Bitstream Inc. Reports Third Quarter Results for 2009

November 10, 2009 4:00 PM EST

Net income more than doubles to $0.05 per diluted share as revenue increases by 3%.

MARLBOROUGH, Mass.--(BUSINESS WIRE)-- Bitstream Inc. (Nasdaq: BITS) today reported that total revenue increased by $177,000 or 3% to $5,660,000 for the three months ended September 30, 2009 as compared to total revenue of $5,483,000 for the three months ended September 30, 2008. Total revenue for the three months ended September 30, 2009 increased by $411,000 or 8% as compared to total revenue of $5,249,000 for the three months ended June 30, 2009. The Company's cash and cash equivalents at September 30, 2009 totaled $17,673,000, an increase of $606,000 from a balance of $17,067,000 at June 30, 2009.

"The third quarter was an exciting time for Bitstream and a very productive one. We increased revenue 3%, decreased operating expenses by $181,000 or 6% and more than doubled our operating profit and net income as compared to the third quarter of 2008," said Anna Magliocco-Chagnon, President and Chief Executive Officer". "September 2009 was our best month for e-commerce sales in our history and in October we signed our first OEM licensing deals for our BOLT(TM) browsing technology, which we believe will lead to additional licensing opportunities for our new Bolt Browser."

GAAP Results

Our income from operations increased $373,000 or 228% to $536,000 for the three months ended September 30, 2009 as compared to $163,000 for the three months ended September 30, 2008. Net income increased $332,000 or 177% to $519,000 or $0.05 per diluted share for the three months ended September 30, 2009 as compared to net income of $187,000 or $0.02 per diluted share for the three months ended September 30, 2008.

Non-GAAP Results

Our income from operations, not including the effect of stock-based compensation expense, increased $392,000 or 109% to $752,000 for the three months ended September 30, 2009 as compared to $360,000 for the three months ended September 30, 2008. Net income, not including the effect of stock-based compensation expense, increased $351,000 or 91% to $735,000 or $0.07 per diluted share for the three months ended September 30, 2009 as compared to net income of $384,000 or $0.04 per diluted share for the three months ended September 30, 2008.

A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

CONFERENCE CALL REMINDER

Today, November 10, 2009 at 4:30 p.m. EST, Bitstream will host a conference call with the financial community to discuss its results for the quarter ended September 30, 2009:

    --  Domestic Dial-in number: 1-866-837-9789
    --  International Dial-in number: 1-703-639-1425

Call into the conference number 5-10 minutes prior to the start time. An operator will request that you provide your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call number, please contact Bitstream at (617) 497-6222.

A replay of the conference call will be available through November 20, 2009 (access code): 1411660

    --  Domestic Replay number: 1-888-266-2081
    --  International Replay number: 1-703-925-2533

Forward Looking Statements Disclosure

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. 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 products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission, including Bitstream's Annual Report on Form 10-K for the year ended December 31, 2008.

Use of Non-GAAP Financial Information

To supplement the financial measures presented in the Company's press release in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company also presents non-GAAP measures relating to revenue, income from operations, net income and net income per diluted share which were adjusted from amounts determined based on GAAP to exclude share-based compensation expenses, as well as the related income tax effects.

The Company believes these non-GAAP financial measures will enhance the reader's overall understanding of Bitstream's current financial performance and the Company's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP, and may have limitations in that they do not reflect all of Bitstream's results of operations as determined in accordance with GAAP.

These non-GAAP measures should only be used to evaluate Bitstream's results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP.

About Bitstream

Bitstream Inc. (NASDAQ: BITS) is a software development company that makes communications compelling. Bitstream enables customers worldwide to render high-quality text, browse the Web on wireless devices, select from the largest collection of fonts online, and customize documents over the Internet. Its core competencies include fonts and font technology, browsing technology, and publishing technology. For more information about Bitstream, please visit www.bitstream.com.

Bitstream and MyFonts.com are registered trademarks, and Pageflex, the Bitstream logo, BOLT and ThunderHawk are trademarks of the Company. Other technologies and brand names are used for information only and remain trademarks or registered trademarks of their respective companies.

Bitstream Inc.

Consolidated Statements of Operations

(In Thousands, Except Per Share Data)

(unaudited)

                                         Three Months Ended    Nine Months Ended
                                         September 30,         September 30,

                                         2009      2008        2009      2008

Revenue:

Software license                       $ 4,512   $ 4,222     $ 12,361  $ 14,563

Services                                 1,148     1,261       3,549     3,807

Total revenue                            5,660     5,483       15,910    18,370

Cost of revenue:

Software license                         1,779     1,696       4,946     5,555

Services                                 500       598         1,622     1,782

Total cost of revenue                    2,279     2,294       6,568     7,337

Gross profit                             3,381     3,189       9,342     11,033

Operating expenses:

Marketing and selling                    871       979         2,778     3,358

Research and development                 1,234     1,334       3,641     4,048

General and administrative               740       713         2,195     2,072

Total operating expenses                 2,845     3,026       8,614     9,478

Operating income                         536       163         728       1,555

Interest and other income, net           18        30          53        160

Income before provision for income       554       193         781       1,715
taxes

Provision for income taxes               35        6           96        56

Net income                             $ 519     $ 187       $ 685     $ 1,659

Basic net earnings per share           $ 0.05    $ 0.02      $ 0.07    $ 0.17

Diluted net earnings per share         $ 0.05    $ 0.02      $ 0.07    $ 0.16

Basic weighted average shares            9,799     9,521       9,770     9,621
outstanding

Diluted weighted average shares          10,248    10,160      10,179    10,332
outstanding

Bitstream Inc.

Consolidated Balance Sheets

(In Thousands)

(unaudited)

ASSETS                                          September 30,    December 31,
                                                2009             2008

Current assets:

Cash and cash equivalents                       $ 17,673       $ 16,162

Accounts receivable, net                          1,399          1,827

Prepaid expenses and other current assets         800            527

Restricted cash                                   150            150

Total current assets                              20,022         18,666

Property and equipment, net                       630            427

Other assets:

Goodwill                                          727            727

Restricted cash, long-term                        136            ---

Intangible assets                                 68             81

Total other assets                                931            808

Total assets                                    $ 21,583       $ 19,901

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                $ 1,479        $ 832

Accrued payroll and other compensation            381            1,057

Other accrued expenses                            557            583

Deferred revenue                                  1,565          1,937

Total current liabilities                         3,982          4,409

Long-term deferred rent                           407            ---

Total liabilities                                 4,389          4,409

Total stockholders' equity                        17,194         15,492

Total liabilities and stockholders' equity      $ 21,583       $ 19,901

Bitstream Inc.

Non-GAAP Results

(In Thousands, Except Per Share Data)

(unaudited)

The following table shows Bitstream's non-GAAP results reconciled to
GAAP results included in this release.

                                               Three Months
                                               Ended September 30,

                                               2009      2008

GAAP operating income                        $ 536     $ 163

SFAS 123R stock-based compensation             216       197

Non-GAAP operating income                    $ 752     $ 360

GAAP net income                              $ 519     $ 187

SFAS 123R stock-based compensation             216       197

Non-GAAP net income                          $ 735     $ 384

Diluted net income per share:

GAAP net income                              $ 0.05    $ 0.02

SFAS 123R stock-based compensation             0.02      0.02

Non-GAAP net income                          $ 0.07    $ 0.04

Shares used to compute diluted GAAP and
                                               10,248    10,160
Non-GAAP net income per share

    Source: Bitstream Inc.

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