BARRA Reports 25 Percent Increase in Revenues and Net Income Up 27 Percent
October 26, 1998 04:49 PM
BERKELEY, Calif., Oct. 26 /PRNewswire/ -- BARRA, Inc. BARZ today reported a 25 percent increase in revenues and a 27 percent increase in net income for the quarter ended September 30, 1998, as compared to the same quarter a year ago.
For the September 1998 quarter, the Company reported consolidated revenues of $39,026,614 and net income of $4,676,485 or 32 cents of diluted earnings per share. This compares to revenues of $31,234,193 and net income of $3,673,451 or 25 cents of diluted earnings per share for the same quarter a year ago.
"Recent unprecedented volatility in the world's securities markets and the related incidents of significant portfolio losses only serve to underscore the need for reliable risk management," said Andrew Rudd, BARRA's chairman and chief executive officer. "There is no one else in the risk management business who has the research depth, the product sophistication, the breadth of product coverage, the global reach, and the consulting support that BARRA provides. We expect that these recent developments will provide significant new opportunities for applying BARRA's broad range of solutions to risk management challenges," he added.
Revenues from the analytics and consulting businesses combined were up 19 percent over the same quarter a year ago. Including the revenues from the businesses purchased since last year, revenues from the Company's analytics and data businesses were up 21 percent. The strengthening of the U.S. dollar primarily against the yen during the September 1998 quarter accounted for a decline in reported revenues of approximately $618,000 compared to exchange rates in effect for the same quarter a year ago. The analytics revenue increases were partially offset by decreases or lower growth rates for revenues from certain of the Company's consulting businesses.
During the quarter, BARRA announced increased speed and functionality in two of the US fixed income products available within the BARRA Cosmos System(TM) -- Cosmos-Precision(TM) and Cosmos-Decision(TM). Together, these two products provide fixed income asset managers, and fixed income investment professionals in the insurance and banking industries, with the most powerful analytics available for managing tax exempt and taxable bonds, including structured products. "We are committed to strengthening our position as the leading global provider of fixed income products and services, and will continue to improve and expand our offerings," said Dr. Rudd.
Also this quarter, BARRA announced an Online Products Center barra.com, providing the investment community with Internet access to six online products including the Market Impact Model(TM), BARRA Real-time Treasury Analytics(TM), Directus(TM), BARRA Equity Risk Data(TM), Bond Express(R) and TEDnet(TM). BARRA's Online Product Center offers investment professionals access to analytics via the Internet.
Electronic brokerage revenues were up 91 percent over the same quarter a year ago. These revenues consist of royalties from the operation of the Portfolio System for Institutional Trading (POSIT). POSIT is operated by the Company's POSIT joint venture partner, ITG, Inc., and is the world's largest intra-day equity-matching trading system. POSIT crossed a record breaking average of 26.9 million shares per day for the September 1998 quarter and has crossed approximately 4.3 billion shares to date this calendar year.
Revenues from the Company's asset management businesses totaled $6,270,069 for the September 1998 quarter, compared to $5,174,933, for the same quarter a year ago. Included in the September 1998 quarter results were approximately $2.3 million of performance-based fees from accounts where investment performance exceeded agreed upon benchmarks. This represents an increase of approximately $481,000 in performance fees compared to the same quarter a year ago.
The investment management contracts for those clients of the Company's asset management subsidiary, Symphony Asset Management LLC, whose funds are managed on a performance fee basis, provide for the fees to be determined and paid primarily on the annual anniversary dates of the contracts. Symphony, therefore, only recognizes these fees as revenue on these determination dates. Symphony performance fees for the September 1998 quarter were for accounts representing approximately 23 percent of the current total of assets subject to performance fees and included fees for some accounts that had partial year performance periods. It is estimated that approximately 66 percent and 3 percent of the current total of performance-based funds under management will have performance fee determination dates in the quarters ended December 31, 1998 and March 31, 1999, respectively. The pattern of anniversaries can change from quarter to quarter because of the addition, termination and renegotiation of account agreements. There is also, of course, no assurance that the investment performance will continue at historical levels.
As of the beginning of the December 1998 quarter, Symphony had approximately $2.3 billion of assets under direct management. Of the funds under direct management, approximately $1.6 billion are managed under agreements that provide for performance fees in addition to a base management fee. Approximately $1.3 billion of the funds managed under performance fee agreements are invested using equity market neutral strategies. These strategies involve building individual dollar balanced long and short portfolios of large to mid capitalization U.S. equity securities, small capitalization U.S. equity securities and U.K. equity securities. The market neutral strategies (and related portfolios) that have been in existence since January 1998 or before, all have positive returns for the nine month period ended September 30, 1998.
Total operating expenses for the quarter ended September 30, 1998 increased 22 percent over the same quarter a year ago. Included in these expenses are compensation and benefits costs which increased 25 percent compared to the prior year. Compensation and benefit expenses have increased primarily because, the Company has acquired The Estimate Directory, Directus and Redpoint businesses since last year, annual salary adjustments are effective July 1 of each year, the pattern of accruals of annual incentive compensation, and the Company has increased its use of contractors for Year 2000 projects.
