Virage Announces Record Fiscal Third Quarter Revenues
SAN MATEO, CALIF. - January 17, 2002 - Virage, Inc. [Nasdaq: VRGE], a leading provider of enterprise rich-media application software, today reported record revenues for its third fiscal quarter, ended December 31, 2001.
Pro forma total revenues for the quarter ended December 31, 2001 were $5.0 million, a slight increase from the prior quarter and an increase of 53% over the same quarter in the prior year. Pro forma gross profit for the quarter was 54% of total revenues, up from 46% in the prior quarter. Pro forma net loss for the third quarter was $4.1 million, or $0.20 per share, compared to a prior quarter pro forma net loss of $5.2 million, or $0.26 per share.
Including non-cash, stock-based charges in accordance with generally accepted accounting principles, total revenues for the quarter were $4.8 million and net loss for the quarter was $5.2 million, or $0.26 per share. This compares to total revenues of $4.7 million and a net loss of $6.4 million, or $0.31 per share, in the prior quarter.
"I am pleased with our overall performance in what continue to be challenging economic times," said Paul G. Lego, chairman and CEO of Virage. "Through good sales management and tight cost control, I'm happy to say that we were able to maintain revenues as well as improve both our gross margin and bottom line significantly this quarter. We introduced our first rich-media solutions based on Virage's award-winning application platform. We also strengthened our management team to accelerate the development and deployment of these solutions. Overall, we continue to extend our industry leadership and believe that we are well-positioned for the future."
For the nine months ended December 31, 2001, pro forma total revenues were $14.2 million, an 82% increase over revenues of $7.8 million reported for the same period last fiscal year. Pro forma net loss was $15.3 million, or $0.76 per share, versus $18.1 million, or $1.03 per share, for the nine months ended December 31, 2000.
Including non-cash, stock-based charges in accordance with generally accepted accounting principles, total revenues were $13.5 million and net loss was $18.8 million, or $0.93 per share, for the nine months ended December 31, 2001. This compares to total revenues of $7.8 million and a net loss of $21.8 million, or $1.57 per share, for the nine months ended December 31, 2000.
Cash and short-term investments totaled $35.1 million as of December 31, 2001 versus $37.1 million as of September 30, 2001. Accounts receivable totaled $2.4 million, representing 43 days sales outstanding. The company had no debt as of December 31, 2001.
"This quarter, our operating loss was our lowest as a public company," said Al Castino, CFO of Virage. "Gross margin increased to 54%, and operating expenses dropped 10% which is our third consecutive quarterly improvement. We have carefully controlled costs while continuing to invest in important new products and solutions."
Other Third Quarter Highlights
New Customers and Repeat Business from Existing Customers
During the third quarter, Virage added a diverse set of first-time customers in the U.S. including Siebel Systems, Forrester Research, Ogilvy & Mather, University of Iowa, and America's Most Wanted, a television program produced by Twentieth Century Fox. New international customers for Virage in Q3 included Hong Kong Cable, Agence de Presses in Belgium, Ministero Interno in Italy, and the Nippon Institute for Educational Research in Japan. Virage also generated significant repeat business from existing customers including Bell Globemedia Interactive, British Telecom, Cisco, Deutsche Bank, KLA Tencor, MLB Advanced Media, and NASCAR.com. As of December 31, Virage concluded its processing of 2001 game content for MLB Advanced Media and had received most of the payments due. Additionally, in the third quarter, Virage received new orders from several existing government customers.
First Virage Solutions Launched And Platform Strengthened
In December, Virage announced its first two turnkey rich-media solutions. The new applications, VS Publishing™ and VS Webcasting™, are each built upon the company's award-winning video application platform.
VS Publishing offers media & entertainment customers a streamlined workflow for rich-media web publishing, including simple editorial control and greater website programming capabilities. The new product allows content owners to publish more content with fewer resources. VS Publishing is available as either in-house software or as a hosted service.
