Giga Information Group Reports Financial Results for Fourth
Quarter and 2001; Company Reports Diluted EPS of $0.09 in
Q4 Versus $0.09 Per Share Loss in Same Quarter of 2000
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 13, 2002--
Second Consecutive Quarter of Profitability
Giga Information Group, Inc. (OTC BB: GIGX) today announced
its financial results for the quarter and year ended
December 31, 2001. Giga reported net income of $972,000, or
$0.09 per diluted share, in the fourth quarter of this year
compared to a net loss of $977,000, or $0.09 per diluted
share, in the same quarter of last year. Operating income
in the 2001 fourth quarter was $1.4 million versus an
operating loss of $1.0 million in the comparable quarter of
2000. Total revenues increased 2%, from $16.7 million in
the fourth quarter of 2000 to $17.1 million in the same
quarter of 2001, with research, advisory and consulting
revenues increasing 1.6%, from $15.4 million to $15.7
million, over the same period.
The earnings improvement was primarily the result of the
continuing reduction in the cost of services, which dropped
from 42% of revenue in the fourth quarter of last year to
35% in the same quarter of this year, and lower sales and
marketing expenses, which dropped from 46% to 34% over the
same period. Staff reductions and cost-cutting actions
taken in the second, third and fourth quarters contributed
to the reduction in both the cost of services and
sales/marketing expenses.
The 2001 fourth quarter net income included a writedown of
assets and other charges of $1.0 million, primarily
associated with Giga's operations in Israel. These charges
were offset by an adjustment to accrued restructuring costs
of $203,000 mainly due to favorable settlements of Giga's
contractual obligations and the reversal of $183,000 for
previously recognized stock compensation expenses.
Operating income would have been $1.8 million adjusting for
these special items, and net income would have been $1.6
million, or $0.14 per diluted share, in the fourth quarter
of 2001.
According to Robert Weiler, chairman and chief executive
Officer of Giga Information Group, "The final quarter of
2001 reflected the full impact of the actions we took in
the summer and fall timeframe to streamline our operations
and achieve a profitable business model. Giga not only
achieved earnings per share of $0.09 in the fourth quarter,
but we exceeded our target range of $0.05 to $0.07 per
share. We now have reported two consecutive profitable
quarters and achieved revenue growth in an extremely
difficult year. Our financial performance reflects our
resiliency, our focus, and an extraordinary team effort by
the Giga team."
He noted, "The power of our analyst base, in combination
with the dramatic usage of the GigaWeb delivery model, has
created a solid, loyal customer following. Our
consulting 'point' products, notably Total Economic Impact
(TM) and Web Site Scorecard(TM), have diversified and
extended our reach. We start 2002 on solid footing, and
with an improving economy and increased IT spending, I am
confident that we'll meet or exceed our forecast for the
coming year."
Investor Conference Call
Giga plans to hold its investor conference call at 10 a.m.
Eastern Daylight Time on Thursday, February 14, 2002, to
review the financial performance for fourth quarter and
2001, and to discuss its future outlook. The investor call
will be accessible via webcast; click on the investor
information section of Giga's web site (www.gigaweb.com).
2001 Financial Results
Revenues were $69.8 million for 2001, an increase of 1.5%
compared to prior year revenues of $68.7 million. Research,
advisory and consulting revenues grew 6% over the same
period, from $61.7 million to $65.4 million.
Cost of services as a percentage of revenues decreased from
45% in 2000 to 40% in 2001. Sales and marketing expenses
dropped from 46% of revenues to 40% of revenues over the
same period. The growth in revenues, and more significantly
the reduction in cost of services and sales and marketing
expenses, resulted in a 77% drop in operating losses --
from $8.3 million in 2000 to $1.9 million in 2001. The net
loss dropped from $8.2 million, or $0.80 per share, to $2.4
million, or $0.23 per share, over the same period -- a 70%
decrease.
