Exa Reports Third Quarter Fiscal 2014 Financial Results

Revenue Increases 12%, or 15% on a Constant Currency Basis, From a Year Ago

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| Source: Exa Corporation

BURLINGTON, Mass., Dec. 4, 2013 (GLOBE NEWSWIRE) -- Exa® Corporation (Nasdaq:EXA), a global innovator of fluids simulation solutions for product engineering, today announced financial results for the third quarter of fiscal 2014, which ended October 31, 2013.

"We are pleased to report a return to double-digit growth in the quarter, with revenue increasing 12%, or 15% on a constant currency basis, from a year ago," said Stephen Remondi, President and Chief Executive Officer of Exa. "With our improving business momentum, we are more confident in our ability to deliver double-digit revenue growth for all of fiscal 2014. We believe we have significant opportunities ahead of us and that we can deliver strong growth as we further penetrate existing customers, and leverage our leadership in ground transportation to new clients in additional markets around the world. To accomplish this we expect to continue making investments in products, technology and people across our organization that we believe will drive long-term growth and increasing shareholder value."

Third Quarter Fiscal 2014 Financial Highlights

Revenue

  • Total revenue for the third quarter of fiscal 2014, which ended October 31, 2013, was $14.1 million, an increase of 12% compared to $12.6 million in the comparable period in fiscal 2013. Revenue in the third quarter grew by 15% on a constant currency basis, compared with the corresponding period in fiscal 2013.
  • License revenue was $11.1 million for the third quarter of fiscal 2014, compared to $10.3 million in the comparable period in fiscal 2013, representing an increase of 8%, or 10% on a constant currency basis.
  • Project revenue was $3.0 million for the third quarter of fiscal 2014, compared to $2.3 million in the comparable period in fiscal 2013, representing an increase of 30%, or 35% on a constant currency basis.

Profitability

  • GAAP income from operations was $0.7 million in the third quarter of fiscal 2014, compared to GAAP income from operations of $0.9 million in the comparable period in fiscal 2013.
  • Non-GAAP income from operations was $1.1 million in the third quarter of fiscal 2014, compared to non-GAAP income from operations of $1.2 million in the comparable period in fiscal 2013.
  • Adjusted EBITDA was $1.6 million in the third quarter of fiscal 2014, compared to $1.6 million in the comparable period in fiscal 2013.
  • GAAP net income was $0.5 million in the third quarter of fiscal 2014, compared to GAAP net income of $0.2 million for the comparable period in fiscal 2013. GAAP net income per share was $0.04, based on 14.7 million diluted weighted average shares outstanding, compared to GAAP net income per share of $0.01 for the comparable period in fiscal 2013, based on 14.6 million diluted weighted average shares outstanding.
  • Non-GAAP net income was $0.8 million, or $0.05 per diluted share in the third quarter of fiscal 2014, compared to non-GAAP net income of $0.4 million, or $0.03 per diluted share, in the third quarter of fiscal 2013.

Balance Sheet

  • The company had $25.4 million in cash and cash equivalents at October 31, 2013, compared to $33.0 million at July 31, 2013.

Business Outlook

Based on information available as of December 4, 2013, Exa is issuing guidance for the fourth quarter and full year fiscal 2014 as indicated below.

Fourth Quarter Fiscal 2014:

  • Total revenue is expected to be in the range of $14.2 million to $15.7 million.
  • GAAP net (loss)/income is expected to be in the range of $(0.2) million to $0.4 million.
  • Non-GAAP net income is expected to be in the range of $0.1 million to $0.7 million.
  • Adjusted EBITDA is expected to be in the range of $0.6 million to $1.8 million.
  • Basic share count for the third quarter is estimated to be 13.4 million shares.
  • Diluted share count for the third quarter is estimated to be 14.8 million shares.

Full Year Fiscal 2014:

  • Total revenue is expected to be in the range of $53.5 million to $55.0 million.
  • GAAP net loss is expected to be in the range of ($1.0) million to $(0.4) million.
  • Non-GAAP net income is expected to be in the range of breakeven to $0.6 million.
  • Adjusted EBITDA is expected to be in the range of $3.1 million to $4.2 million.
  • Basic share count for the full year is estimated to be 13.4 million shares.
  • Diluted share count for the full year is estimated to be 14.7 million shares.

