Continued Improvement in Operating Results
- Revenue up 19%, excluding EUR1.5m from a software development contract in 2001
- EBITDA losses before restructuring costs 29% lower year-on-year
- Cash used in operations reduced by 65% from previous quarter
- Growing interest in world-class products released during 2002
Brainpower (Frankfurt: BPW), provider of investment analytics, attribution
and decision support solutions to global asset managers, announces its
results for the Fourth Quarter and Full-Year ended December 31, 2002.
"Market conditions remained extremely challenging due to the persistent
weakness in equity markets and the resulting caution amongst banks towards
IT investments," stated Rocco Pellegrinelli, Chairman and Chief Executive
Officer of Brainpower.
"Brainpower's cost reduction program implemented in order to cope with this
difficult environment continues to bear fruit as we successfully reduced both EBITDA losses and cash used in operations for the fourth consecutive quarter and for the full-year. EBITDA losses before restructuring costs were 27% below third quarter and 29% lower than full-year 2001.
Revenue of EUR1.85 million in the fourth quarter ended December 31, 2002
represented a decrease of 24% over the previous year's fourth quarter revenues of EUR2.4 million. Full-year 2002 revenues equalled EUR7.55 million, representing a decrease of 4% over 2001. However, excluding revenue recognized in the prior year from a large software development contract, Brainpower's revenues increased 10% over fourth quarter 2001 and 19% year-on-year.
Throughout 2002 we continued to invest in R&D in order to strengthen both our competitive position and our value proposition. A new family of web-based products was launched (StockXceed and FundXceed) offering broader content and expanded functionality. These products raised the industry standard in terms of breadth and usability. The market reaction to the launch of these two products has been very positive and we experienced an expanding qualified customer pipeline in the fourth quarter."
Bill Holwell, Chief Financial Officer, commented: "While we continue to generate the majority of our revenues in Italy, Switzerland and the UK, we have achieved growth in other geographies, most notably in Germany, which accounted for 9% of total group revenues in the fourth quarter.
Our ten largest customers generated 43% of revenue in the quarter and 37% of
revenue for the full-year.
At December 31, 2002, Brainpower's total backlog of booked revenue to be recognized over 2 to 3 years was EUR6.6 million. This was a reduction of EUR1.6 million versus the total backlog of revenue at the end of the previous quarter. The total backlog of revenue to be recognized over the next twelve months totalled EUR4.2 million. These reductions were due to the weakness in the e-broker market segment and difficult trading conditions impacting new business activity.
Recognized revenue in the fourth quarter ended December 31, 2002 was EUR1.85
million, representing a decrease of 24% over the previous year's fourth quarter revenues of EUR2.4 million. Excluding the large software development revenue recognized last year, this represents an increase of 10% on core business over the previous year's fourth quarter. Full-year revenues equalled EUR7.55 million, representing a decrease of 4% over 2001. Excluding revenues from a large software development contract recognized in the prior year, current year revenues increased 19%.
Revenue contributed from third parties was EUR96,000 for the quarter ended
December 31, 2002 and EUR500,000 for the full-year.
Gross profit in the fourth quarter was EUR1.5 million or 84% of revenue, versus EUR1.4 million or 80% in the third quarter. Gross profit for the full-year 2002 was EUR6.2 million or 82% of revenues, versus EUR6.9 million or 88% for 2001.
Operating expenses before depreciation and amortisation were EUR13.3 million
for the full- year 2002, versus EUR16.9 million in 2001, reflecting Brainpower's successful implementation of its cost reduction program during
Operating expenses before depreciation and amortisation were EUR2.84 million
in the fourth quarter of 2002, a reduction of EUR316,000 from the third
quarter 2002. This amount included EUR171,000 relating to further restructuring expenses, therefore ongoing operating costs were EUR2.67
million, in line with expectations and EUR323,000 less than the previous quarter.
Sales & Marketing
Full-year sales and marketing costs decreased from EUR8.1 million for the
year ended December 31, 2001 to EUR5.7 million in 2002, primarily due to a
reduction in marketing spend and the closure of non-strategic sales offices
as part of the cost reduction plan implemented during the year. On the same
basis, costs decreased from EUR1.37 million in the third quarter to EUR1.22
million in the fourth quarter 2002.
There were a total of 25 employees in sales and marketing functions at December 31, 2002, down from 27 at the end of the third period 2002 and 37 at December 31, 2001.
Research & Development
R&D costs increased from EUR3.37 million for the year 2001 to EUR3.54 million in 2002, mainly due to increased salary costs. Total R&D costs however, decreased by EUR88,000 to EUR751,000 in the quarter.
There were a total of 37 employees in R&D at December 31, 2002, down from 39
at the end of the third period 2002 and 44 at December 31, 2001.
General & Administrative
Full Year G&A expenses were EUR3.1 million for 2002, showing a decrease of
EUR331,000 from 2001. Costs decreased from EUR786,000 in the third quarter
to EUR697,000 in the fourth quarter, reflecting the implementation of earlier cost reduction plans.
The total number of employees in general and administrative roles has remained steady over the past year at 16.
OTHER PROFIT & LOSS ITEMS
Total depreciation and amortization expense for full-year 2002 was EUR1.24
million versus EUR1.18 million in 2001. The fourth quarter 2002 expense was
EUR295,000, in line with the previous quarter.
The net loss for the full-year 2002 was EUR8.3 million, 22% below the net
loss of EUR10.7 million in 2001, which reflects the positive impact of the
Company's cost reduction program. The net loss for the fourth quarter was
EUR1.59 million, a reduction of EUR370,000 (19%) from the third quarter.
Excluding restructuring charges, Brainpower's net loss for the quarter ended
December 31, 2002 was EUR1.42 million versus EUR1.8 million in the third
Brainpower's cash position as at December 31, 2002 was EUR5.1 million compared to EUR5.9 million at the end of the third quarter. The Company's cash burn rate for the quarter was EUR780,000 which, excluding restructuring costs, represents an improvement of EUR882,000 versus the third quarter 2002.
Management remains committed to achieve our EBITDA breakeven target in 2003.
Given the Company's sales projections, management believes Brainpower has
sufficient cash to reach this objective and effectively complete our business plan goals.
As at December 31, 2002 the accumulated deficit was EUR26.7 million versus EUR25.1 million at the end of the third quarter 2002. Shareholders equity ended the year at EUR7.1 million.
Brainpower employed a total of 85 people at December 31, 2002, a net decrease of 6 from the end of the third quarter 2002 and 20 fewer than the total at December 31, 2001.
"This press release contains forward looking statements which involve risks and uncertainties. The actual performance, results and timing of the business of Brainpower N.V. could differ materially from the performance, results and timing discussed in this press release. This press release is not distributed in or into the United States of America."