11% savings in labor and overhead expenses as a result of these actions. We also continued to make strong progress against the following stated transformation initiatives:
- Broaden our product portfolio. We have significantly increased our advanced interface IP portfolio through a licensing agreement with AMD that provides silicon proven standards-based IP, such as PCIe, HDMI and MIPI, and the associated development expertise. We expanded our Intelli™ DDR memory controller product line with the introduction of Intelli™ LPDDR2 to address the needs of mobile/portable applications. Virage Logic was also recently designated as an IBM PowerPC Partner, granting us the rights to license and distribute IBM's PowerPC processor cores and peripheral cores.
- Be first-to-market with next generation advanced technology products. We continued our momentum with new 32/28-nanometer (nm) customer engagements. We also extended our leadership on the 40nm node with our SiWare™ Memory and SiWare™ Logic products which represent the industry’s broadest offering of silicon proven IP on this technology node. This offering is being adopted by both fabless customers, and large IDMs such as NEC. Our early leadership on this node has already resulted in Virage Logic receiving its first 40 nm royalty revenue from production wafers during the quarter.
“Our leadership position at the advanced technology nodes and our broadening product portfolio has enabled us to capture increasingly larger deals. Furthermore, our strong cash position combined with our expanded product portfolio and the progress we continue to make on our transformation initiatives will enable us to emerge as a stronger, trusted IP partner to the global semiconductor industry.”
Dr. Shubat concluded, “In summary, we are encouraged by the stronger bookings activity and sales pipeline we have seen in the first few weeks of our third fiscal quarter. This increased activity should enable the Company to post stronger quarterly license revenue in the third fiscal quarter. However, royalty revenue for this quarter is based on wafers produced in the March ending quarter and consequently, we anticipate lower royalty revenues.
“For the third quarter fiscal 2009, we are projecting revenues of $11.5
million to $12.5 million and non-GAAP loss per share of ($0.03) to $0.00
per share. The Company expects to realize, before tax, approximately
$0.8 million to $1.0 million in non-GAAP adjustments comprised primarily
of FAS123R stock compensation and acquisition-related expenses.”
