EXA Exa Corp. (MM)

Exa® Corporation (NASDAQ:EXA), a global innovator in simulation software for product engineering, today announced financial results for the second quarter fiscal 2018, which ended July 31, 2017.

Revenue Summary

Second Quarter

	2Q18 (millions)		2Q17 (millions)		Growth Rate		Constant Currency Growth Rate
Total Revenue	$17.5		$17.1		2%		3%
License Revenue	$15.2		$14.8		3%		4%
Project Revenue	$2.3		$2.3		(2)%		(2)%

“Our second-quarter financial results were all within our guided ranges,” said Stephen Remondi, President and Chief Executive Officer of Exa. “In the second quarter we saw continued growth from the heavy vehicle and aerospace markets and the slower growth from the passenger car industry we expected. However, we are optimistic that bookings activity in the automotive market will catch up with demand in consumption trends, giving us confidence to guide improving revenue growth in the second half of the year.”

“In addition, we are pleased by the stronger and broader initial demand for our DigitalROCK solutions among super-major, independent and national oil companies. By significantly expanding our addressable market, we believe this new vertical market will represent a material contribution to our near-term as well as long-term growth.”

Second Quarter Fiscal 2018 Financial Highlights

Revenue

• Total revenue for the second quarter of fiscal 2018 was $17.5 million, compared to $17.1 million in the comparable period in fiscal 2017. On a constant currency basis, total revenue increased 3% when compared with the corresponding period in fiscal 2017.
• License revenue was $15.2 million for the second quarter of fiscal 2018, compared to $14.8 million in the comparable period in fiscal 2017, representing an increase of 3%, 4% on a constant currency basis.
• Project revenue was $2.3 million for the second quarter of fiscal 2018, compared to $2.3 million in the comparable period in fiscal 2017, representing a decrease of 2%, 2% on a constant currency basis.

Profitability

• GAAP loss from operations was $(2.4) million in the second quarter of fiscal 2018, compared to a loss of $(0.4) million in the comparable period in fiscal 2017.
• Non-GAAP operating loss was $(1.2) million in the second quarter of fiscal 2018, compared to income of $0.1 million in the comparable period in fiscal 2017.
• GAAP net loss was $(2.6) million in the second quarter of fiscal 2018, compared to a loss of $(0.7) million for the comparable period in fiscal 2017. GAAP net loss per share was $(0.18), based on 15.0 million diluted weighted average shares outstanding, compared to GAAP net loss per share of $(0.05) for the comparable period in fiscal 2017, based on 14.8 million diluted weighted average shares outstanding.
• Adjusted EBITDA was $0.0 million in the second quarter of fiscal 2018, compared to $1.0 million in the comparable period in fiscal 2017.
• Non-GAAP net loss was $(1.9) million, or $(0.12) per diluted share in the second quarter of fiscal 2018, compared to a loss of $(0.3) million, or $(0.02) per diluted share, in the comparable period in fiscal 2017.

Balance Sheet

• The company had $18.4 million in cash and cash equivalents as of July 31, 2017, compared to $26.6 million as of April 30, 2017.

Business Outlook

Based on information available as of today, Exa is providing third quarter and fiscal 2018 guidance as indicated below.

Third Quarter Fiscal 2018:

• Total revenue is expected to be in the range of $19.4 million to $21.2 million.
• Adjusted EBITDA is expected to range from $2.0 million to $3.0 million.
• GAAP net (loss) income is expected to be in the range of $(0.7) million to $0.3 million.
• Non-GAAP net income is expected to be in the range of $0.1 million to $1.1 million.
• Basic share count for the third quarter is estimated to be 15.1 million shares.
• Diluted share count for the third quarter is estimated to be 15.5 million shares.

Full Year Fiscal 2018:

• Total revenue is expected to be in the range of $76.0 million to $80.0 million.
• Adjusted EBITDA is expected to be in the range of $6.0 million to $8.2 million.
• GAAP net loss is expected to be in the range of $(5.7) million to (3.5) million.
• Non-GAAP net loss is expected to be in the range of $(2.7) million to $(0.5) million.
• Basic share count for the full year is estimated to be 15.0 million shares.
• Diluted share count for the full year is estimated to be 15.5 million shares.

The above guidance assumes an exchange rate of 1.17 US dollars per Euro and 110 Japanese yen per US dollar for fiscal year 2018.

