Q4 2003 Virage Logic Corporation Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day everyone, and welcome to the Virage Logic 2003 fourth-quarter teleconference. As a reminder, this conference is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to the Vice President of Finance and CFO, Mr. Jim Pekarsky. Please go ahead, sir.

JIM PEKARSKY, CFO, VIRAGE LOGIC CORPORATION: Thank you, Peter, and good afternoon everyone. Thank you for joining us for Virage Logic's fourth-quarter fiscal 2003 results conference call. Today we will review the Company's financial results for the quarter, which were released approximately a half hour ago. This call is also being broadcast on the Internet and will be available on the Virage Logic web site at www.viragelogic.com. A copy of the news release announcing the financial results, which includes a reconciliation of pro forma net and operating loss to reported results, is available on this web site.

Joining me from our headquarters today is Adam Kablanian, Virage Logic's President and CEO. I will begin today's call with the usual Safe Harbor statement, and then Adam will take you through the highlights and key business events of the quarter. After that, I will discuss the details of our financial results, and our financial outlook. Finally, Adam will provide our current business outlook.

Today's presentation, including the question-and-answer period, may include projections, trends, outlook or other forward-looking statements that are subject to risks and uncertainties, which may cause actually events and results to differ materially. These risks and uncertainties include Virage Logic's ability to forecast its business, including its revenue and expense outlook, and risks including those that are discussed in detail in Virage Logic's SEC filings, including its annual report on Form 10-K for the period ended September 30, 2002, and other documents that the Company files from time to time, specifically our quarterly report on Form 10-Q.

Although an audio archive of this teleconference will be available on the Company's web site until the close of business in 2004, the statements made are only as of October 30, 2003, and we disclaim any duty or intention to update forward-looking statements. Before I turn the call over to Adam, I would like to note that unless stated otherwise, all pro forma numbers provided today, exclude the items shown in the reconciliation of pro forma net and operating loss to reported results included in the news release distributed earlier today. Now let me turn the meeting over to Adam.

ADAM KABLANIAN, PRESIDENT, CEO, DIRECTOR, VIRAGE LOGIC CORPORATION: Thank you, Jim, and good afternoon, everyone. As many of you may be aware, on October 21st, we issued a news release announcing preliminary results for the fourth-quarter revenues of 9.9 million, and also announced Jim's resignation and planned departure for the CFO position at privately-held AccelChip.

Top-line results for the quarter came in at the high end of our prior business outlook provided on July 24th, 2003, which called for revenues of approximately 9.7 to 10 million. And we are pleased to have met our expectations for the fourth quarter, as we continue to execute on our semiconductor IT platform strategy. The silicon-proven platform solution that we now have available is helping us to further penetrate existing customers and to compete for new business where the customer is seeking to outsource their memory, logic and I/O design requirements from a single source. As a result, we were able to sign a number of strategic agreements with our customers during the fourth quarter, rounding up a year in which we made significant progress in further advancing our technology and marketing of our platform solution.

Some examples of this during the fourth quarter included joint charters nanoaccess alliance to prequalify our 90-nanometer semiconductor (ph) IP platform to ensure lower production risk for customers as they move to this process node. In addition, we signed a 90-nanometer licensing agreement with a high-volume producer of graphics chips based in North America for our self-test and repair STAR Memory System for a number of applications. We also signed a large 90-nanometer deal for our ASAP memory product line with Infineon (ph) in Europe.

As announced earlier today, we completed a follow-on royalty-bearing licensing agreement with SMIC, which named Virage Logic as its preferred provider for .13 micron process, following a prior agreement that provided SMIC with our semiconductor IP platform on SMIC's .18 micron CMOS process. SMIC's worldwide customer base will now have access to silicon-proven platform technology from us.

During the quarter, we also partnered with NEC to successfully tape out a high-volume consumer application utilizing our silicon qualified NOVeA technology. This is the first tape out at NEC utilizing NOVeA, which follows customer adoption. We are pleased with NEC's success in qualifying NOVeA on their CMOS process node. And finally, during the fourth quarter, we signed six new direct royalty-bearing agreements for the STAR memory system. As you know, STAR is a key component of our royalty seeding strategy, and we now have over 55 STAR agreements in place. In addition, we also signed two new NOVeA agreements, one with the Department of Defense for IBM's .18 micron process; and one with Thompson Multimedia on TSMC's .13 micron process.

Now, I will move to some key metrics for the fourth quarter. License revenue for .13 …