Virage Logic Reports Third Quarter Fiscal 2007 Financial Results

Revenue Increases and Loss Narrows Sequentially

FREMONT, Calif. -- Aug 01, 2007  -- Virage Logic Corporation (Nasdaq: VIRL), the semiconductor industry's trusted IP partner and pioneer in Silicon Aware IP(TM), today reported financial results for the third quarter and the nine-month period of fiscal year ended June 30, 2007.

Revenue for the third quarter of fiscal 2007 was $11.3 million, compared with $15.3 million for the comparable quarter of fiscal 2006 and $10.6 million in the prior quarter. License revenue for the third quarter of fiscal 2007 was $8.2 million compared to $11.1 million in the third quarter of fiscal 2006 and $7.8 million in the previous quarter. Royalties for the third quarter of fiscal 2007 were $3.1 million, compared with $4.2 million for the third quarter of fiscal 2006 and $2.8 million in the prior quarter.

As reported under U.S. generally accepted accounting principles (GAAP), net loss for the third quarter of fiscal 2007 was $1.2 million, or $0.05 per share, compared with a net loss of $1.6 million, or $0.07 per share, for the same period a year ago and with a net loss of $1.8 million, or $0.08 per share, for the second quarter of fiscal 2007.

During the quarter the company incurred $0.6 million of restructuring charges in connection with consolidation of some of our operations, including the closing of our Seattle R&D site.

Excluding the effects of FAS123R stock-based compensation expense and the restructuring charges, the company would have reported a net loss of $94,000, or $0.00 per share. Net loss for the third quarter of fiscal 2007 included $0.7 million of FAS123R stock-based compensation expense and $0.6 million of restructuring expense.

Dan McCranie, president and chief executive officer of Virage Logic, said, "While we were able to grow revenue 7% sequentially to $11.3 million, we did not meet our minimum revenue guidance of $11.5 million. That said, the company did make significant improvements in securing new multi-year licensing contracts, particularly in the most advanced 45nm and 65nm process nodes. These contract wins resulted in our again achieving sequential total license backlog growth. And, looking into the intermediate future, we are seeing several positive indicators that lead us to believe we are making strong progress on our goal to transform the company. Specifically, our opportunity pipeline is larger and increasing. We believe that these opportunities are a direct result of our focus over the past six months to develop new memory compilers and logic libraries at the most advanced process nodes, and our continuous improvement in product quality and delivery against agreed upon schedules. This combination of being first to market with next-generation product, superior quality and strict adherence to promised delivery schedules are among the essential elements in Virage Logic becoming the trusted IP partner for the semiconductor industry. As a result of these efforts, we have been able to re-engage with several key customers as well as engage with new customers at a more strategic level."

The company has a goal to drive toward a superior cost structure for development and delivery of its IP. On the operational side, therefore, initiatives have been launched to improve operational efficiencies and lower operating expenses. In fiscal Q2, the Engineering and Development organization was restructured to drive next-generation IP product. Also, during this past quarter, the decision was made to close the Seattle R&D office and consolidate the functions in the Company's other global R&D centers. The impact of these changes will benefit both engineering efficiencies as well as lower overall cost of operation.

Mr. McCranie continued, "With the increase in license booking activity in the past quarter, we are entering our fiscal Q4 with a higher backlog than last quarter. With this backlog increase, coupled with our projected turns business for the coming quarter, we anticipate total revenues to increase to approximately $12.0 million to $13.0 million in the fourth quarter of fiscal 2007. License revenues are expected at $9.1 million to $9.9 million and royalty revenues are expected at $2.9 million to $3.1 million. With these revenue numbers, and with the recent reduction in operating costs, the company expects to report a GAAP net loss of approximately $0.01 to $0.04 per share. The company also expects $1.0 million of stock-based compensation expense per FAS123R. Without the impact of stock-based compensation expense, the company would expect earnings to be between a loss per share of $0.01 and a profit of $0.01 per share."

Mr. McCranie concluded, "In summary, we are making clear and quantifiable progress on multiple fronts. The efforts of our advanced technology group as well as strong performance from certain elements of our demand creation team were particularly noteworthy this past quarter. We now need to continue this progress at an accelerated pace."

Financial Tables

Click here to read financial tables

Conference Call

Virage Logic's management will hold a teleconference on third-quarter 2007 results at 1:30 p.m. PACIFIC / 4:30 p.m. EASTERN today, August 1, 2007. Participants can access the call by dialing (888) 413-9033 (domestic) or (706) 679-5076 (international) or can listen via a live Internet webcast, which can be found on the Investor Relations page of the Virage Logic website at www.viragelogic.com. A replay of the call will be available at (800) 642-1687 (domestic) or (706) 645-9291 (international), access number 7209688 through August 4, 2007; and the webcast can be accessed at www.viragelogic.com for 30 days.

About Virage Logic Corporation

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. Today, as the semiconductor industry's trusted IP partner, the company is a leading provider of embedded memories, logic, and I/Os, and is pioneering the development of a new class of IP called Silicon Aware IP(TM). 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 Characterization Lab(TM) for certain products to help ensure high quality, reliable IP across a wide range of foundries and process technologies. The company also prides itself on providing superior customer support and was named the 2006 Customer Service Leader of the Year in the Semiconductor IP Market by Frost & Sullivan. Headquartered in Fremont, California, Virage Logic has R&D, sales and support offices worldwide. For more information, visit www.viragelogic.com.