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Bitstream Reports Q3: Sales Down 12.6%, Pageflex unit Sales Down 24.8%

Thursday, October 31, 2002

Press release from the issuing company

CAMBRIDGE, Mass.--Oct. 30, 2002--Bitstream Inc today reported that revenue for the three months ended Sept. 30, 2002, was $1,847,000, compared with $2,114,000 for the three months ended Sept. 30, 2001, an decrease of $267,000 or 12.6%. Cost of revenue for the three months ended Sept. 30, 2002, was $534,000, compared with $472,000 for the three months ended Sept. 30, 2001, an increase of $62,000 or 13.1%. This increase was due to an increase of $204,000 in royalties paid by its MyFonts.com segment to third-party foundries, partially offset by decreases at the company's other two business segments. Operating expenses for the three months ended Sept. 30, 2002, were $1,947,000, a decrease of $400,000, or 17.0%, from $2,347,000 for the three months ended Sept. 30, 2001, due primarily to decreases in expenses incurred by the company's Pageflex business segment. The company's loss from operations for the three months ended Sept. 30, 2002 was $(634,000), compared with a $(705,000) loss for the three months ended Sept. 30, 2001, a decrease of $71,000 or 10.1%. The company's net loss for the three months ended Sept. 30, 2002, was $(616,000), representing a decrease of $169,000, or 21.5%, from a $(785,000) loss for the three months ended Sept. 30, 2001. Basic and diluted net loss per share were $(0.07) for the three months ended Sept. 30, 2002 vs. $(0.10) for the three months ended Sept. 30, 2001. The company's cash and cash equivalent balance at Sept. 30, 2002, was $4,979,000, a decrease of $433,000 from the June 30, 2002, balance of $5,412,000. "We continue to fight a tough economy as consumers and businesses were reluctant to spend on OEM technologies and software products during the third quarter," said Charles Ying, chief executive officer. "As many of our customers delayed purchasing decisions this quarter, we remained vigilant in keeping our expenses under control and in maintaining our cash position. As a result, we have been able to minimize our cash burn, which was $737,000 for the nine months ended Sept. 30, 2002 vs. $1,146,000 for the nine months ended Sept. 30, 2001. In addition, we continue to focus on introducing our latest products, ThunderHawk and .EDIT, to the market as we believe they represent significant future growth potential for the company." Bitstream is composed of three different businesses: (1) its type and technology ("Type") business, which generates revenue primarily from the licensing of font rendering software and fonts to the embedded, set-top box, wireless device and information appliance markets; (2) MyFonts.com, a wholly owned subsidiary that was formed in late 1999 as the first e-commerce site to aggregate fonts from multiple vendors on one easy-to-use Web site ("MyFonts.com"); and (3) Pageflex, a wholly owned subsidiary that was formed in early 1999 to establish the company as a leader in dynamic page composition technologies ("Pageflex"). The performance of each business segment is discussed in greater detail below. Type Results Type revenue for the three months ended Sept. 30, 2002, decreased $379,000, or 26.8%, to $1,035,000 from $1,414,000 for the three months ended Sept. 30, 2001. Cost of revenue decreased $122,000, or 47.7%, to $134,000 for the three months ended Sept. 30, 2002, from $256,000 for the three months ended Sept. 30, 2001. As a result, Type Gross Profit decreased by $257,000 from $1,158,000 for the three months ended Sept. 30, 2001, to $901,000 for the three months ended Sept. 30, 2002. Operating expenses for the three months ended Sept. 30, 2002, increased $67,000, or 7.4%, to $977,000 compared with $910,000 for the three months ended Sept. 30, 2001. This increase was primarily due to increased research and development costs, including costs associated with the development of the ThunderHawk wireless browser. Loss from operations for the company's Type business segment was $(76,000) or a decrease of $324,000 from an operating profit of $248,000 for the three months ended Sept. 30, 2001. "We believe that the decrease in revenue during the quarter ended Sept. 30, 2002, as compared to the quarter ended Sept. 30, 2001 is only a temporary setback for the Type business as certain customers who were