Bitstream Inc. Reports Second Quarter 2003 Results.Business Editors/High-Tech Writers CAMBRIDGE Cambridge, city, Canada Cambridge (kām`brĭj), city (1991 pop. 92,772), S Ont., Canada, on the Grand River, NW of Hamilton. It was formed in 1973 with the amalgamation of Galt, Hespeler, and Preston, all founded in the early 19th cent. , Mass.--(BUSINESS WIRE)--Aug. 4, 2003 Highlights Include the First Consolidated Operating Profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. Since the Third Quarter of 1998, the First Pageflex Operating Profit Since Its Inception, and an Increase in Consolidated Revenue of $539,000 or 24.4% as Compared With the Quarter Ended June June: see month. 30, 2002 Bitstream The transmission, or flow, of binary data (bits). Inc. (Nasdaq:BITS) today reported that revenue increased $539,000 or 24.4% to $2,752,000 for the three months ended June 30, 2003 as compared with $2,213,000 for the three months ended June 30, 2002. The company's net income for the three months ended June 30, 2003 was $132,000, or $0.01 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, an increase of $425,000 or 145.1% as compared with a loss of $(293,000) or $(0.04) per share for the three months ended June 30, 2002. During the same periods, cost of revenue increased $135,000 or 23.0% to $722,000 due to an increase of $205,000 in costs primarily consisting of royalties to third party foundries incurred by the company's MyFonts MyFonts is a distributor of digital fonts, based in Cambridge, MA, selling fonts through the www.myfonts.com web site. It launched in September 1999 (during the ATypI conference in Boston), and started selling fonts in March 2000. business segment offset by decreases for the company's other segments. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the three months ended June 30, 2003 were $1,990,000, an increase of $48,000 or 2.5% from $1,942,000 for the three months ended June 30, 2002. The increase in operating expenses was attributable to increases in marketing and sales expenses in all three of the company's business segments. Income from operations for the three months ended June 30, 2003 was $40,000, an increase of $356,000 from an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $(316,000) for the three months ended June 30, 2002. Prior to the quarter ended June 30, 2003, Bitstream had not generated income from operations on a quarterly basis since the quarter ended Sept. 30, 1998. The company's cash and cash equivalents for the three months ended June 30, 2003 decreased $339,000 to $3,647,000 as compared with $3,986,000 at March 31, 2003. Other income for the three months ended June 30, 2003 included a $99,000 gain on the company's investment in DiamondSoft Inc. The $99,000 represents the company's 31.7% share of DiamondSoft's net income for the quarter ended June 30, 2003. On July July: see month. 1, 2003, in connection with the acquisition of DiamondSoft by Extensis, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Celartem Technology USA Inc., Bitstream sold its shares in DiamondSoft to Extensis in a cash transaction resulting in a gain on Bitstream's investment in an amount to be determined in the third quarter of 2003. Bitstream also received approximately $1,340,000 in cash from this transaction in early July 2003, in addition to benefiting from the release in June 2003 of $300,000, which had guaranteed a DiamondSoft line of credit. "Consolidated revenue increased $720,000 or 35.4% as compared to the first quarter of 2003 while net income was $132,000, an increase of $1,049,000, as compared to a net loss of $(917,000) for the first quarter of 2003," said Charles Ying, chief executive officer. "We are extremely pleased with the company's second quarter results. In addition to increasing revenue, we achieved operational profitability for the company as a whole, the Type segment and, for the first time since its inception, the Pageflex segment. "Immediately following the end of the quarter, we also increased our cash position by approximately $1.3 million through the sale of our investment in DiamondSoft and will also benefit from a gain in the sale of this investment during the third quarter of 2003." Bitstream is composed of three different businesses: (1) its type and type technology business, which currently generates revenue primarily from the licensing of font font or typeface or type family Assortment or set of type (alphanumeric characters used for printing), all of one coherent style. Before the advent of computers, fonts were expressed in cast metal that was used as a template for printing. rendering See render. (graphics, text) rendering - The conversion of a high-level object-based description into a graphical image for display. For example, ray-tracing takes a mathematical model of a three-dimensional object or scene and converts it into a bitmap image. software