Teknowledge Reports Year-End 2003 and Fourth Quarter Results:
Commercial Revenues Improve 43% Compared to 2002
PALO
ALTO, Calif., Nov. 13, 2003 -- Teknowledge Corporation
(Nasdaq: TEKC
- News),
a leading provider of software and services to transform business data into value, today reported financial results for the fourth quarter and year ended December 31, 2003.
Total revenue for full year 2003 was $11,408,000, up 3% from revenue of $11,117,000 in 2002. Sales in the Commercial segment, primarily Financial Solutions, increased 43% to $4,092,000 from $2,861,000 in 2002. Revenue from government research and development was $7,316,000 in 2003, compared with $8,256,000 in 2002, a decrease of 11%. Approximately 36% of revenues in 2003 were generated from Financial Solutions, 64% from government. The comparable percentages in 2002 were 24% from Financial Solutions, 74% from government, and 2% from other commercial sales.
For the full year 2003, the Company reported a net income of $114,000, or $0.02 per basic and diluted share. This compares to a net loss of ($2,829,000), or ($0.50) basic and diluted per share, on $11,117,000 of revenue in 2002.
Revenue for the fourth quarter of 2003 was $2,626,000, up 18% from $2,230,000 in the fourth quarter of 2002. Net loss was ($374,000), or ($0.07) per basic and diluted share, compared to net loss of ($2,176,000), or ($0.38) basic and diluted per share, in the year-ago quarter.
Fourth quarter 2003 revenues from commercial operations rose to $1,232,000 from $370,000 in the comparable quarter of 2002, and increase of 233%. Government revenue decreased 25% to $1,394,000 from $1,860,000 in 2002. Most of this decrease was due to two large contracts ending, along with a slower-than-expected pipeline of new R&D contract opportunities. During the fourth quarter of 2003, the Company invested $191,000 in internal R&D and bid and proposal work, and $113,000 on an internal project to make the company more competitive. The Company announced recently a new government contract for $4.3 million, but this contract arrived too late in the quarter to benefit the quarterly results.
The Company anticipates growth in demand for TekPortal™ products and services in the second quarter of 2004, based on a review of the current customer pipeline. Government service growth is expected to grow as contract R&D opportunities expand in the second half of 2004, and the Company moves into more application-focused contracts. Overall for 2004, the Company is forecasting stronger profits and a broader customer base in both the commercial and government segments.
Highlights from the Company’s balance sheet include a stable cash position, zero long-term debt, and an improved financing arrangement signed in the first quarter of 2004. The Company reported that its current liabilities had decreased by about $1 million to $3,878,000 at December 31, 2003, from $4,826,000 at December 31, 2002.
Effective March 28, 2004, Teknowledge renewed its line of credit with a local bank. The new agreement extends the term of the line from one year to two, ending March 28, 2006. Under the new arrangement, the Company may borrow as much as $3,000,000 or 80 percent of eligible receivables, whichever is lesser, at an initial rate of 1.0% over the Wall Street Journal prime interest rate (currently 4.00%) with a floor of 4.25%. In connection with the credit line, the Company received a $1,000,000 term loan sub-facility. The term loan is for a two-year term at an initial interest rate of 3.0% over the Wall Street Journal prime rate, with a floor of 4.25%.
In association with the new term loan credit facility, the Company granted a warrant for 15,000 shares of Common Stock with a strike price of $7.00 per share.
Neil Jacobstein, President and CEO, said, “Teknowledge ended 2003 well-positioned to improve its financial performance in 2004. In the commercial segment, Teknowledge has added several large TekPortal ® customers, strengthened its position as the leading supplier of on-premise financial account aggregation software, and added OFX and ACH Transfers software to its TekPortal eFinance Suite of product offerings. We have a very strong pipeline of banks interested in implementing our ACH Transfers product in Q2 2004. Also, our technology licensing and patent income prospects have never been stronger.”
