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Artisan Components, Inc. Reports Record Revenue and Record Net Income for Its Second Quarter of Fiscal 2004

28 April 2004

SUNNYVALE, Calif.--(BUSINESS WIRE)--April 28, 2004--Artisan Components, Inc., (Nasdaq:ARTI), a leading provider of physical intellectual property (IP), today reported its results for the three-month period ended March 31, 2004. Total revenue for the second quarter of fiscal 2004 was comprised of license revenue and net royalty revenue of $15.3 million and $6.1 million, respectively, or $21.4 million, an increase of 33% from the same period in the prior year. Total revenue for the second quarter of fiscal 2003 was $16.1 million, comprised of license revenue and net royalty revenue of $13.9 million and $2.2 million, respectively.

Net income for the second quarter of fiscal 2004, on a generally accepted accounting principles ("GAAP") basis, was $4.8 million or $0.19 per diluted share, an increase of 297% from the same period in the prior year. For the second quarter of fiscal 2003, GAAP net income was $1.2 million or $0.06 per diluted share.

Pro forma net income for the second quarter of fiscal 2004 was $3.8 million or $0.15 per diluted share, an increase of 112% compared to pro forma net income of $1.8 million or $0.09 per diluted share for the second quarter of fiscal 2003. Pro forma net income is comprised of GAAP net income plus, to the extent incurred in any particular quarter, amortization of purchased intangible assets, deferred stock-based compensation expense, in-process research and development from acquisitions and the related income tax effect. A detailed reconciliation of GAAP net income to pro forma net income is included with this press release.

Total revenue for the first six months of fiscal 2004 was comprised of license revenue and net royalty revenue of $27.6 million and $13.8 million, respectively, or $41.4 million, an increase of 38% from the same period in the prior year. Total revenue for the first six months of fiscal 2003 was $30.1 million, comprised of license revenue and net royalty revenue of $25.9 million and $4.2 million, respectively.

Net income for the first six months of fiscal 2004, on a GAAP basis, was $8.5 million or $0.34 per diluted share, an increase of 152%, compared with net income of $3.4 million or $0.17 per diluted share for the first six months of fiscal 2003.

Pro forma net income for the first six months of fiscal 2004 was $7.1 million or $0.29 per diluted share, an increase of 103%, compared to pro forma net income of $3.5 million or $0.18 per diluted share for the first six months of fiscal 2003.

"We are pleased to report continued strong growth in our business. Our outstanding royalty results validate the power of our large and growing user base as well as our business model," said Mark Templeton, president and chief executive officer of Artisan Components. "During the quarter, we saw particularly strong license bookings, especially in the more advanced 90 nanometer process technologies."

Artisan is hosting a conference call beginning at 2:00 p.m. PST (5:00 p.m. EST) on Wednesday, April 28, 2004 to discuss the results of the second quarter of fiscal 2004 and to review Artisan's progress and outlook. Interested parties may participate in the conference call available by telephone at 800-884-5695 and the passcode is 27760725. There will also be a live webcast available within the investor relations' section of Artisan's website at access.arm.com. A telephonic replay will be available through Wednesday, May 5, 2004 at 888-286-8010. The passcode for the replay is 73441666.

Use of Non-GAAP Financial Measures

This earnings release includes financial information presented on both a pro forma and GAAP basis. Pro forma net income is comprised of GAAP net income plus, to the extent incurred in any particular quarter, amortization of purchased intangible assets and deferred stock-based compensation from acquisitions and in-process research and development. Pro forma net income and net income per share are reduced by the amount of additional tax that would be required to be accrued and expensed by us if pro forma results were used instead of GAAP results to calculate our tax liability.

We provide pro forma financial information to enhance the reader's overall understanding of our current financial performance and our prospects for the future. We believe the pro forma results provide useful information to investors by excluding certain expenses that we believe are not indicative of our core operating results. The pro forma measures are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between quarters. Further, these pro forma results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since we have historically reported pro forma results to the investment community, we believe the inclusion of pro forma numbers provides consistency in our financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Safe Harbor Statement

This press release contains forward-looking statements, including statements regarding Artisan's introduction of new products and technologies and demand for Artisan's products. These statements are subject to various risk factors including, without limitation, whether there will be technical or other difficulties that delay or prevent Artisan from introducing new products and technologies, market acceptance of such new products and technologies, Artisan's ability to convert bookings into license revenue, and uncertainties attendant to any new product offering. We refer you also to the documents that Artisan files from time to time with the Securities and Exchange Commission, in particular the section entitled "Factors Affecting Future Operating Results" in Artisan's annual report on Form 10-K and its quarterly reports on Forms 10-Q.

About Artisan Components

Artisan Components, Inc. is a leading provider of physical intellectual property (IP) components for the design and manufacture of complex system-on-a-chip integrated circuits. Artisan's products include embedded memory, standard cell, input/output, analog and mixed-signal components, which are designed to achieve the best combination of performance, density, power and yield for a given manufacturing process. Artisan has licensed its IP components to over 1,200 companies involved in integrated circuit design. Artisan is headquartered in Sunnyvale, California. More information about Artisan Components, including free library access, can be found at access.arm.com.

Artisan Components and Artisan are registered trademarks of Artisan Components, Inc. All other trademarks or registered trademarks are the property of their respective owners.

