Substantial reduction in EBITDA losses & operating expenses

- Revenues of €1.42 million down slightly from second quarter
- Product portfolio expands
- Pre-marketing for new products encouraging
- Total revenue backlog decreases by 8%
- Italian subsidiary EBIT positive for third consecutive quarter

Brainpower N.V. (Frankfurt: BPW), provider of enterprise-wide investment analytics, attribution and decision-support solutions to global asset managers, announces results for the quarter ended September 30, 2003.

Revenues equaled €1.42 million for the third quarter, down 2% from second quarter revenues of €1.46 and down 22% from the year ago period. EBITDA losses (earnings before interest, taxes, depreciation and amortization) before restructuring costs equaled €1.11 million, a significant improvement from EBITDA losses of €1.46 million in the previous period and €1.54 million in the third quarter 2002.

Rocco Pellegrinelli, Chairman and Chief Executive Officer of Brainpower, commented: "The Brainpower team made significant headway in implementing our latest cost reduction program announced last quarter. These efforts contributed significant savings in the quarter, the results of which can be seen in our EBITDA numbers.

As we forecasted in our second quarter earnings announcement, new business was soft during the normally slow third quarter, resulting in a slight decrease in our total revenue backlog. However, we anticipate a strong fourth quarter helped by the launch of two new products whose development was completed during the third quarter. The first new product is an application specifically designed for professional hedge funds investors, which we launched two weeks ago in London. The second is an extremely innovative system for powering the advisory business at private banks. The release of both products shows Brainpower’s commitment to a growth strategy based on breadth and innovation. Both new products will help our company strengthen our offer and to expand in more market niches. The early reception amongst our customers has been extremely positive."

Bill Holwell, Chief Financial Officer, commented: "Brainpower continues to work hard at driving costs out of our business. We successfully reduced operating costs by 15% quarter on quarter and 26% year on year. Management expects further significant reductions in operating costs in the fourth quarter as the full benefit of our latest restructuring program is realized.

Our EBITDA losses ended the quarter at their lowest level since the fourth quarter 2000 - the first full trading period after Brainpower’s listing on Germany’s Deutsche Börse. At an EBIT level, our Italian country operation, Brainpower’s largest, was in the black for the third consecutive quarter.

Cash used in the quarter was €657,000, a significant improvement over the previous quarter in which €1.7 million was used. We benefited not only from Brainpower’s 6-monthly invoicing model but also from our continued strong cash collection efforts and strict cost control. Brainpower ended the quarter with cash and cash equivalents of €1.5 million. As announced last quarter, the company recently put in place a short-term credit facility amounting to €1 million. This facility was not utilized during the period."

REVENUES

For the three months ended September 30, 2003 revenues were €1.42 million, representing a 2% decrease from the previous quarter and a decrease of 22% from last year’s third quarter revenues.

At the end of September 2003, Brainpower’s total backlog of booked revenue to be recognized over 2 to 3 years was €7.1 million. This represented a decrease of 8% 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 €4.0 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 September 30, 2003 was 78%.

OPERATING EXPENSES

For the quarter ended September 30, 2003, Brainpower’s operating expenses before depreciation and amortization were €2.22 million, excluding restructuring costs of €60,000, down from €2.60 million excluding restructuring costs in the quarter ended June 30, 2003.

Sales & Marketing
Sales & marketing costs decreased from €1.06 million in the second quarter to €908,000 in the quarter ended September 30, 2003. The number of people in sales & marketing decreased by five, to 19, of whom eight were direct salespeople.

Research & Development
Research & development costs decreased from €809,000 in the second quarter to €656,000 for the quarter ended September 30, 2003. The Company ended the period with a total of 35 people working in R&D, a decrease of two from the previous quarter.

General & Administrative
The Company employs 13 people in general & administrative functions, a decrease of one from the previous quarter. G&A expenses decreased significantly over the period from €735,000 in the second quarter to €651,000 for the quarter ended September 30, 2003.
Restructuring Costs
Restructuring costs of €60,000 were incurred in the quarter. This charge reflects activities undertaken as part of Brainpower’s latest cost reduction program. Continued cost reductions are targeted in all areas of the business including Sales & Marketing, Research & Development and General & Administration.

OTHER P&L ITEMS

EBITDA losses of €1.11 million for the third quarter ended September 30, 2003 before restructuring costs compare favorably with EBITDA losses of €1.46 million in the second quarter, an improvement of 24% quarter on quarter and 28% from the corresponding period in 2002. Net losses were €1.4 million for the quarter, of which €60,000 were related to restructuring costs. This compares to net losses of €1.8 million in the second quarter, of which €130,000 related to restructuring costs.

BALANCE SHEET

Brainpower ended the period with cash and cash equivalents of approximately €1.5 million compared to €2.2 million at June 30, 2003.

HEADCOUNT

In total, Brainpower had 74 employees as at September 30, 2003, a decrease of eight from the total as at June 30, 2003.

"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."

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