Jacobstein added, “We experienced in 2003 a temporary slowdown of our government segment. This had a relatively mild impact on our overall results for 2003, testifying to the value of our diversified business model. The large increase in government defense spending in 2003 was not focused on R&D, but the need for innovation persists, and R&D contract opportunities are already beginning to improve. We invested heavily in government bid-and-proposal and internal R&D work during Q4 in order to increase our chances for additional and larger government contracts later in 2004. Fundamentally, I believe that we have excellent prospects in 2004 in our security and knowledge system contract R&D work. We have already added a new $4.3 million DARPA security contract, which has just begun to impact our revenues for 2004.
"Our team is taking the appropriate steps to position Teknowledge for growth in both commercial and defense-related revenue in 2004,” Jacobstein said. “It is important to not be confused by short-term fluctuations in any part of our business. Fundamentally, for a Company its size, Teknowledge has an outstanding suite of Financial Solutions products, strong reference sites in its base of 70-plus financial services customers, a very talented and experienced defense R&D contracting staff, a large pipeline of next generation software technology, and a proactive stance in prosecuting its patent portfolio against some of the largest software companies in the world. We are truly excited about Teknowledge’s prospects for 2004.”
TEKNOWLEDGE CORPORATION
Consolidated Balance Sheets
(In thousands)
Dec. 31 Dec. 31
2003 2002
--------------
Assets
Cash and cash equivalents $1,045 $1,114
Receivables and unbilled charges 1,815 1,810
Other assets 141 159
Deferred tax asset, short-term 768 768
Capitalized software, net 4,156 4,760
Equipment and improvements, net 126 237
--------------
Total assets $8,051 $8,848
==============
Liabilities and stockholders' equity
Accounts payable $1,107 $907
Accrued payroll & related liabilities 912 1,154
Line of credit 960 1,317
Other accrued liabilities 900 1,448
Stockholders' equity 4,172 4,022
--------------
Total liabilities and stockholders' equity $8,051 $8,848
TEKNOWLEDGE CORPORATION
Unaudited Consolidated Income Statements
(In thousands, except per share data)
Three Months
Ended December
31
2003 2002
----------------
Revenues $2,625 $2,229
Costs and expenses 3,019 2,778
----------------
Operating income (loss) (394) (549)
Nonoperating income (loss) 20 (1,627)
----------------
Income (loss) before tax (374) (2,176)
Provision for income tax - -
----------------
Net income (loss) (374) (2,176)
================
Diluted net income (loss) per share $(0.07) $(0.38)
================
Shares used in computing diluted
net income (loss) per share 5,731 5,716
================
Twelve Months
Ended December
31,
2003 2002
----------------
Revenues $11,408 $11,117
Costs and expenses 11,303 12,487
----------------
Operating income (loss) 105 (1,370)
Nonoperating income (loss) 9 (1,459)
----------------
Income (loss) before tax 114 (2,829)
Provision for income tax - -
----------------
Net income (loss) 114 (2,829)
================
Diluted net income (loss) per share $0.02 $(0.50)
================
Shares used in computing diluted
net income (loss) per share 5,720 5,714
================
About
Teknowledge
Teknowledge
Corporation provides advanced software and services to
transform business data into value. Teknowledge is the
largest provider of financial account aggregation software
worldwide and a prime contractor for R&D in Internet
security, Web-based training, distributed systems and
knowledge processing. Founded in 1981, Teknowledge holds
an extensive intellectual property portfolio, including
nine software patents. More information about Teknowledge
may be found at www.Teknowledge.com.
This
press release contains forward-looking statements relating
to the demand, market acceptance, and anticipated growth
of products and services offered by the Company that are
subject to a high level of uncertainty. All forward-looking
statements involve risk and uncertainties, and actual
results could differ materially from those set forth in
the forward-looking statements contained herein.
CONTACT: investors,
Dennis Bugbee, +1-650-424-0500, or media, Pushpita Prasad, +1-650-429-2723.
SOURCE: Teknowledge
Corporation
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