and fonts to the embedded Inserted into. See embedded system. , set-top box The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. , wireless device and information appliance See Internet appliance. (hardware) Information Appliance - (IA) A consumer device that performs only a few targeted tasks and is controlled by a simple touch-screen interface or push buttons on the device's enclosure. markets, but has more recently focused its product development efforts on a leading-edge browser browser Software that allows a computer user to find and view information on the Internet. The first text-based browser for the World Wide Web became available in 1991; Web use expanded rapidly after the release in 1993 of a browser called Mosaic, which used for handheld devices named ThunderHawk(TM) ("Type"); (2) its MyFonts.com business, which generates revenue from its Web site, MyFonts.com, as well as from providing its database technology for other sites including Bitstream.com. MyFonts.com was the first e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. site to aggregate fonts from multiple vendors on one easy-to-use Web site ("MyFonts"); and (3) its Pageflex business, which generates revenue from on-demand marketing and composition solutions such as Mpower(TM), an enterprise solution that allows companies to dynamically create customized and personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. business documents driven from the Web and marketing databases, Persona persona /per·so·na/ (per-so´nah) [L.] in jungian psychology, the personality mask or facade presented by a person to the outside world, as opposed to the anima, the inner being. per·so·na n. (TM), a variable data desktop publishing desktop publishing, system for producing printed materials that consists of a personal computer or computer workstation, a high-resolution printer (usually a laser printer), and a computer program that allows the user to select from a variety of type fonts and sizes, application designed to produce personalized documents, and .EDIT(TM), a java-browser-based interactive WYSIWYG (What You See Is What You Get) Pronounced "wiz-ee-wig." It refers to displaying text and graphics on screen the same as they will print on paper or display on a Web page. composition software that presents the user with templates that can be customized ("Pageflex"). The performance of each business segment is discussed in greater detail below. Type Results Type revenue for the three months ended June 30, 2003 was $1,150,000, a decrease of $39,000 or 3.3% as compared with $1,189,000 for the three months ended June 30, 2002. Cost of revenue decreased $67,000 or 28.8% to $166,000 for the three months ended June 30, 2003 from $233,000 for the three months ended June 30, 2002. This decrease was primarily due to a $90,000 decrease in third party royalties and other costs of licenses, partially offset by an increase in costs attributable to the establishment of a customer support infrastructure for the company's ThunderHawk product. Consequently, Type gross profit increased by $28,000 or 2.9% from $956,000 for the three months ended June 30, 2002 to $984,000 for the three months ended June 30, 2003. Operating expenses for the three months ended June 30, 2003 decreased $34,000 or 3.4% to $962,000 as compared with $996,000 for the three months ended June 30, 2002. This decrease was primarily attributable to a decrease in research and development expenses related to the company's type technology products. Income from operations for the company's Type business segment increased $62,000 to $22,000 for the three months ended June 30, 2003, as compared with a loss from operations of $(40,000) for the three months ended June 30, 2002. "We are delighted that the company's original type and type technology products were able to generate $386,000 of operating profit for the three months ended June 30, 2003, of which $364,000 was invested in research and development on the end-user and enterprise versions of our ThunderHawk browser and to increase marketing and sales activities related to these products. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that we will close our first sale of the Enterprise Edition of the ThunderHawk browser during the third quarter of 2003," said Anna M. Chagnon, president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "During the quarter ended June 30, 2003 we renewed major set top box placements including a license with Microsoft for its MSN (1) (MicroSoft Network) A family of Internet-based services from Microsoft, which includes a search engine, e-mail (Hotmail), instant messaging (Windows Live Messaging) and a general-purpose portal with news, information and shopping (MSN Directory). (R) TV service, continued negotiation on royalties Synopsis On Royalty: A Very Polite Inquiry into Some Strangely Related Families is the