Bitstream Management Discusses Q1 2011 Results - Earnings Call Transcript

Bitstream (BITS)

Q1 2011 Earnings Call

May 13, 2011 4:30 pm ET

Executives

James Dore - Chief Financial Officer, Principal Accounting Officer and Vice President

Analysts

Matthew Spratford - Sidoti & Company, LLC

Ken Lang

Unknown Analyst -

Brandon Butler

J.D. Steinhilber

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the first quarter earnings release conference call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today, Mr. Jim Dore. Sir, please go ahead.

James Dore

Hello, and welcome to Bitstream Inc.’s First Quarter 2011 Conference Call. I am Jim Dore, Vice President and Chief Financial Officer of Bitstream. Here with me today is Costas Kitsos, Bitstream's Vice President of Engineering, who is currently focused on our Publishing division.

As previously announced, Anna Chagnon has resigned as our CEO on May 1, and Amos Kaminski, the Chairman of our Board was named Executive Chairman and CEO of Bitstream. Unfortunately, Mr. Kaminski is traveling out of the country on company business related to our acquisition in Israel and will not be able to join us on the call today. For those of you new to Bitstream, Mr. Kaminski has been Chairman of the Board since August 2010. He was also previously Chairman of the Board from 1991 through 1996 and has been a director of the company since 1985. Mr. Kaminski asked me to relay the following message from him, so I'll read that statement.

Good afternoon. I apologize for not being able to join the call today. I will be present at our annual meeting on June 8 and will be happy to address any questions you may have at that time. We thank Anna Chagnon for her leadership and commitment to Bitstream. With her departure, the board has elected me to serve as interim CEO. We have formed a search committee to search for and nominate to the board a new CEO who will grow the company and shareholder value. The executive team also wishes to thank Anna for her leadership at Bitstream.

And so now we will begin the conference call with highlights for the quarter, followed by a question-and-answer session.

During this conference call, we may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that forward-looking statements are inherently uncertain. 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 product, competition and the timely introduction of new products. Any forward-looking statements made during this conference call represent the company's judgment as of today, and we caution listeners not to place undue reliance on such statements.

A short time ago, we reported our results for the first quarter of 2011 with the following financial highlights. Revenue increased by $1.6 million or 31% to $6.8 million for the 3 months ended March 31, 2011, as compared to total revenue of $5,208,000 for the 3 months ended March 31, 2010, and by $294,000 or 5% sequentially as compared to $6,519,000 for the 3 months ended December 31, 2010. Revenue has now grown sequentially for the last 4 quarters.

Q1 revenue was the highest quarterly revenue amount since we went public in 1996, and revenue increased across all of our product lines as compared to the first quarter of 2010. The company's aggregate cash, cash equivalents and investments at March 31, 2011, totaled $11,456,000, an increase of $188,000 from a balance of $11,268,000 at December 31, 2010.

The increase in cost of license revenue for the 3 months ended March 31, 2011, as compared to the 3 months ended March 31, 2010, is due to an increase in direct third-party costs of $473,000, primarily from royalties associated with our e-commerce sales and $47,000 for amortization expense related to the acquisition of iWay technology. Cost of services increased primarily due to additional personnel added with the iWay acquisition.

Operating expenses increased $1,558,000 to $4,496,000 for the 3 months ended March 31, 2011, from $2,938,000 for the 3 months ended March 31, 2010, reflecting our investment in the iWay and BOLT technologies. Our type OEM and e-commerce product lines continue to be strong and generate sales and cash to help fund these investments.

Our GAAP loss from operations increased $602,000 to $1,005,000 for the 3 months ended March 31, 2011, as compared to $403,000 for the 3 months ended March 31, 2010.

Our net loss increased $636,000 to $1,034,000 or $0.10 per share for the 3 months ended March 31, 2011, as compared to $398,000 or $0.04 per share for the 3 months ended March 31, 2010.

Our non-GAAP loss excludes stock-based compensation expense, the amortization of intangible assets, which are primarily acquired from Press-sense Ltd, and acquisition cost of certain assets of Press-sense Ltd. Our non-GAAP loss from operations increased $511,000 to a loss of $680,000 for the 3 months ended March 31, 2011, as compared to $169,000 for the 3 months ended March 31, 2010.

Our non-GAAP net loss increased $545,000 to $709,000 or $0.07 per share for the 3 months ended March 31, 2011, as compared to $164,000 or $0.02 per share for the 3 months ended March 31, 2010. I'll now go into each of our -- our product lines.

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