VA Software Reports Second Consecutive Profitable Quarter on 55% Year-Over-Year Revenue Growth

VA Software Corporation (NASDAQ: LNUX), the online media, software and e-commerce leader in community-driven Open Source innovation, today announced financial results for its third quarter of fiscal 2006, ended April 30, 2006.

Total third quarter fiscal 2006 revenue from continuing operations grew 55%, to $10.8 million, compared to third quarter fiscal 2005 total revenue of $7.0 million. For the nine months ending April 30, 2006, total revenue from continuing operations grew 45% to $33.1 million, compared to $22.8 million for the nine months ending April 30, 2005.

On a GAAP basis, the third quarter fiscal 2006 net income from continuing operations was $1.0 million, or $0.02 per share, compared to the third quarter fiscal 2005 GAAP net loss of ($1.7) million, or ($0.02) per share. For the nine months ending April 30, 2006, net income on a GAAP basis was $10.3 million, or $0.16 per share, compared to a net loss of ($3.7) million, or ($0.06) per share, for the nine months ending April 30, 2005. Excluding the gain on the sale of Animation Factory, Inc., which was completed during the second quarter of fiscal 2006, for the nine months ending April 30, 2006, net income on a GAAP basis from continuing operations was $0.6 million, or $0.01 per share, compared to a net loss on a GAAP basis of ($4.4) million, or ($0.07) per share, for the nine months ending April 30, 2005. During the third quarter of fiscal 2006, the company's cash and investment balances grew by $1.8 million to $49.6 million as of April 30, 2006.

"We are proud to announce another profitable quarter, a direct result of solid execution across all three of our continuing businesses. Revenue growth was led by the media business, with third quarter revenue of $4.0 million, up 96% compared to $2.1 million in the third quarter of fiscal 2005. Our software business had another strong quarter with $2.9 million in third quarter revenue, up 53% compared to $1.9 million in the third quarter of fiscal 2005. Third quarter fiscal 2006 revenue from our e-commerce business grew by 29% to $3.9 million, compared to the third quarter of fiscal 2005," said Ali Jenab, president and CEO. "Our media team clearly demonstrated success in selling more inventory at higher prices during the quarter as advertisers ran major branding campaigns on our network. Both our media and software businesses have strong pipelines of opportunities for our fourth fiscal quarter."

As specified in the attached reconciliation of net income/(loss) as reported to pro forma net income/(loss), the third quarter fiscal 2006 pro forma net income was $1.1 million, or $0.02 per share, compared to the third quarter fiscal 2005 pro forma net loss of ($1.7) million, or ($0.03) per share.

A conference call to review results will be held at 5:00 pm (Eastern) today. The call may be accessed via webcast at http://www.vasoftware.com or by dialing (800) 895-1713 or (785) 424-1058. A replay of the call will be available for 30 days by dialing (800) 839-2475 or (402) 220-7220.

Recent Highlights

--  Customers. Through third quarter fiscal 2006, VA Software had sold
    the SourceForge® solution to a total of 155 customers. During the
    third quarter of fiscal 2006, Motorola, Amazon.com, Atlas Technologies,
    Seacor Holdings and entities in Japan and Germany, among others were
    added to the installed base. In addition, existing customers,
    including FedEx, Lockheed Martin, USDA Forest Service and Northrop
    Grumman purchased additional SourceForge licenses or services.

--  SourceForge.net. SourceForge.net® launched an upgrade to its
    software map, offering more efficient browsing of the more than
    120,000 Open Source projects hosted on the site. Following the debut of
    the new software map, queries to the supporting search systems
    increased by more than 25%. The new software map enables the community
    to sort projects by several different metrics, including activity
    level, ranking, and latest release. Registered users can access
    additional functionality including powerful filtering options plus the
    ability to monitor individual projects directly from the software map
    and to suggest projects for re-categorization.

    Other upgrades completed by or scheduled to be rolled out this month
    include a powerful restructure of how users can search for, and within,
    projects. The site also recently deployed improvements to its CVS
    service and plans later this month to deploy a major upgrade to the
    Mailman mailing list software used to power the site's project mailing
    list.

--  OSTG. OSTG sites, SourceForge.net, Slashdot.org, freshmeat.net,
    Linux.com, Newsforge.com and ITMJ.com continue to see measurable
    success with selling, building and hosting custom publishing programs
    for major clients such as AMD, HP, IBM, Perforce and Rackspace. Recent
    programs have included the continuation of AMDs large-scale audience
    outreach initiatives and portals on Slashdot.org and SourceForge.net,
    and the launch of a large-scale world-wide program for IBM to promote
    downloads of Apache Geronimo server as part of IBMs branding
    initiatives around WebSphere® Application Server Community Edition.
    The program generated more than 33,000 downloads in less than eight
    weeks.

    According to Nielsen/NetRatings @Plan Spring 2006 report, OSTG once
    again ranked number one among visitors who went online to seek
    technology news - a spot the network has held since 2003. OSTG also
    ranks number one for delivering visitors in the software/programming
    industry.

    According to Google Analytics, the OSTG network of sites continues to
    serve more than 30 million unique visitors and more than 270 million
    page views monthly.

--  Management. VA Software announced the appointment of Rich Marino as
    Group President of its online media division, OSTG, Inc. (Open Source
    Technology Group). Marino comes to OSTG with more than 24 years of
    executive management, sales, marketing, and global operations
    experience with media organizations such as CNet, Ziff Davis and IDG.