- Italian subsidiary EBIT positive
- Operating costs significantly lower than Q1 2002
- Company to explore additional funding options
- Expansion of third party sales and marketing efforts
Brainpower N.V. (Frankfurt: BPW), provider of enterprise-wide investment analytics, attribution and decision-support solution to global asset managers, today announces financial results for the quarter ended March 31, 2003.
Rocco Pellegrinelli, Chairman and Chief Executive Officer of Brainpower, commented: "Revenues for the quarter ended March 31, 2003 equaled â¬1.4 million, down from â¬1.8 million in the previous quarter. This reduction was largely attributable to a number of contracts that expired in the second half of last year and were not renewed, particularly from clients in the e-brokerage sector. However, going forward the weakness from this customer segment will have minimal impact on our revenues, as our exposure to e-brokerage business is now very small. Most new customers acquired in the first quarter were buy-side institutions, and in total, new business represented annual contract value of â¬445,000.
We believe that after three years of an unrelenting bear market in equities, any pick-up in stock market trends will generate more sales opportunities for Brainpower's technology. At this stage we believe the first half of 2003 will remain challenging, followed by a more productive second half.
Costs were significantly lower in the first quarter than in the first quarter 2002 and remained steady from the previous quarter, primarily due to the successful implementation of a cost reduction program launched in May of last year.
During this period of prolonged weakness in our sector, Brainpower continued to invest heavily in Research & Development, positioning the Company with a robust portfolio of products to gain momentum as market conditions improve. We continued to deliver new functionalities to the market place, and a new version of StockXceed and FundXceed is ready to be launched this month. The list of new functionalities is substantial and the preliminary response from our customers is very positive.
During the quarter we also implemented a new plan to further develop third party sales and marketing channels. The new team responsible for third party alliances, headed by the recently recruited Hammad Nasar from Booz Allen Hamilton, is developing partnerships with a shortlist of world-class organizations. We envisage that these efforts will lead to meaningful commercial agreements in the foreseeable future."
Bill Holwell, Chief Financial Officer, commented: "EBITDA losses (earnings before interest, taxes, depreciation and amortization) before restructuring costs equaled â¬1.59 million, up slightly from the previous period and considerably lower than the year ago period.
Cash used in the quarter was â¬1.2 million, representing an improvement of approximately â¬800,000 over the previous quarter's cash usage, excluding final receipts from a large software development contract received during 2002. Brainpower ended the quarter with cash and cash equivalents of â¬3.9 million, which we believe is sufficient to fund operations until the Company reaches EBITDA breakeven. The Company is, however, exploring additional funding options in case business opportunities should require additional capital."
For the three months ended March 31, 2003 revenues were â¬1.42 million, representing a 27% decrease from last year's first quarter revenues and a 23% decrease from the previous quarter.
At the end of March 2003, Brainpower's total backlog of booked revenue to be recognized over 2 to 3 years was â¬6.7 million. This represented a reduction of â¬0.1 million from the total backlog of revenue at the end of the previous quarter. The total backlog of revenue to be recognized in the next 12 months totals â¬4.3 million. This amount is exclusive of revenues, which would be recognized from the renewal of contracts that expire during the next 12 months and revenues from third party contracts.
The gross margin for the quarter ended March 31, 2003 was 77%.
For the quarter ended March 31, 2003, Brainpower's operating expenses before depreciation and amortization were â¬2.68 million, excluding restructuring costs of â¬65,000.
Sales & Marketing
Sales & marketing costs decreased from â¬1.22 million in the fourth quarter of last year to â¬1.13 million in the quarter ended March 31, 2003. The number of people in sales & marketing remained at 25, 12 of whom were direct salespeople.
Research & Development
Research & development costs increased from â¬751,000 in the fourth quarter of last year to â¬832,000 for the first quarter ended March 31, 2003. The Company ended the quarter with a total of 38 people working in R&D, an increase of one from the previous quarter.
General & Administrative
The Company employs 15 people in general & administrative functions, a decrease of one from the previous quarter. G&A expenses increased over the period from â¬697,000 in the fourth quarter to â¬718,000 for the quarter ended March 31, 2003.
Restructuring costs of â¬65,000 were incurred in the quarter. This charge reflects activities undertaken as part of Brainpower's cost reduction program.
OTHER P&L ITEMS
EBITDA losses before restructuring costs were â¬1.59 million in the first quarter, showing an improvement of 10% from the corresponding period in 2002. Net losses were â¬1.9 million for the quarter, of which â¬65,000 were related to restructuring costs. This compares to net losses of â¬1.6 million in the fourth quarter, of which â¬170,000 related to restructuring costs.
Brainpower ended the period with cash and cash equivalents of approximately â¬3.9 million compared to â¬5 million at December 31, 2002. The accumulated deficit at March 31, 2003 was â¬28.5 million and total shareholders' equity was â¬5.1 million.
In total, Brainpower had 85 employees as at March 31, 2003 - no change from the number as at December 31, 2002.