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 and non-GAAP net loss, 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 2018 financial results conference call
When:		Monday, August 28, 2017
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 69216214, Domestic
		(404) 537-3406, Passcode 69216214, 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, 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 (Nasdaq:EXA) (www.exa.com) Corporation's visualization and simulation software helps designers and engineers enhance the performance of their products, reduce product development costs and improve the efficiency of their design and engineering processes. 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. Exa currently focuses primarily on the ground transportation market, in which 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, and has recently expanded its technology offerings into the fields of aerospace and oil and gas production. 

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, 2017 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,
		2017			2017
ASSETS
Current assets:
Cash and cash equivalents	$	18,429		$	24,552
Accounts receivable		15,444			24,259
Prepaid expenses and other current assets		3,440			2,898
Total current assets		37,313			51,709
Property and equipment, net		13,475			14,028
Intangible assets, net		1,519			1,694
Deferred tax assets		541			566
Restricted cash		352			352
Other assets		906			725
Total assets	$	54,106		$	69,074
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,678		$	4,616
Accrued expenses		7,097			10,569
Current portion of deferred revenue		23,840			29,006
Current portion of capital lease obligations		1,496			1,737
Total current liabilities		35,111			45,928
Deferred revenue		33			238
Capital lease obligations		162			914
Deferred rent		2,085			2,391
Other long-term liabilities		441			429
Total liabilities		37,832			49,900
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; 15,047,030 and   14,926,429 shares issued, respectively; 15,014,528 and 14,893,927 shares   outstanding, respectively		15			15
Additional paid-in capital		96,492			94,516
Accumulated deficit		(80,036	)		(74,817	)
Treasury stock (32,502 common shares, at cost)		0			0
Accumulated other comprehensive loss		(197	)		(540	)
Total stockholders’ equity		16,274			19,174
Total liabilities and stockholders’ equity	$	54,106		$	69,074

 

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,
		2017				2016				2017				2016
Revenue:
License revenue	$	15,200			$	14,810			$	29,630			$	28,869
Project revenue		2,253				2,302				4,379				5,028
Total revenue		17,453				17,112				34,009				33,897
Operating expenses (1):
Cost of revenues		5,326				4,632				10,512				9,436
Sales and marketing		3,493				3,392				6,913				6,723
Research and development		6,800				6,023				13,204				12,234
General and administrative (2)		4,201				3,457				8,214				6,906
Total operating expenses		19,820				17,504				38,843				35,299
Loss from operations		(2,367	)			(392	)			(4,834	)			(1,402	)
Other (expense) income, net:
Foreign exchange (loss) gain		(525	)			(22	)			(739	)			193
Interest expense		(12	)			(39	)			(28	)			(86	)
Interest income		18				11				32				21
Other income, net		—				3				—				12
Total other (expense) income, net		(519	)			(47	)			(735	)			140
Loss before income taxes		(2,886	)			(439	)			(5,569	)			(1,262	)
Benefit (provision) for income taxes		251				(239	)			384				(359	)
Net loss	$	(2,635	)		$	(678	)		$	(5,185	)		$	(1,621	)
Net loss per share:
Basic	$	(0.18	)		$	(0.05	)		$	(0.35	)		$	(0.11	)
Diluted	$	(0.18	)		$	(0.05	)		$	(0.35	)		$	(0.11	)
Weighted average shares outstanding used in computing net   loss per share:
Basic		14,952,668				14,784,795				14,926,865				14,711,429
Diluted		14,952,668				14,784,795				14,926,865				14,711,429
Comprehensive loss:
Net loss	$	(2,635	)		$	(678	)		$	(5,185	)		$	(1,621	)
Foreign currency translation adjustment		300				(75	)			343				42
Comprehensive loss	$	(2,335	)		$	(753	)		$	(4,842	)		$	(1,579	)
(1) Includes stock-based compensation expense as follows:
	Three Months Ended July 31,								Six Months Ended July 31,
		2017				2016				2017				2016
Cost of revenues	$	42			$	39			$	79			$	83
Sales and marketing		181				58				252				148
Research and development		435				162				707				345
General and administrative		456				178				701				350
Total	$	1,114			$	437			$	1,739			$	926
(2) Includes amortization expense related to intangible assets as follows:
	Three Months Ended July 31,								Six Months Ended July 31,
		2017				2016				2017				2016
General and administrative	$	88			$	88			$	175			$	175

 