                       Artisan Components, Inc.
                 Condensed Consolidated Balance Sheet
                            (In thousands)
                             (Unaudited)

                                                Mar. 31,    Sept. 30,
                                                 2004         2003
                                               ----------   ----------
ASSETS
Current assets:
  Cash and cash equivalents                      $86,523      $98,841
  Marketable securities                           18,185        9,921
  Accounts receivable, net                        22,699       18,398
  Prepaid expenses and other current assets        3,541        2,197
                                               ----------   ----------
    Total current assets                         130,948      129,357

Long-term marketable securities                   24,625        5,504
Property and equipment, net                        6,303        7,418
Purchased intangible assets, net                   6,157        8,394
Goodwill, net                                     36,016       36,016
Other assets                                         496          414
                                               ----------   ----------
    Total assets                                $204,545     $187,103
                                               ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                  $531       $1,486
  Accrued liabilities                              7,619        7,201
  Deferred revenue, current portion               10,127        7,094
                                               ----------   ----------
    Total current liabilities                     18,277       15,781

Deferred revenue                                     885          788
Other liabilities                                    900        1,146
Deferred tax liability                             2,540        3,257
                                               ----------   ----------
    Total liabilities                             22,602       20,972
                                               ----------   ----------
Stockholders' equity:
Common stock                                          23           22
Additional paid-in capital                       174,193      168,442
Treasury stock                                         -       (1,399)
Deferred stock-based compensation                   (195)        (368)
Accumulated other comprehensive income               111          118
Retained earnings/(Accumulated deficit)            7,811         (684)
                                               ----------   ----------
    Total stockholders' equity                   181,943      166,131
                                               ----------   ----------
    Total liabilities and stockholders'
     equity                                     $204,545     $187,103
                                               ==========   ==========


                       Artisan Components, Inc.
           Condensed Consolidated Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                                  Three Months Ended Six Months Ended
                                       Mar. 31,          Mar. 31,
                                  ------------------ -----------------
                                      2004     2003     2004     2003
                                  --------- -------- -------- --------

Gross revenue:
  License                          $15,254  $13,945  $27,642  $25,914
  Royalty                            6,508    3,041   15,473    5,714
                                  --------- -------- -------- --------
    Gross revenue                   21,762   16,986   43,115   31,628
                                  --------- -------- -------- --------

Net revenue:
  License                           15,254   13,945   27,642   25,914
  Net royalty                        6,114    2,177   13,788    4,192
                                  --------- -------- -------- --------
    Total revenue                   21,368   16,122   41,430   30,106
                                  --------- -------- -------- --------

Costs and expenses:
  Cost of revenue *                  5,018    3,581    9,417    7,487
  Product development *              4,723    4,756    9,879    7,691
  Sales and marketing *              3,920    3,226    7,664    6,330
  General and administrative *       1,886    1,838    3,549    3,233
  In-process research and
   development                           -      520        -      520
  Amortization of purchased
   intangible assets                   896      907    2,237    1,399
                                  --------- -------- -------- --------
    Total cost and expenses         16,443   14,828   32,746   26,660
                                  --------- -------- -------- --------
Operating income                     4,925    1,294    8,684    3,446
Other income, net                      357      175      682      378
                                  --------- -------- -------- --------
Income before provision for
 income taxes                        5,282    1,469    9,366    3,824
Provision for income taxes             496      263      871      453
                                  --------- -------- -------- --------
Net income                          $4,786   $1,206   $8,495   $3,371
                                  ========= ======== ======== ========
Net income per share - basic         $0.21    $0.07    $0.38    $0.19
                                  ========= ======== ======== ========
Net income per share - diluted       $0.19    $0.06    $0.34    $0.17
                                  ========= ======== ======== ========

Shares used in per share
 calculation - basic                22,752   17,831   22,583   17,792
                                  ========= ======== ======== ========
Shares used in per share
 calculation - diluted              24,720   19,896   24,635   19,803
                                  ========= ======== ======== ========
* Includes stock-based
 compensation expense of:               76       59      173       59



                       Artisan Components, Inc.
            Reconciliation of GAAP to Pro Forma Net Income
             (In thousands, except per share information)
                             (Unaudited)

                                  Three Months Ended Six Months Ended
                                       Mar. 31,          Mar. 31,
                                  ------------------ -----------------
                                    2004     2003     2004     2003
                                  --------- -------- -------- --------
Net income                          $4,786   $1,206   $8,495   $3,371

Adjustments to reported net
 income to arrive at pro forma
 results:
Add:  amortization of purchased
 intangible assets from
 acquisitions                          896      907    2,237    1,399
Add:  deferred stock-based
 compensation expense                   76       59      173       59
Add:  in-process research and
 development                             -      520        -      520
Pro forma tax adjustment            (2,006)    (919)  (3,840)  (1,867)
                                  --------- -------- -------- --------
Pro forma net income                $3,752   $1,773   $7,065   $3,482
                                  ========= ======== ======== ========
Pro forma net income per share -
 basic                               $0.16    $0.10    $0.31    $0.20
                                  ========= ======== ======== ========
Pro forma net income per share -
 diluted                             $0.15    $0.09    $0.29    $0.18
                                  ========= ======== ======== ========
Shares used in per share
 calculation - basic                22,752   17,831   22,583   17,792
                                  ========= ======== ======== ========
Shares used in per share
 calculation - diluted              24,720   19,896   24,635   19,803
                                  ========= ======== ======== ========

SOURCE: Artisan Components, Inc.





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