Exa Corporation
Aug 29, 2016

Exa Reports Second Quarter Fiscal 2017 Financial Results

License Revenue Increases 14%, Operating Leverage Continues to Improve

BURLINGTON, Mass., Aug. 29, 2016 (GLOBE NEWSWIRE) -- Exa® Corporation (NASDAQ:EXA), a global innovator in simulation software for product engineering, today announced financial results for the second quarter fiscal 2017, which ended July 31, 2016.

Revenue Summary

Second Quarter

 2Q17 (millions)2Q16 (millions)Growth 
Rate
Constant Currency 
Growth Rate
Total Revenue$17.1 $15.5  11% 8%
License Revenue$14.8 $13.0  14% 11%
Project Revenue$2.3 $2.5  (7)% (8)%

"Second quarter revenue was within our guidance range, reflecting the predictability of our licensing model. In addition, profitability exceeded our guidance range as we continue to realize the leverage in our operating model," said Stephen Remondi, President and Chief Executive Officer of Exa. "We believe that our focus on license revenue, as we continue the conversion of project-based customers to ExaCLOUD-based recurring license customers, will drive stronger year-over-year revenue growth in the second half of the year. As such, we remain confident that we will deliver continued growth in both revenue and profitability in fiscal 2017, further strengthening our leadership position in the market."

Second Quarter Fiscal 2017 Financial Highlights

Revenue

Profitability

Balance Sheet

Business Outlook

Based on information available as of today, Exa is providing third quarter and fiscal 2017 guidance as indicated below.

Third Quarter Fiscal 2017:

Full Year Fiscal 2017:

The above guidance assumes an exchange rate of 1.11 US dollars per Euro and 104.0 Japanese yen per US dollar for fiscal year 2017.

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 operating loss, non-GAAP net loss and non-GAAP net loss per diluted share, to the comparable GAAP measures is provided below and in the attachments to this press release. 

Conference Call Information
  
What: Exa's second quarter fiscal 2017 financial results conference call
When: Monday, August 29, 2016
Time:4:30 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 63984357, Domestic
 (404) 537-3406, Passcode 63984357, 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 operating income (loss), non-GAAP net income (loss), non-GAAP net income (loss) 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 operating income (loss) is GAAP income (loss) from operations. The GAAP measure most comparable to non-GAAP net income (loss) and Adjusted EBITDA is GAAP net income (loss).  The GAAP measure most comparable to non-GAAP net income (loss) per diluted share is GAAP net income (loss) 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 (loss) as net income (loss), excluding the after tax impact of non-cash, stock-based compensation expense and the amortization of acquired intangibles. We define EBITDA as net income (loss), excluding depreciation and amortization, interest expense, net, other income (expense), foreign exchange gain (loss) and benefit (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 (Nasdaq:EXA) (www.exa.com) Corporation's visualization and simulation software helps designers and engineers produce better vehicles and equipment. As a design evolves, Exa accurately predicts the performance of that design while providing actionable insight to optimize the performance of the product. With Exa, the need for costly physical prototypes and expensive late-stage changes is reduced. Now, designers and engineers are freed from the risk of producing compromised products that do not meet market and regulatory requirements. Some of the most successful product companies in the world use Exa, including BMW, Delphi, Denso, Fiat Chrysler, Ford, Hino, Honda, Hyundai, Jaguar Land Rover, Kenworth, Komatsu, MAN, Nissan, Peterbilt, Peugeot, 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, 2016 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
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
     
  July 31, January 31, 
   2016   2016 
ASSETS    
Current assets:    
Cash and cash equivalents $33,187  $27,649 
Accounts receivable  11,655   32,072 
Prepaid expenses and other current assets  2,689   3,707 
Total current assets  47,531   63,428 
Property and equipment, net  10,832   12,032 
Intangible assets, net  1,869   2,044 
Deferred tax assets  441   428 
Restricted cash  352   352 
Other assets  775   737 
Total assets $61,800  $79,021 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $2,151  $3,462 
Accrued expenses  7,458   12,199 
Current portion of deferred revenue  26,014   32,849 
Current portion of capital lease obligations  2,321   2,823 
Total current liabilities  37,944   51,333 
Deferred revenue  1,736   4,484 
Capital lease obligations  1,657   2,549 
Deferred rent  2,527   2,490 
Other long-term liabilities  726   678 
Total liabilities  44,590   61,534 
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 shares authorized; 14,853,358 and
  14,663,621 shares issued, respectively; 14,820,856 and 14,631,119 shares
  outstanding, respectively
  15   15 
Additional paid-in capital  92,928   91,626 
Accumulated deficit  (75,306)  (73,685)
Treasury stock (32,502 common shares, at cost)  0   0 
Accumulated other comprehensive loss  (427)  (469)
Total stockholders' equity  17,210   17,487 
Total liabilities and stockholders' equity $61,800  $79,021 
     