attempt of Jeremy Paxman to examine and understand how the increasingly irrelevant institution that is Monarchy has managed to continue to hold to the imaginations of the public. for our first Font Fusion Bitstream Font Fusion is a small, fast, object-oriented font engine written in ANSI C capable of rendering high-quality text on any platform, any device, and at any resolution. The entire source code is portable, optimized, and executes independent of operating system and processor. license with a major cell phone manufacturer, and licensed our font technology and fonts to over 62 OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers. "During the quarter, we had 4,800 user registrations for the ThunderHawk end-user version bringing the total to date to over 14,800. This represents a 50% increase over the number of registrations during the first quarter of 2003 and the highest quarterly volume of ThunderHawk downloads since the launch of the free trial period. We believe that this is an indication of a recent increase in the market for browsers for Pocket PC devices It may never be fully completed or, depending on its its nature, it may be that it can never be completed. However, new and revised entries in the list are always welcome. This is a list of Pocket PC and Windows CE devices, and companies that make, or have made, them. . "We also had 298 new subscribers during the quarter ended June 30, 2003, which brought the total subscribers for the end-user version of ThunderHawk to date to over 1,000. Additionally, we entered into discussions with several new corporate accounts and we have learned that many of these accounts have allocated funding for pilot programs in their 2003 budgets. "To improve the appeal of ThunderHawk to the corporate market, we focused our development efforts on increased device support, a new Enterprise Edition, better scalability, increased functionality, and on creating the prototype for a cell phone version of ThunderHawk, which was completed during the quarter. With the release of ThunderHawk 1.07, we believe we have a corporate version that will address the needs of the mobile workforce by allowing them to access data through ThunderHawk from their Pocket PCs. "We also have continued our discussions with nine wireless carriers concerning potential strategic relationships and currently have four wireless carriers testing the latest version of the technology and three new carriers interested in viewing the prototype of the ThunderHawk cell phone version. The feedback from these carriers has prompted us to improve the server infrastructure and scalability of ThunderHawk with the release of 1.07 as we work towards achieving our goal of providing the killer application Killer Application Killer application or "killer app" is a buzzword that describes a software application that surpasses all of its competitors. Notes: The term is sometimes used to describe a type of software. for the world of 3G wireless technology." MyFonts Results MyFonts revenue increased $276,000 or 83.4% to $607,000 for the three months ended June 30, 2003 as compared with $331,000 for the three months ended June 30, 2002. Cost of revenue, which primarily represents royalties paid to foundries whose products MyFonts resells, increased $205,000 or 75.9% to $475,000 for the three months ended June 30, 2003 as compared with $270,000 for the three months ended June 30, 2002. Operating expenses for the three months ended June 30, 2003 increased $25,000 or 16.7% to $175,000 from $150,000 for the three months ended June 30, 2002. Loss from operations for the MyFonts business decreased $46,000 or 51.7% to $(43,000) for the three months ended June 30, 2003 as compared with $(89,000) for the three months ended June 30, 2002. "MyFonts continued to grow revenue during the second quarter, increasing revenue $89,000 or 17.2% to $607,000 as compared to $518,000 for the first quarter of 2003," said John Collins, vice president and chief technology officer. "MyFonts also decreased its operating loss by $39,000 or 47.6% to $(43,000) for the quarter ended June 30, 2003 from a loss of $(82,000) for the quarter ended March 31, 2003. During the second quarter, MyFonts.com acquired over 22,000 new users bringing the total as of June 30, 2003 to 118,000 registered users. During the quarter, over 30% of orders were placed by users who had previously purchased fonts from MyFonts.com. "MyFonts.com has over 130 foundries, large and small, working with MyFonts.com to offer their fonts for sale. This represents an aggregate collection of over 28,000 fonts allowing us to serve the needs of a wide variety of customers, including those who have never purchased a font before. During the first quarter, we also began selling font collections from several foundries on CDs to increase our product offering and provide revenue growth. We now offer 50 CDs