The 2001 net loss included the previously discussed $1.0
million asset writedown and other charges for Giga's
operations in Israel, as well as restructuring costs of
$1.3 million for staff reductions and the cancellation of a
facility expansion project. These charges were offset by a
non-recurring benefit of $569,000 relating to an adjustment
of commission expenses and the $183,000 reversal of stock
compensation expenses, mentioned earlier. The 2000 net
income included $253,000 of restructuring charges. Adjusted
for these special items in both years, Giga's net loss in
2001 would have been $850,000, or $0.08 per share, compared
to a net loss of $8.0 million, or $0.78 per share, for the
prior year.
Giga reported that its revenue run rate at December 31,
2001, was approximately $73.8 million compared to
approximately $75.3 million at the end of last year, or a
2% decrease. Giga has defined revenue run rate as its
Annualized Value plus the previous 12 months' revenues from
services not included in Annualized Value, primarily events
and services such as Web Site ScoreCard and Total Economic
Impact(TM). Annualized Value is the cumulative annualized
subscription value of Giga's advisory services and
contracts in effect at any given point in time.
2001 Highlights
-- Giga launched a new advisory product called ForSITE in
the summer. ForSITE is a customized product targeted at
helping CIOs increase their effectiveness. Forty-eight
members signed up for ForSITE during the seven months after
the launch of the product, with nearly $1.0 million in
bookings generated during the period.
-- Giga's Total Economic Impact(TM) (TEI) product, which
helps companies measure and communicate the value of
information technology, attracted 34 customers and
generated $2.2 million in bookings in 2001.
-- Web Site Scorecard(TM) had 55 clients in 2001, up 17%
compared to last year. Total bookings in 2001 were $1.3
million.
-- Giga achieved a client retention rate of 83% compared
to 85% in the final quarter of last year. On an annual
basis, client retention was 82% in 2001 versus 84% in 2000.
Outlook
According to Weiler, "Our customer retention rate is
substantially higher than that of our competitors. This is
especially gratifying in light of the difficulties faced by
IT companies and research/advisory firms in 2001. It's
clear that the tactical, results-oriented orientation of
our research is proving its value in this economy. For
instance, Giga's Total Economic Impact(TM) product is the
right product at the right time, and customer response has
been dramatic. Our security analysts have chaired and
contributed to major national security conferences and are
frequently quoted in the major national and business press.
Our customer conferences have been extremely successful, in
the U.S. and abroad."
He explained, "As we assess the industry and review our
customers' key technology issues and spending priorities,
it appears that IT budgets are showing some early signs of
improvement. It is now time to reinvest in the business and
to capitalize on an improving market for our research,
advisory and consulting services. Without this investment,
profitability and revenue growth will not be maintained.
Employee retention, new product development, sales and
marketing programs must be nurtured.
"As a result, we have developed a financial plan that
responds to the anticipated customer demand for our
services. We will invest in future revenue growth, while
still attaining a healthy profit target."
For 2002, Giga's forecast includes:
-- Revenues that are fairly flat compared to 2001
-- Quarterly revenues starting to increase in the fourth
quarter, as a result of the additional investments
-- Positive operating cash flow for the year
-- Fully diluted earnings per share of between $0.04 and
$0.06 for the first quarter of 2002
-- Fully diluted earnings per share of between $0.17 to
0.19 for the year.
Giga's future outlook is based on current expectations and
is being provided so that Giga can discuss its future
outlook during its upcoming investor conference call and
with investors, potential investors, the media, financial
analysts and others. Giga's forecast is subject to the
paragraph at the end of this press release and assumes that
none of the factors mentioned in that paragraph will have a
negative impact on expected results.
About Giga Information Group
Giga Information Group is a leading global technology advisory firm that provides objective research, pragmatic advice, and personalized consulting. Emphasizing close interaction between analysts and clients, Giga enables companies to make better strategic decisions that maximize technology investments and achieve business results. Founded in 1995, Giga is headquartered in Cambridge, Mass. For additional information, visit www.gigaweb.com.
