2/19/03

QRS Achieves Key Turnaround Objectives for 2002

Paul Demery , Managing Editor, B2B E-commerce

Company Reports Second Consecutive Quarter of Profitability

RICHMOND, Calif., Feb. 18 /PRNewswire-FirstCall/ -- QRS Corporation (Nasdaq: QRSI) announced today the results of its fourth quarter and fiscal year ended December 31, 2002. (Photo: http://www.newscom.com/cgi-bin/prnh/20000508/QRSLOGO )

The Company reported net income for the fourth quarter of $1.0 million, or $0.06 per share, diluted, up from the net income of $0.6 million, or $0.04 per share, diluted, reported for the third quarter of 2002. For the full year, the Company reported a net loss of $4.1 million, or $0.26 per share, comprised of a net loss of $5.6 million in the first half of 2002 and net income of $1.5 million in the second half.

In 2001, the Company reported a net loss of $141.2 million, or $9.08 per share, for the fourth quarter and $173.3 million, or $11.26 per share, for the full year. Net losses for the fourth quarter and full year 2001, exclusive of restructuring charges and impairment losses, would have been $12.4 million, or $0.79 per share, and $28.4 million, or $1.84 per share, respectively.

The Company reported revenues of $32.0 million for the fourth quarter 2002, compared to revenues of $33.5 million for the third quarter and $34.6 million for the year earlier quarter. Full year revenue was $136.0 million for 2002, compared to $143.1 million for the prior year.

"We`re very pleased to have executed on our turnaround plans for 2002," said Liz Fetter, President and CEO of QRS. "We significantly improved our financial performance, strengthened our operational fundamentals, aligned the product portfolio, and built a seasoned management team. We delivered these results despite the challenging economy and now, QRS is ready to capitalize on the opportunities we see in the marketplace. I am confident we have the foundation for future growth."

The Company reported a fourth quarter gross margin of 49%, which compares to 48% in the third quarter and 25% for the year earlier quarter. Full year gross margin increased from 38% in 2001 to 47% in 2002.

Operating expenses were down for the quarter and the year. Fourth quarter operating expenses were $14.9 million, compared to $15.6 million for the third quarter and $150.1 million for the year earlier quarter. Full year operating expenses were $69.0 million, compared to $235.6 million reported for the prior year. 2001 operating expenses, exclusive of restructuring charges and impairment losses, would have been $26.0 million for the fourth quarter and $97.3 million for the full year.

Cash and marketable securities increased by $2.2 million for the fourth quarter and $1.0 million for the full year 2002 to $39.6 million. Days sales outstanding at the end of 2002 were 42 days, compared to 47 days at the end of the third quarter and 58 days at the end of 2001.

Revenues from Software Applications, which include both enterprise and hosted applications, were $8.1 million for the fourth quarter compared to $8.6 million for the third quarter and $9.5 million for the fourth quarter last year. Software Applications revenues for the full year 2002 totaled $35.5 million, compared to $39.0 million for the prior year. Gross margins for Software Applications were 73% for the fourth quarter and 69% for the full year 2002, compared to 72% for the third quarter and 50% for the prior year.

Revenues for Trading Community Management were $17.6 million for the fourth quarter, compared to $18.8 million for the third quarter and $19.5 million for the fourth quarter last year. Trading Community Management revenues for the full year 2002 totaled $73.7 million, compared to $80.7 million for the prior year. Gross margins for Trading Community Management were 52% for the fourth quarter and 49% for the full year 2002, compared to 49% for the third quarter and 46% for the prior year.

Revenues for Global Services were $6.3 million for the fourth quarter, compared to $6.1 million for the third quarter and $5.6 million for the fourth quarter last year. Global Services revenues for the full year 2002 totaled $26.9 million, compared to $23.5 million for the prior year. Gross margins for Global Services were 12% for the fourth quarter and 11% for the full year 2002, compared to 11% for the third quarter, and (11%) for the prior year.