The above guidance assumes an exchange rate of 1.35 US dollars per Euro and 100.0 Japanese yen per US dollar for the balance of fiscal year 2014.

An explanation and reconciliation of historical and forward-looking non-GAAP measures presented above, including revenue on a constant currency basis, adjusted EBITDA, non-GAAP income (loss) from operations and non-GAAP net income (loss), to the comparable GAAP measures is provided below and in the attachments to this press release.

Conference Call Information
 
What: Exa's third quarter fiscal 2014 financial results conference call 
When: Wednesday, December 4, 2013
Time: 5:00 p.m. ET
Webcast: http://investor.exa.com (live and replay)
Live Call: (877) 878-2664, Domestic
  (970) 315-0423, International
Replay: (855) 859-2056, Passcode 15425809, Domestic
  (404) 537-3406, Passcode 15425809, International

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are presented on a GAAP basis, we disclose revenue on a constant currency basis, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per diluted share and Adjusted EBITDA. These non-GAAP measures are not in accordance with, or an alternative for, amounts determined in accordance with generally accepted accounting principles in the United States. The GAAP measure most comparable to revenue on a constant currency basis is GAAP revenue. The GAAP measure most comparable to non-GAAP income from operations is GAAP income from operations. The GAAP measure most comparable to Non-GAAP net income and Adjusted EBITDA is GAAP net income. The GAAP measure most comparable to Non-GAAP net income per diluted share is GAAP net income per diluted share. A reconciliation of these non-GAAP financial measures to the corresponding GAAP measure is included below.

We define revenue on a constant currency basis as GAAP revenue, adjusted to reverse the impact of changes in the average exchange rates of currencies in which our international operations generated revenue and incurred expenses.

We define Non-GAAP net income as net income, excluding the after tax impact of non-cash, stock-based compensation expense and the amortization of acquired intangibles. We define EBITDA as net income, excluding depreciation and amortization, interest expense, loss on extinguishment of debt, other income (expense), foreign exchange gain (loss) and provision for income taxes, and we define Adjusted EBITDA as EBITDA, excluding non-cash, stock-based compensation expense.

Our management uses these non-GAAP measures when evaluating our operating performance and for internal planning and forecasting purposes. We believe that these measures help indicate underlying trends in our business, are important in comparing current results with prior period results, and are useful to investors and financial analysts in assessing our operating performance. For example, our international operations generate revenue and incur expenses that are denominated in foreign currencies. These amounts could be materially affected by currency fluctuations. Our principal exposures are to fluctuations in exchange rates for the United States dollar versus the Euro, British pound, Japanese yen, Chinese yuan and Korean won. Changes in currency exchange rates that are beyond our control can significantly affect our consolidated results of operations. We believe that disclosure of our revenue on a constant currency basis is useful as an indicator of demand for our solutions independent of the influence of currency exchange fluctuations. Management considers Adjusted EBITDA to be an important indicator of our operational strength and the performance of our business and a good measure of our historical operating trends. The non-GAAP financial information presented here should be considered in conjunction with, and not as a substitute for, or superior to, the financial information presented in accordance with GAAP and, in particular, should not be considered a measure of our liquidity. There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies. Investors should carefully consider the attached reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures.

About Exa Corporation

Exa Corporation develops, sells and supports simulation software and services to enhance product performance, reduce product development costs and improve the efficiency of design and engineering processes. Exa's simulation solutions enable their customers to gain crucial insight into design performance early in the design cycle, thus reducing the likelihood of expensive redesigns and late-stage engineering changes. As a result, Exa's customers realize significant cost savings and fundamental improvements in their engineering development process. Our products include, PowerFLOW®, PowerDELTA®, PowerCLAY®, PowerVIZ®, PowerSPECTRUM®, PowerACOUSTICS®, PowerINSIGHT®, PowerCASE™, PowerCOOL® and PowerTHERM® along with professional engineering consulting services. A partial customer list includes: AGCO, BMW, Ford, Hyundai, Kenworth, MAN, Nissan, Peterbilt, Renault, Scania, Toyota, Volkswagen, and Volvo Trucks.