unable to complete purchases by Sept. 30, 2002, subsequently closed or are in the process of closing in the early part of the quarter ending Dec. 31, 2002," said Anna M. Chagnon, president and chief operating officer. "We have also made significant progress in qualifying potential corporate accounts for deployments of our ThunderHawk Enterprise Edition in 2003. The Enterprise Edition not only provides access to the Internet on a wide variety of PocketPC devices, it also expands the ability of a corporation to provide key access to its intranet making it ideal for corporate applications such as sales order entry, information retrieval, delivery confirmation and expense report management. "In addition, we have continued our long-term strategy of working with wireless carriers in 3G trials to help solidify our goal of providing the killer application for the world of 3G wireless technology." MyFonts.com Results MyFonts.com revenue for the three months ended Sept. 30, 2002, increased $250,000, or 173.6%, to $394,000 from $144,000 for the three months ended Sept. 30, 2001. Revenue attributable to this segment, before elimination of intercompany royalties due on the resale of Bitstream products, for the three months ended Sept. 30, 2002, increased $278,000, or 140.4%, to $476,000 from $198,000 for the three months ended Sept. 30, 2001. Cost of revenue, which primarily represents royalties paid to non-related foundries whose products MyFonts.com resells, for the three months ended Sept. 30, 2002, increased $204,000, or 178.9%, to $318,000 from $114,000 for the three months ended Sept. 30, 2001. Operating expenses for the three months ended Sept. 30, 2002, decreased $135,000, or 46.1%, to $158,000 from $293,000 for the three months ended Sept. 30, 2001. This decrease was primarily due to the decrease in research and development expenses related to site development. Loss from operations for the MyFonts.com business decreased $181,000, or 68.8%, to $(82,000) for the three months ended Sept. 30, 2002, compared with $(263,000) for the three months ended Sept. 30, 2001. "We are delighted that third-quarter revenue for MyFonts.com increased by over 173% and 15% as compared with the three months ended Sept. 30, 2001, and the three months ended June 30, 2002, respectively," said John Collins, vice president and chief technology officer. "In August, we launched a new look together with new help pages for MyFonts.com. The new appearance, which makes it much easier for users to find their way around without assistance, and the new help pages that focus on frequently asked questions, have reduced the number of requests for technical support. One statistic that we are particularly pleased with is that 25 to 30% of the orders are from existing customers, which we believe is key to continued growth." Pageflex Results Revenue from the company's Pageflex business for the three months ended Sept. 30, 2002, decreased $138,000, or 24.8%, to $418,000 from $556,000 for the three months ended Sept. 30, 2001. Cost of revenue for the three months ended Sept. 30, 2002, decreased $20,000, or 19.6%, to $82,000 from $102,000 for the three months ended Sept. 30, 2001. Operating expenses for the three months ended Sept. 30, 2002, decreased $332,000 or 29.0%, to $812,000 from $1,144,000 for the three months ended Sept. 30, 2001. Operating loss decreased by $214,000, or 31.0%, to $(476,000) for the three months ended Sept. 30, 2002, from $(690,000) for the three months ended Sept. 30, 2001. "While concerns over the economy have affected the closure of new Mpower sales, our customer base is strong and includes a wide variety of corporations, including Web-to-print and application service providers, consumer products companies, advertising agencies and print service providers. "We are pleased that despite the effects of the economy we have continued our focus on profitability for this segment, leading to a $1,442,000, or 62.4% decrease in this segment's operating loss to $(870,000) for the first nine months of this year as compared to a $(2,312,000) operating loss for the same nine months last year," said David Frenkel, general manager of Pageflex. "We believe that .EDIT sets us apart from our competition and we will make every effort in the near future to exploit that advantage for the Web-top publishing generation."

 

 

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