The Company's consolidated revenues for the six months ended September 30, 1998 were $74,939,762, up 28 percent from the same period a year ago. Net income for the first six months of this year was $9,202,788, or 63 cents of diluted earnings per share, up from $7,325,444, or 52 cents of diluted earnings per share excluding one-time charges of $9,914,000 for the write-off of in-process research and development costs associated with the acquisition of Global Advanced Technology Corporation in June of the prior year.
BARRA, founded in 1975, provides innovative analytical models, software, consulting, investment data and money management services that enable its clients worldwide to make superior investment and trading decisions. Based in Berkeley, Calif., BARRA also has offices in major financial centers throughout the world. Information on BARRA is also available on-line at barra.com.
Each statement in this news release containing any form of the words "will", "can" or "expect", or any future verb tense, is a forward-looking statement that may involve a number of risk factors and uncertainties. Among other factors that could cause actual results to differ materially are the following: the timing of performance fee determination dates for the Company's asset management business; availability of adequate third-party data on reasonable terms and at reasonable prices; significant delays or excessive costs associated with product research, development and/or introduction; the loss of a large single revenue source; fluctuations in U.S. dollar exchange rates for non-U.S. currencies; the ability of software and data to accommodate dates after December 31, 1999 and the adoption of the Euro Currency. Further information on potential factors that could affect the Company's financial results is included in the Company's Form 10-K for the 1998 fiscal year filed with the Securities and Exchange Commission (SEC). Please refer to the Company's SEC filings, copies of which are available from the Company without charge for further information.
BARRA Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Month Periods Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
Operating Revenues:
Subscription and
consulting fees $28,237,994 $23,691,131 $55,028,387 $44,809,455
Electronic brokerage 4,518,551 2,368,129 8,285,815 4,949,034
Asset management 6,270,069 5,174,933 11,625,560 8,582,166
Total operating
revenues 39,026,614 31,234,193 74,939,762 58,340,655
Operating Expenses:
Cost of subscription
products 2,328,283 1,611,046 4,959,130 3,326,267
Compensation and
benefits 18,998,244 15,192,724 35,747,018 28,151,224
Occupancy 1,883,368 1,418,554 3,622,162 2,550,182
Other operating
expenses 6,308,254 6,055,365 12,650,195 10,808,132
One-time acquisition
charges -- -- -- 9,914,000
Total operating
expenses 29,518,149 24,277,689 56,978,505 54,749,805
Interest Income
& Other 229,841 616,369 802,676 1,071,439
Income before Equity
in Net Income
and Loss of Investees,
Minority Interest
and Income Taxes 9,738,306 7,572,873 18,763,933 4,662,289
Equity in Net Income
and Loss of Investees (116,800) (45,806) (366,946) (24,118)
Minority Interest (1,955,137) (1,193,531) (3,310,964) (1,782,768)
Income before
Income Taxes 7,666,369 6,333,536 15,086,023 2,855,403
Income Taxes (2,989,884) (2,660,085) (5,883,235) (5,443,959)
Net Income (Loss) $4,676,485 $3,673,451 $9,202,788 ($2,588,556)
Net Income (Loss)
Per Share:
Basic $0.34 $0.27 $0.67 ($0.20)
Diluted $0.32 $0.25 $0.63 ($0.20)
Weighted Average
Common and Common
Equivalent Shares:
Basic 13,821,724 13,402,542 13,784,447 13,055,971
Diluted 14,568,491 14,406,827 14,569,809 13,055,971
SUPPLEMENTAL INFORMATION:
Net Income Excluding
One-time Acquisition
Charges $4,676,485 $3,673,451 $9,202,788 $7,325,444
Net Income Per
Share Excluding
One-time Acquisition
Charges:
Basic $0.34 $0.27 $0.67 $0.56
Diluted $0.32 $0.25 $0.63 $0.52
Weighted Average
Common and Common
Equivalent Shares:
Basic 13,821,724 13,402,542 13,784,447 13,055,971
Diluted 14,568,491 14,406,827 14,569,809 14,010,159
BARRA, Inc. and Subsidiaries
Selected Balance Sheet Data
As of September 30, 1998 (Unaudited) and March 31, 1998
September 30, March 31,
1998 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $17,058,650 $33,673,314
Short-term investments 15,317,835 8,294,394
Investment in municipal debt securities
- available for sale 6,391,664 6,265,204
Accounts receivable:
Subscription and other
(Less allowance
for doubtful accounts
of $152,733 and $169,183) 22,977,511 18,152,071
Asset Management 7,206,494 2,449,324
Related parties 5,371,259 3,855,057
Prepaid expenses 1,782,846 1,965,819
Total current assets 76,106,259 74,655,183
TOTAL ASSETS: $129,549,432 $121,460,106
Current Liabilities:
Accounts payable 1,655,826 $2,223,129
Due to related party 1,374,972 1,079,199
Accrued expenses payable:
Accrued compensation 4,739,642 9,663,688
Accrued corporate income taxes 4,939,621 4,884,113
Other accrued expenses 8,044,623 7,211,705
Unearned revenues 23,548,489 22,160,710
Total current liabilities 44,303,173 47,222,544
Total shareholders' equity 81,236,979 70,750,983
SOURCE BARRA, Inc. |