Safe Harbor Statement

This press release, including the section entitled "Business Outlook," contains forward-looking statements describing our expectations concerning future events and our future financial performance. These statements are only predictions and may be inaccurate. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under "Risk Factors" in our Annual Report on Form 10-K for the year ended January 31, 2013, and Form 10-Q for the quarter-ended April 30, 2013, and in our other SEC filings. These factors may cause our actual results to differ materially from those described in our forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, our future results, levels of activity, performance or achievements may differ from our expectations. Other than as required by law, we do not undertake a responsibility to update any of the forward-looking statements after the date of this press release, even though our situation may change in the future.

EXA CORPORATION
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
     
  October 31, January 31,
  2013 2013
ASSETS    
Current assets:    
Cash and cash equivalents  $ 25,439  $ 30,716
Accounts receivable  7,538  27,840
Deferred tax assets  1,646  970
Prepaid expenses and other current assets  2,107  1,938
Total current assets  36,730  61,464
Property and equipment, net  5,924  6,176
Intangible assets, net  2,833  3,096
Deferred tax assets  13,212  12,274
Other assets  1,115  1,060
Total assets  $ 59,814  $ 84,070
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:    
Accounts payable  $ 852  $ 1,743
Accrued expenses  6,062  7,284
Current portion of long-term debt, net of discount (1)  --   1,747
Current portion of deferred revenue  11,674  26,013
Current maturities of capital lease obligations  2,010  2,051
Total current liabilities  20,598  38,838
Long-term debt, net of current portion and discount (1)  --   5,024
Deferred revenue  423  128
Capital lease obligations  1,890  2,818
Other long-term liabilities  879  1,009
Deferred rent  981  1,482
Total liabilities  24,771  49,299
     
Commitments and contingencies    
     
Stockholders' equity :    
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding  --   -- 
Common stock, $0.001 par value; 30,000,000 and 195,000,000 shares authorized, respectively; 13,380,361 and 13,319,715 shares issued, respectively; 13,347,859 and13,287,213 shares outstanding, respectively  13  13
Additional paid-in capital  84,805  83,786
Accumulated deficit  (49,835)  (49,012)
Treasury stock (32,502 common shares, at cost)  --   -- 
Accumulated other comprehensive loss  60  (16)
Total stockholders' equity   35,043  34,771
Total liabilities and stockholders' equity   $ 59,814  $ 84,070
     
(1) Includes amounts due to a related party, as follows:    
  October 31, January 31,
  2013 2013
     
Current portion of long-term debt  $ --   $ 274
Long-term debt, net of current portion  $ --   $ 499
     
 
EXA CORPORATION
Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) 
(Unaudited)
(in thousands, except share and per share data)
         
  Three Months Ended October 31, Nine Months Ended October 31,
  2013 2012 2013 2012
Revenue:        
 License revenue $11,121 $10,317 $32,532 $30,545
 Project revenue 2,987 2,295 6,768 5,194
Total revenues 14,108 12,612 39,300 35,739
Operating expenses (1):        
 Cost of revenues 4,023 3,644 11,527 9,979
 Sales and marketing 2,243 1,529 6,539 4,838
 Research and development 4,428 4,113 13,264 12,410
 General and administrative (2) 2,736 2,435 7,933 6,361
Total operating expenses 13,430 11,721 39,263 33,588
Income from operations 678 891 37 2,151
Other expense, net:        
 Foreign exchange gain (loss) 31 (115) (25) 211
 Interest expense (71) (403) (628) (1,226)
 Interest income 4 1 13 3
 Loss on extinguishment of debt  --   --  (755)  -- 
 Other income, net 2 2 7 513
Total other expense, net (34) (515) (1,388) (499)
Income (loss) before income taxes 644 376 (1,351) 1,652
(Provision) benefit for income taxes (128) (217) 528 (549)
 Net income (loss)  $516 $159 $(823) $1,103
         