EXA CORPORATION 
Condensed Consolidated Statements of Operations and Comprehensive Loss 
(Unaudited) 
(in thousands, except share and per share data) 
          
  Three Months Ended July 31, Six Months Ended July 31, 
   2016   2015   2016   2015  
Revenue:         
License revenue $14,810  $12,977  $28,869  $25,219  
Project revenue  2,302   2,478   5,028   5,004  
Total revenue  17,112   15,455   33,897   30,223  
Operating expenses (1):         
Cost of revenues  4,632   4,755   9,436   9,398  
Sales and marketing  3,392   2,440   6,723   4,928  
Research and development  6,023   5,952   12,234   12,122  
General and administrative (2)  3,457   3,126   6,906   6,393  
Total operating expenses  17,504   16,273   35,299   32,841  
Loss from operations  (392)  (818)  (1,402)  (2,618) 
Other (expense) income, net         
Foreign exchange (loss) gain  (22)  (171)  193   (223) 
Interest expense  (39)  (54)  (86)  (119) 
Interest income  11   2   21   5  
Other income, net  3    12   
Total other (expense) income, net  (47)  (223)  140   (337) 
Loss before income taxes  (439)  (1,041)  (1,262)  (2,955) 
Provision for income taxes  (239)  (154)  (359)  (128) 
Net loss $(678) $(1,195) $(1,621) $(3,083) 
Net loss per share:         
Basic $(0.05) $(0.08) $(0.11) $(0.21) 
Diluted $(0.05) $(0.08) $(0.11) $(0.21) 
Weighted average shares outstanding used in computing net loss per share:         
Basic  14,784,795   14,535,539   14,711,429   14,420,562  
Diluted  14,784,795   14,535,539   14,711,429   14,420,562  
          
Comprehensive loss:         
Net loss $(678) $(1,195) $(1,621) $(3,083) 
Foreign currency translation adjustment  (75)  (12)  42   28  
Comprehensive loss $(753) $(1,207) $(1,579) $(3,055) 
          
          
(1) Includes stock-based compensation expense as follows:         
  Three Months Ended July 31, Six Months Ended July 31, 
   2016   2015   2016   2015  
Cost of revenues $39  $53  $83  $122  
Sales and marketing  58   85   148   200  
Research and development  162   185   345   426  
General and administrative  178   168   350   357  
Total $437  $491  $926  $1,105  
          
          
(2) Includes amortization expense related to intangible assets as follows:       
  Three Months Ended July 31, Six Months Ended July 31, 
   2016   2015   2016   2015  
General and administrative $88  $87  $175  $175  
                  


EXA CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
     
  Six Months Ended July 31,
   2016   2015 
Cash flows provided by operating activities:    
Net loss $(1,621) $(3,083)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization  1,991   1,528 
Stock-based compensation expense  926   1,105 
Deferred rent expense  230   (179)
Deferred income taxes  (13) 
Net change in operating assets and liabilities:    
Accounts receivable  20,004   21,302 
Prepaid expenses and other current assets  997   (276)
Other assets  (39)  68 
Accounts payable  (910)  112 
Accrued expenses  (5,102)  (3,635)
Other liabilities  47   (93)
Deferred revenue  (9,777)  (7,251)
Net cash provided by operating activities  6,733   9,598 
Cash flows used in investing activities:    
Purchases of property and equipment  (836)  (626)
Net cash used in investing activities  (836)  (626)
Cash flows used in financing activities:    
Proceeds from stock option and warrant exercises  356   1,130 
Payments of capital lease obligations  (1,456)  (1,301)
Net cash used in financing activities  (1,100)  (171)
Effect of exchange rate changes on cash  741   (180)
Net increase in cash and cash equivalents  5,538   8,621 
Cash and cash equivalents, beginning of period  27,649   21,785 
Cash and cash equivalents, end of period $33,187  $30,406 
     