EXA CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
		Six Months Ended July 31,
			2017				2016
Cash flows (used in) provided by operating activities:
Net loss		$	(5,185	)		$	(1,621	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			2,429				1,991
Stock-based compensation expense			1,739				926
Deferred rent (income) expense			(294	)			230
Deferred income taxes			25				(13	)
Net change in operating assets and liabilities:
Accounts receivable			8,712				20,004
Prepaid expenses and other current assets			(548	)			997
Other assets			(183	)			(39	)
Accounts payable			(107	)			(910	)
Accrued expenses			(3,273	)			(5,102	)
Other liabilities			12				47
Deferred revenue			(5,435	)			(9,777	)
Net cash (used in) provided by operating activities			(2,108	)			6,733
Cash flows used in investing activities:
Purchases of property and equipment			(3,780	)			(836	)
Net cash used in investing activities			(3,780	)			(836	)
Cash flows used in financing activities:
Proceeds from stock option exercises			351				356
Acquisition of common stock for tax withholding obligations			(148	)			-
Payments of capital lease obligations			(993	)			(1,456	)
Net cash used in financing activities			(790	)			(1,100	)
Effect of exchange rate changes on cash			555				741
Net (decrease) increase in cash and cash equivalents			(6,123	)			5,538
Cash and cash equivalents, beginning of period			24,552				27,649
Cash and cash equivalents, end of period		$	18,429			$	33,187
Supplemental cash flow disclosures:
Cash paid for interest		$	28			$	86
Cash paid for income taxes		$	1,260			$	1,117
Supplemental disclosure of non-cash investing activities:
Decrease in unpaid purchases of property and equipment		$	(2,110	)		$	(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,
			2017				2016				2017				2016
Net loss		$	(2,635	)		$	(678	)		$	(5,185	)		$	(1,621	)
Add back:
Depreciation and amortization			1,212				980				2,429				1,991
Interest (income) expense, net			(6	)			28				(4	)			65
Other income, net			—				(3	)			—				(12	)
Foreign exchange loss (gain)			525				22				739				(193	)
(Benefit) provision for income taxes			(251	)			239				(384	)			359
EBITDA			(1,155	)			588				(2,405	)			589
Stock-based compensation expense			1,114				437				1,739				926
Adjusted EBITDA		$	(41	)		$	1,025			$	(666	)		$	1,515
Non-GAAP operating (loss) income:		Three Months Ended July 31,								Six Months Ended July 31,
			2017				2016				2017				2016
Operating loss		$	(2,367	)		$	(392	)		$	(4,834	)		$	(1,402	)
Add back:
Stock-based compensation expense			1,114				437				1,739				926
Amortization of acquired intangible assets			88				88				175				175
Non-GAAP operating (loss) income		$	(1,165	)		$	133			$	(2,920	)		$	(301	)
Non-GAAP net loss:		Three Months Ended July 31,								Six Months Ended July 31,
			2017				2016				2017				2016
Net loss			(2,635	)			(678	)			(5,185	)			(1,621	)
Add back:
Stock-based compensation expense			1,114				437				1,739				926
Amortization of acquired intangible assets			88				88				175				175
Income tax effect (1)			(421	)			(184	)			(670	)			(385	)
Non-GAAP net loss		$	(1,854	)		$	(337	)		$	(3,941	)		$	(905	)
Non-GAAP net loss, per diluted share:		Three Months Ended July 31,								Six Months Ended July 31,
			2017				2016				2017				2016
Net loss, per diluted share (2)		$	(0.18	)		$	(0.05	)		$	(0.35	)		$	(0.11	)
Add back:
Stock-based compensation expense			0.07				0.03				0.12				0.06
Amortization of acquired intangible assets			0.01				0.01				0.01				0.01
Income tax effect (1)			(0.03	)			(0.01	)			(0.04	)			(0.03	)
Non-GAAP net loss, per diluted share (2)(3):		$	(0.12	)		$	(0.02	)		$	(0.26	)		$	(0.06	)
(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 15.0 million and 14.8 million for the three months ended July 31, 2017 and 2016, respectively, and 14.9 million and 14.7 million for the six months ended July 31, 2017 and 2016, 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, 2017				Year ended  January 31, 2018
(in millions)
Net income (loss)	$	(0.7) - 0.3			$	(5.7) - (3.5)
Add back:
Depreciation and amortization		1.3				5.2
Interest expense, net		0.1				0.4
Provision for income taxes		0.1				1.9
EBITDA		0.8 - 1.8				1.8 - 4.0
Stock-based compensation expense		1.2				4.2
Adjusted EBITDA	$	2.0 - 3.0			$	6.0 - 8.2
Non-GAAP net income (loss):		Three months ended  October 31, 2017				Year ended  January 31, 2018
(in millions)
Net income (loss)		(0.7) - 0.3				(5.7) - (3.5)
Add back:
Stock-based compensation expense		1.2				4.2
Amortization of acquired intangible assets		0.1				0.4
Income tax effect (1)		(0.5)				(1.6)
Non-GAAP net income (loss)		0.1 - 1.1				(2.7) - (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