from six foundries for sale on the site." Pageflex Results Revenue from the company's Pageflex business increased $302,000 or 43.6% to $995,000 for the three months ended June 30, 2003 from $693,000 for the three months ended June 30, 2002. Cost of revenue for the three months ended June 30, 2003 decreased $3,000 or 3.6% to $81,000 from $84,000 for the three months ended June 30, 2002. Operating expenses for the three months ended June 30, 2003 increased $57,000 or 7.2% to $853,000 from $796,000 for the three months ended June 30, 2002. Consequently Pageflex recognized its first quarterly operating profit. Income from operations was $61,000 for the three months ended June 30, 2003, an increase of $248,000 from an operating loss of $(187,000) for the three months ended June 30, 2002. "We are very excited that Pageflex has attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. its first ever quarterly operating profit in the second quarter of 2003," said David Frenkel, general manager of Pageflex. "Revenue increased by $337,000 or 51.2% to $995,000 for the quarter ended June 30, 2003 as compared to $658,000 for the quarter ended March 31, 2003. This increase in revenue comes from a combination of new adopters and increased license purchases from current users. "The increase in revenue and a decrease in operating expenses of $107,000 or 11.1% as compared to the first quarter of 2003 combined to increase Pageflex's operating profit by $450,000 to $61,000 for the three months ended June 30, 2003 as compared to a loss of $(389,000) for the three months ended March 31, 2003. During the quarter ended June 30, 2003 we had six new placements of .EDIT and Mpower to corporations, bringing the total number of Pageflex customers to over 85 and we also signed agreements with three new resellers that are committed to creating a business based on sales of our products. "We believe that we hold a significant advantage in the emerging Web-top publishing market and that revenue in the coming quarters will continue to grow." Today, Aug. 4, 2003, at 4:30 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. , Bitstream will host a conference call with the financial community to discuss its second quarter results. Interested participants should call 800-231-5571 no sooner than 10 minutes before the call begins and ask the operator for the Bitstream earnings release call. An operator will request your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call number, call the Liolios Group at 949-574-3860. There will also be an Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Simulcast (Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. needed for simulcast. Simulcast is voice only) at: www.viavid.net/detailpage.aspx?sid=00001640. A replay of the conference call will be available until Aug. 11, 2003 at: 877-519-4471, enter the playback Playback could mean:
This news release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements are based on management's current expectations. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the company's products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the company's filings with the Securities and Exchange Commission, including Bitstream's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2002. Bitstream Inc. Bitstream is the leading developer of font technology, digital fonts, and custom font designs. Bitstream licenses its award-winning TrueDoc(R) and Font Fusion(TM) technologies to Web and application developers, and to manufacturers of information appliances, wireless and handheld devices, set-top boxes, embedded systems Embedded systems Computer systems that cannot be programmed by the user because they are preprogrammed for a specific task and are buried within the equipment they serve. , and printers. Setting the standard for excellence in font technology, Bitstream holds numerous key patents that cover the creation of portable fonts for the Internet. Building on this experience, Bitstream has released ThunderHawk(TM), a full-featured browser for the wireless Web. MyFonts.com MyFonts.com Inc., a venture funded by Bitstream and established as a wholly owned subsidiary in 1999, is a showcase of the world's fonts available from one easy-to-use Internet portal. It provides the largest collection of fonts ever assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. for online delivery, and offers easy ways to find and purchase fonts online, unique typographic See typography. resources, and a forum for interacting with font experts. For more information, visit http://www.myfonts.com, the Web site for finding, trying, and buying fonts online. Pageflex Inc. Pageflex (www.pageflexinc.com) is the pioneer of a new direction in composition software: Web-top publishing. Moving beyond desktop publishing, Pageflex Web-top publishing software helps novice users create high-quality