Net income (loss) per share:        
 Basic $0.04 $0.01 $(0.06) $0.18
 Diluted $0.04 $0.01 $(0.06) $0.09
Weighted average shares outstanding used in computing net income (loss) per share:        
 Basic 13,341,235 13,264,018 13,318,839 6,133,987
 Diluted 14,704,522 14,639,264 13,318,839 12,303,723
         
         
Comprehensive income (loss):        
Net income (loss) $516 $159 $(823) $1,103
Foreign currency translation adjustments 64 10 76 13
Comprehensive income (loss) $580 $169 $(747) $1,116
         
         
(1) Includes stock-based compensation expense as follows:        
         
  Three Months Ended October 31, Nine Months Ended October 31,
  2013 2012 2013 2012
 Cost of revenues $35 $28 $99 $82
 Sales and marketing 67 49 169 143
 Research and development 110 75 264 232
 General and administrative 138 83 314 253
 Total $350 $235 $846 $710
         
(2) Includes amortization expense related to intangible assets as follows:        
         
  Three Months Ended October 31, Nine Months Ended October 31,
  2013 2012 2013 2012
 General and administrative $88 $98 $263 $292
         
 
EXA CORPORATION
 Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
     
  Nine Months Ended October 31,
  2013 2012
Cash flows provided by (used in) operating activities:    
Net (loss) income  $ (823)  $ 1,103
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:  
 Depreciation and amortization 1,561  1,321
 Stock-based compensation expense 846  710
 Deferred rent expense (424)  (142)
 Non-cash interest 162  444
 Loss on extinguishment of debt, non-cash portion 465  -- 
 Mark-to-market adjustment of preferred stock warrant liability  --   (228)
 Mark-to-market adjustment of equity participation right  --   (276)
 Deferred income taxes (1,614)  244
Net change in operating assets and liabilities:    
 Accounts receivable 20,398  15,780
 Prepaid expenses and other current assets (201)  104
 Other assets (55)  2,053
 Accounts payable (887)  (1,722)
 Accrued expenses (1,107)  (4,391)
 Other liabilities 84  (76)
 Deferred revenue (13,978)  (19,062)
Net cash provided by (used in) operating activities 4,427  (4,138)
     
Cash flows used in investing activities:    
 Purchases of property and equipment (674)  (348)
Net cash used in investing activities (674)  (348)
     
Cash flows (used in) provided by financing activities:    
 Net decrease in line of credit  --   (7,000)
 Proceeds from borrowings under long-term debt  --   3,500
 Proceeds from stock option and warrant exercises 173  31
 Payments of long-term debt (7,365)  (816)
 Payments of capital lease obligations (1,532)  (675)
 Proceeds from initial public offering, net of $4,174 issuance costs  --   34,592
 Payment of debt issuance costs  (213)  (100)
Net cash (used in) provided by financing activities (8,937)  29,532
     
Effect of exchange rate changes on cash  (93)  66
     
Net (decrease) increase in cash and cash equivalents (5,277)  25,112
     
Cash and cash equivalents, beginning of period  30,716  11,468
Cash and cash equivalents, end of period  $ 25,439  $ 36,580
     
Supplemental cash flow disclosures:    
 Cash paid for interest  $ 533  $ 751
 Cash paid for income taxes  $ 289  $ 773
Supplemental disclosure of non-cash investing and financing activities:    
 Acquisition of equipment through capital leases  $ 563  $ 2,116
 Conversion of preferred stock into common stock  $ --   $ 32,685
 Conversion of preferred stock warrants into common stock warrants  $ --   $ 1,324
     
     
EXA CORPORATION
Reconciliation of historical Non-GAAP to GAAP measures
(Unaudited)
(in thousands, except per share data)
         
Adjusted EBITDA:        
  Three Months Ended Nine Months Ended
  October 31, October 31,
  2013 2012 2013 2012
         
Net income (loss) $516 $159 $(823) $1,103
 Add back:        
Depreciation and amortization 522 489 1,561 1,321
Interest expense, net 67 402 615 1,223
Loss on extinguishment of debt  --   --  755  -- 
Other income, net (2) (2) (7) (513)
Foreign exchange (gain) loss (31) 115 25 (211)
Provision (benefit) for income taxes 128 217 (528) 549
EBITDA 1,200 1,380 1,598 3,472
Stock-based compensation expense 350 235 846 710
         