Supplemental cash flow disclosures:    
Cash paid for interest $86  $119 
Cash paid for income taxes $1,117  $1,043 
Supplemental disclosure of non-cash investing activities:    
Decrease in unpaid purchases of property and equipment $(337) $  —
     


EXA CORPORATION
Reconciliation of historical Non-GAAP to GAAP measures
(Unaudited)
(in thousands, except per share data)
         
         
Adjusted EBITDA: Three Months Ended July 31, Six Months Ended July 31,
   2016   2015   2016   2015 
         
Net loss $(678) $(1,195) $(1,621) $(3,083)
Add back:        
Depreciation and amortization  980   778   1,991   1,528 
Interest expense, net  28   52   65   114 
Other income, net  (3)     (12)   
Foreign exchange loss (gain)  22   171   (193)  223 
Provision for income taxes  239   154   359   128 
EBITDA  588   (40)  589   (1,090)
Stock-based compensation expense  437   491   926   1,105 
Adjusted EBITDA $1,025  $451  $1,515  $15 
         
Non-GAAP operating income (loss): Three Months Ended July 31, Six Months Ended July 31,
   2016   2015   2016   2015 
         
Operating loss $(392) $(818) $(1,402) $(2,618)
Add back:        
Stock-based compensation expense  437   491   926   1,105 
Amortization of acquired intangible assets  88   87   175   175 
Non-GAAP operating income (loss) $133  $(240) $(301) $(1,338)
         
Non-GAAP net loss: Three Months Ended July 31, Six Months Ended July 31,
   2016   2015   2016   2015 
         
Net loss  (678)  (1,195)  (1,621)  (3,083)
Add back:        
Stock-based compensation expense  437   491   926   1,105 
Amortization of acquired intangible assets  88   87   175   175 
Income tax effect (1)  (184)  (199)  (385)  (445)
Non-GAAP net loss $(337) $(816) $(905) $(2,248)
         
Non-GAAP net loss, per diluted share: Three Months Ended July 31, Six Months Ended July 31,
   2016   2015   2016   2015 
Net loss, per diluted share (2) $(0.05) $(0.08) $(0.11) $(0.21)
Add back:        
Stock-based compensation expense  0.03   0.03   0.06   0.08 
Amortization of acquired intangible assets  0.01   0.01   0.01   0.01 
Income tax effect (1)  (0.01)  (0.02)  (0.03)  (0.03)
Non-GAAP net loss, per diluted share (2)(3): $(0.02) $(0.06) $(0.06) $(0.16)
         
(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 statutory United States federal tax rate and our estimated state tax rate. The tax effect is exclusive of any impact from valuation allowances established against our United States net deferred tax assets and other discrete items. 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 14.8 million and 14.5 million for the three months ended July 31, 2016 and 2015, respectively, and 14.7 million and 14.4 million for the six months ended July 31, 2016 and 2015, respectively.
         
(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 ended
October 31, 2016
  Year ended
 January 31, 2017
(in millions)     
Net loss$ (0.9) - (0.3) $(2.9) - (2.6)
Add back:     
Depreciation and amortization  1.0   4.5
Interest expense, net  0.1   0.2
Provision for income taxes  0.2   1.3
EBITDA  0.4 - 1.0   3.1 - 3.4
Stock-based compensation expense  0.5   1.8 - 3.0
Adjusted EBITDA$ 0.9 - 1.5  $4.9 - 6.4
      
Non-GAAP net (loss) income Three months ended
October 31, 2016
  Year ended
 January 31, 2017
(in millions)     
Net loss  (0.9) - (0.3)  (2.9) - (2.6)
Add back:     
Stock-based compensation expense  0.5   1.8 - 3.0
Amortization of acquired intangible assets  0.1   0.3
Income tax effect (1)  (0.2)  (0.7) - (1.2)
Non-GAAP net (loss) income  (0.5) - 0.1   (1.5) - (0.5)
      
      
(1)  Non-GAAP financial information is adjusted using a blended rate equivalent to our annual statutory United States federal tax rate and our estimated state tax rate. The tax effect is exclusive of any impact from valuation allowances established against our United States net deferred tax assets and other discrete items. 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