printed products using intelligent, flexible templates, without installing or learning any new software. Pageflex templates are intelligent and flexible because professional designers can set rules to define which elements can change, how much they can change, and who can change them. Pageflex products maintain corporate identity and design integrity while enabling sophisticated customization of documents. Pageflex also leads the field in variable-data composition software for both enterprise and desktop. Pageflex software is used for a wide variety of applications, including on-demand marketing materials, stationery The term for boilerplate in the Eudora mail client, starting with Version 3.0. Stationery files are stored on disk and brought into new messages or added to replies. See boilerplate. and business cards, advertising, catalogs, and personalized digital printing. Pageflex products are distributed through original equipment manufacturers (OEMs), value added resellers See VAR. (company) value added reseller - (VAR, or "value added retailer") A company which sells something (e.g. computers) made by another company (an OEM) with extra components added (e.g. specialist software). (VARs), application service providers (ASPs), and system integrators See systems integrator. (SIs). The Pageflex worldwide customer base includes manufacturers, service providers, advertising agencies, commercial printers, graphic design houses, and ASPs. Users of Pageflex products include Xerox, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , Ford, EFI See UEFI. EFI - Extensible Firmware Interface , Coldwell Banker, Wunderman, Valassis, Consolidated Graphics Consolidated Graphics (NYSE "CGX") is a national, commercial printing company based in Houston, Texas. Founded in 1985 by Joe R. Davis, the company has grown to over 70 locations across 26 states and is known as the leading sheetfed, web and digital printing company in North , Newgen Results, USA Mail-Well, httprint, Moore Moore, city (1990 pop. 40,761), Cleveland co., central Okla., a suburb of Oklahoma City; inc. 1887. Its manufactures include lightning- and surge-protection equipment, packaging for foods, and auto parts. Wallace Wal·lace , Alfred Russel 1823-1913. British naturalist who developed a concept of evolution that paralleled the work of Charles Darwin. , and Spire. Note to Editors: Bitstream and TrueDoc are registered trademarks and Font Fusion and ThunderHawk are trademarks of Bitstream Inc. Pageflex, Mpower, .EDIT and NuDoc are trademarks of Pageflex Inc., a wholly owned subsidiary of Bitstream Inc. MyFonts.com is a trademark of MyFonts.com Inc., a wholly owned subsidiary of Bitstream Inc. All other trademarks mentioned are for identification purposes only and may be trademarks of their respective owners.
Bitstream Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
Three Months Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Revenue:
Software license $2,486 $ 1,949 $ 4,230 $ 3,785
Services 266 264 554 561
Total revenue 2,752 2,213 4,784 4,346
Cost of revenue:
Software license 608 496 1,147 808
Services 114 91 251 194
Total cost of revenue 722 587 1,398 1,002
Gross profit 2,030 1,626 3,386 3,344
Operating expenses:
Marketing and selling 605 532 1,325 1,127
Research and development 959 991 2,002 1,950
General and administrative 426 419 998 761
Total operating expenses 1,990 1,942 4,325 3,838
Income (loss) from operations 40 (316) (939) (494)
Other income (expense):
Income (loss) on investment in
DiamondSoft Inc. 99 43 192 42
Other income (loss), net 21 19 11 42
Income (loss) before income taxes 160 (254) (736) (410)
Provision for income taxes 28 39 49 70
Net income (loss) $ 132 $ (293)$ (785)$ (480)
Basic net income (loss) per share $ 0.02 $ (0.04)$ (0.09)$ (0.06)
Diluted net income (loss) per share $ 0.01 $ (0.04)$ (0.09)$ (0.06)
Basic weighted average shares
outstanding 8,349 8,313 8,349 8,309
Diluted weighted average shares
outstanding 8,901 8,313 8,349 8,309
Bitstream Inc.
Consolidated Balance Sheets
(In Thousands)
June Dec.
30 31,
ASSETS 2003 2002
Current assets:
Cash and cash equivalents $3,647 $4,828
Accounts receivable, net 1,229 602
Prepaid expenses and other current assets 135 112
Income tax receivable -- 134
Total current assets 5,011 5,676
Property and equipment, net 220 271
Other assets:
Restricted cash -- 300
Goodwill 727 727
Investment in DiamondSoft Inc. 940 748
Intangible assets 218 236
Other assets 1 6
Total other assets 1,886 2,017
Total assets $7,117 $7,964
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 363 $ 245
Accrued expenses 934 1,046
Current portion of deferred revenue 605 667
Total current liabilities 1,902 1,958
Long-term deferred revenue -- 6
Total liabilities 1,902 1,964
Total stockholders' equity 5,215 6,000
Total liabilities and stockholders' equity $7,117 $7,964
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