Adjusted EBITDA $1,550 $1,615 $2,444 $4,182
         
Non-GAAP operating income:        
  Three Months Ended Nine Months Ended
  October 31, October 31,
  2013 2012 2013 2012
         
Operating income $678 $891 $37 $2,151
 Add back:        
Stock-based compensation expense 350 235 846 710
Amortization of acquired intangible assets 88 98 263 292
         
Non-GAAP operating income $1,116 $1,224 $1,146 $3,153
         
Non-GAAP net income:        
  Three Months Ended Nine Months Ended
  October 31, October 31,
  2013 2012 2013 2012
         
Net income (loss) $516 $159 $(823) $1,103
 Add back:        
Stock-based compensation expense 350 235 846 710
Amortization of acquired intangible assets 88 98 263 292
Income tax effect (1) (155) (119) (388) (351)
         
Non-GAAP net income $799 $373 $(102) $1,754
         
Non-GAAP net income, per diluted share:        
  Three Months Ended Nine Months Ended
  October 31, October 31,
  2013 2012 2013 2012
         
Net income (loss), per diluted share (2) $0.04 $0.01 $(0.06) $0.09
 Add back:        
Stock-based compensation expense 0.02 0.02 0.06 0.06
Amortization of acquired intangible assets 0.01 0.01 0.02 0.02
Income tax effect (1) (0.01) (0.01) (0.03) (0.03)
         
Non-GAAP net income, per diluted share (2)(3): $0.05 $0.03 $(0.01) $0.14
 
(1) The tax effect of non-cash stock based compensation expense and non-cash amortization of acquired intangibles is estimated using a blended rate equivalent to our annual estimated United States federal tax rate and our state tax rate, exclusive of our net federal benefit. This rate is based on our estimated annual GAAP income tax rate forecast. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
 
(2) Share amounts utilized on a fully diluted basis were approximately 14.7 million and 13.3 million, respectively, for the three and nine months ended October 31, 2013. Share amounts utilized on a fully diluted bases were approximately 14.6 million and 12.3 million, respectively, for the three and nine months ended October 31, 2012.
 
(3) Due to rounding, totals may not equal the sum of line items in the table above.
 
 
EXA CORPORATION
Reconciliation of forward looking Non-GAAP to GAAP measures
     
EBITDA and Adjusted EBITDA:    
     
  Three Months Year Ended
   Ended January 31, January 31,
 (in millions)  2014  2014
     
Net (loss) income $(0.2) - 0.4 $(1.0) - (0.4)
 Add back:    
Depreciation and amortization 0.6 2.2
Interest expense, net 0.1 0.7
Other expense, net  --  0.7
(Benefit) provision for income taxes (0.3) - 0.3 (0.7) - (0.2)
EBITDA 0.2 - 1.4 1.9 - 3.0
Stock-based compensation expense 0.4 1.2
Adjusted EBITDA $0.6 - 1.8 $3.1 - 4.2
     
     
Non-GAAP net income:    
     
  Three Months Year Ended
  Ended January 31, January 31,
 (in millions)  2014  2014
     
Net (loss) income $(0.2) - 0.4 $(1.0) - (0.4)
 Add back:    
Stock-based compensation expense 0.4 1.2
Amortization of acquired intangibles 0.1 0.4
Income tax effect (1) (0.2) (0.6)
Non-GAAP net income $0.1 - 0.7 $0.0 - 0.6
(1)  Non-GAAP financial information for the quarter is adjusted using a blended tax rate equivalent to our annual estimated United States federal tax rate and our state tax rate, exclusive of our net federal benefit. This rate is based on our estimated annual GAAP income tax rate forecast. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. 
Media Contact:
Michelle Murray-Ross, Exa Corporation
+1 (781) 564-0251
michelle@exa.com

Investor Relations Contact:
Garo Toomajanian, ICR
+1 (781) 564-0337
investor@exa.com