Forward Looking Statements
Statements that are not historical fact may be considered forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but rather reflect Giga's current expectations concerning future events and results. Giga generally uses the words "believes," "expects," "intends," "plans," "anticipates," "likely," "will" and similar expressions to identify forward-looking statements. Such forward looking statements, including those concerning Giga's expectations, involve known and unknown risks, uncertainties and other factors, some of which are beyond Giga's control, which may cause Giga's actual results, performance or achievements, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. In evaluating such statements as well as the future prospects of Giga, specific consideration should be given to various factors including the following: Giga's prior history of losses; Giga's need to attract and retain qualified personnel; Giga's dependence on sales of subscription-based services; Giga's ability to achieve and sustain high renewal rates; Giga's ability to manage and sustain growth; Giga's future capital needs and the risks of working capital deficiency; Giga's dependence on key personnel; competition from other companies including those with greater resources than Giga; the risks associated with the development of new services and products; the potential for significant fluctuations in quarterly operating results; continued market acceptance of and demand for Giga services; uncertainties relating to proprietary rights; Giga's dependence on the Internet infrastructure; the risk of system failure; the risks related to content; the risks associated with international operations; and other risks as detailed from time-to-time in Giga's filings with the Securities and Exchange Commission. Giga undertakes no obligation to update any forward-looking statements as a result of new information, unanticipated events, or otherwise.
Giga Information Group, Inc.
CONSOLIDATED OPERATING RESULTS
(in thousands, except share and per share data)
Quarter Ended December 31, Year Ended December 31,
(unaudited)
2001 2000 2001 2000
Revenues:
Research, advisory
and consulting $ 15,653 $ 15,410 $ 65,379 $ 61,737
Other,
principally events 1,447 1,327 4,379 6,986
Total revenues 17,100 16,737 69,758 68,723
Costs and expenses:
Cost of services 5,957 7,017 27,648 30,654
Sales and marketing 5,854 7,752 28,092 31,923
Research and
development 255 234 1,102 2,174
General and
administrative 2,127 1,892 9,054 9,084
Impairment and
other charges 844 -- 844 --
Restructuring charge (203) (47) 1,329 253
Depreciation and
amortization 908 889 3,576 2,924
Total costs
and expenses 15,742 17,737 71,645 77,012
Income (loss)
from operations 1,358 (1,000) (1,887) (8,289)
Interest income 11 19 86 243
Interest expense (104) (37) (293) 20
Other expense (164) -- (164) --
Foreign exchange
(loss)/gain (15) 41 (103) (231)
Minority interest 46 -- 66 --
Income (loss) from
operations before
income taxes 1,132 (977) (2,295) (8,257)
Income tax
provision/(benefit) 160 -- 140 (25)
Net income (loss) $ 972 $ (977)$ (2,435)$ (8,232)
Earnings (loss)
per common share
Basic $ 0.09 $ (0.09)$ (0.23)$ (0.80)
Diluted $ 0.09 $ (0.09)$ (0.23)$ (0.80)
Weighted average
common shares
outstanding
Basic 10,660,572 10,438,604 10,572,594 10,270,695
Diluted 11,431,172 10,438,604 10,572,594 10,270,695
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands, except share data)
December 31, December 31,
2001 2000
Assets
Cash and cash equivalents $ 1,118 $ 1,640
Restricted cash 57 --
Accounts receivable, net 19,007 21,800
Unbilled accounts receivable 5,588 5,886
Total current assets 29,956 35,378
Restricted cash 620 681
Unbilled accounts receivable 1,399 580
Property and equipment, net 5,770 6,375
Total assets 39,756 44,284
Liabilities and Stockholders' Deficit
Accounts Payable $ 3,841 $ 4,337
Deferred revenues - current 36,601 39,234
Accrued and other current liabilities 7,593 9,669
Debt, current portion 2,832 1,489
Total current liabilities 50,867 54,729
Total liabilities 53,145 55,826
Total stockholders' deficit (13,389) (11,542)
Total liabilities and
stockholders' deficit 39,756 44,284
Common stock issued and outstanding 10,666,021 10,464,741
CONTACT:
Investors
Karen Vahouny
Qorvis Communications
kvahouny@qorvis.com
1 (703) 744-7809
or
Media
Christina Thirkell
Manager, Public Relations
cthirkell@gigaweb.com
1 (617) 577-4965
KEYWORD: MASSACHUSETTS ISRAEL INTERNATIONAL AFRICA/MIDDLE EAST |