VS Webcasting allows corporations to self-produce live and on-demand webcasting events such as executive communications, human resource broadcasts, and webinars. Webcasts can include audio and video synchronized with slide presentations and documents as well as audience polls and questions. At the same time, VS Webcasting creates a searchable, on-demand version of the event that is available minutes after the live broadcast is over.
In the third quarter, Virage also introduced Video Application Server 3.0. The new server software from Virage adds user management and authentication features, allowing systems administrators to manage individuals and groups with varying privileges.
Stanford Au Joins Virage Executive Team
Virage also appointed Stanford Au as the company's new vice president of engineering. Au will be managing all engineering and software development initiatives for the company. Prior to joining Virage, Au was vice president of the Netscape Application Server Engineering Team. Au also spent seven years in senior engineering management positions with Sun Microsystems and five years with Hewlett-Packard. Au holds a B.S. in Electrical Engineering and Computer Science degree from UC Berkeley.
"We are extremely pleased to add someone with Stanford's knowledge and experience to our management team," said Paul Lego. "We believe his enterprise software experience will bring the company to the next level by accelerating our development of rich-media software solutions."
Looking Forward
"We continued to experience a difficult business climate during the last quarter," said Paul Lego. "On the positive side, our sales pipeline during the quarter remained strong as prospects early in the sales cycle continued to show growing interest in our products. However, we also noted increased caution and delayed decision-making late in our sales cycle, with a higher than normal percentage of deals postponed beyond quarter-end. In general, customers have told us that they still expect to make these purchases, but based on the conversion rate of our pipeline from last quarter, it is difficult for us to build this information into our guidance at this time. This abnormally low conversion rate, combined with the conclusion in December of our largest service contract, necessitates guidance of approximately 5 to 15 percent lower revenue than last quarter."
"As the economy improves, we believe we will see increased demand for our products and solutions. In the meantime, we will exercise strong expense controls while continuing to invest in new product development. We reiterate our long-term commitment to build Virage into a profitable and growing business."
Virage Third Quarter Webcast
Virage management will host a webcast to discuss third quarter financial performance, operating and strategic developments and forward-looking guidance at 3:00 pm Pacific Standard Time (6:00 pm Eastern Time) today, Thursday, January 17th, 2002. The webcast will be available live at www.virage.com/ir and will be available for replay at the same URL through February 28, 2002.
Forward-Looking Statements
This press release contains forward-looking statements, including statements about our future sales growth, particularly in the paragraph entitled "Looking Forward." Our forward looking statements are based on currently available information which management has assessed but which is subject to rapid change due to risks and uncertainties that affect our business, including the unpredictability of future revenues due to limited visibility into future demand; the current uncertainty in our marketplace which may impact expected demand, customer selection criteria and sales cycle; our ability to execute on service and software deliverables and major customer contracts; slower economic growth and other factors beyond our control. Our forward looking statements should be considered in the context of these and other risk factors disclosed from time to time in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and Form 10-Q filings.
Pro Forma Operating Results
Our pro forma operating results included in this press release represent our operating results for the respective periods presented excluding the impact of certain non-cash, stock-based charges. Such presentation is not in accordance with generally accepted accounting principles. Pro forma service revenues, total revenues and gross profit exclude $216,000 and $648,000 for the three and nine months ended December 31, 2001, respectively, of non-cash, contra-revenue charges. In addition, pro forma net loss for the three and nine months ended December 31, 2001 exclude non-cash, stock-based charges of $1.1 million and $3.5 million, respectively, and pro forma net loss for the three and nine months ended December 31, 2000 exclude non-cash, stock-based charges of $1.2 million and $3.8 million, respectively.
About Virage, Inc.
Established in 1995, Virage is a leading provider of enterprise rich-media application software. Virage builds integrated rich-media business solutions for corporations, media & entertainment companies, universities and government agencies worldwide. Headquarted in San Mateo, California, Virage (www.virage.com) has offices throughout the United States, Europe and Asia-Pacific.
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