In addition to the Company`s improved financial and operational performance, strategic highlights from 2002 and 2003 year to date include:

-- Secured customer wins and renewals. QRS secured more than 75 wins and agreement extensions in the fourth quarter of 2002 with retailers and suppliers across multiple retail verticals, including Gottschalks Inc., L`Oreal USA Inc., Duane Reade Inc., The Kroger Company, OskKosh B`Gosh, Inc., Ingram Micro Inc., StrideRite Corporation, Lego Systems and Huffy Bicycle Company.
-- Broadened product set. The Company continued to enhance its Trading Community Management capabilities in 2002 to better accommodate collaboration between trading partners of any size and any infrastructure. QRS signed an agreement with Cyclone Commerce in the first half of the year to sell its AS2 software to QRS customers. QRS also launched a collaborative exceptions management offering, QRS Insight(TM), at the National Retail Federation trade show in January 2003.
-- Expanded strategic relationships. QRS signed a strategic agreement with UCCnet in the fourth quarter of 2002 that makes QRS a preferred partner in its InSync Partner Program for item registry and data synchronization with UCCnet`s GLOBALregistry. Earlier in 2002, QRS entered into a new multi-year reseller agreement with IBM, which expands QRS` service offerings and generates significant cost improvements. In 2002, QRS also focused on developing key channel partners for the European market, resulting in an agreement with Tibbett & Britten, a leading international logistics service provider, and, in the first quarter of 2003, an agreement with Influe, Europe`s leading provider of EDI services.
-- Strengthened the Company`s leadership. In 2002, the Company developed and implemented a plan to increase the independence of its Board of Directors. In addition, QRS brought in a new management team in 2002 with broad technology, industry and functional experience.

Overall, the Company expects to remain profitable in the first quarter of 2003, with revenues between $31 and $32 million.

Conference Call Information
In conjunction with the earnings release, QRS will hold a conference call at 2:00 p.m. PST (5:00 p.m. EST) on February 18, 2003. The conference call can be accessed via telephone at 1-877-580-9103 with passcode QRS. The call will also be webcast and can be accessed at www.qrs.com. Telephone replay will be available beginning February 18, 2003 after 7:00 p.m. EST at 1-888-566-0565 (toll-free) and 402-998-1636 (international); a replay of the webcast will be available at www.qrs.com.

About QRS
With headquarters in Richmond, California, QRS has been building solutions that automate the way companies connect, transact, collaborate and differentiate since 1988. QRS delivers collaborative commerce software and services that enable retail companies to bring products to market quickly and profitably. With a full suite of commerce solutions for the entire global trading community, only QRS combines the benefits of total electronic communication with the retail industry`s leading source of product information for accurate partner transactions between companies of any size or technology infrastructure. QRS allows companies to see and manage processes across the supply chain so that problems can be detected and resolved, and offers services that provide insight to the store floor so that companies can enhance the customer experience and improve store operations. More than 8,000* customers from over 20 vertical markets -- including Sears, Roebuck and Co., The Kroger Company, Selfridges plc and Jones Apparel Group -- use QRS to meet customer needs, compress cycle times, reduce costs and improve sales margins. Learn more about QRS at www.qrs.com.

* Based on total, unique QRS corporate customers that purchased or licensed QRS products and services between January and December 2002.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements regarding future events and the future financial performance of QRS Corporation that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by QRS Corporation with the SEC, specifically the most recent reports on Form 10-K, 8-K, and 10-Q, each as it may be amended from time to time, which identify important factors that could cause actual results to differ from those contained in the forward-looking statements, including risks associated with general economic conditions; specific conditions in the retail industry; competition; changes in our senior management; rapid technological change in our industry; dependence upon key customers and their trading partners; ability to introduce and market acceptance of new products and services; the ability to successfully integrate and manage acquired businesses and technologies; customers` willingness to purchase services offered through or in conjunction with third parties; and dependence upon IBM for e-commerce services, among others. QRS assumes no obligation to update the forward-looking information contained in this news release.

NOTE: QRS, the QRS logo and QRS Insight are trademarks or registered trademarks of QRS Corporation in the United States and other countries. All other trademarks belong to their respective owners.

Topics:

Electronic Arts, Entertainment, QRS complex, Software development, Video game industry

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