QRS Significantly Improves Profitability in Second Quarter

Kurt Peters

RICHMOND, Calif., July 29 -- QRS Corporation (Nasdaq: QRSI) announced today its results for the second quarter ended June 30, 2003.

The Company reported its fourth consecutive quarter of profitability with second quarter net income of $1.8 million, or $0.12 per share, diluted, compared to net income of $0.8 million, or $0.05 per share, diluted, for the first quarter 2003 and to a net loss of $2.4 million, or $0.15 per share, for the second quarter 2002.

"We are pleased to have significantly improved our bottom line results this quarter, particularly given the ongoing challenges in the external environment. In fact, we believe we have stabilized revenues, and we expect to see revenues increase slightly in the third quarter," said Liz Fetter, President and CEO of QRS. "We are investing for growth while exercising strong operational discipline and managing our costs in line with our revenue stream. These efforts will better position the Company for a strong future."

The Company reported revenues for the second quarter of $30.6 million, compared to $30.8 million for the first quarter 2003 and $35.1 million for the second quarter 2002. Gross margins for the second quarter were 50%, compared to 49% for the first quarter 2003 and 45% for the second quarter 2002. The Company expects overall gross margins, as a percentage of revenues, to remain in the upper-forties to 50% range this year.

The Company reduced operating expenses for the quarter to $13.4 million, down 7% from the $14.4 million for the first quarter 2003 and down 27% from the $18.2 million for the second quarter 2002. Operating expenses were net of $0.5 million in operating expense benefits, primarily related to the favorable resolution of various tax-related matters and other items. Earnings excluding these benefits would have been $0.08 per share, diluted.

In order to further improve operating performance and continue aligning resources with its growth strategy, the Company is currently conducting a comprehensive review of its cost structure. The Company anticipates that on completion of this review, it will likely recognize a restructuring charge in the third quarter of up to $2 million. The Company expects that the cost savings resulting from these actions will help the Company achieve its goal of double digit operating margins in 2004.

The cash and marketable securities balance at the end of the quarter was $36.4 million, compared to $35.6 million at the end of the first quarter 2003. Cash flows from operations totaled $3.3 million for the quarter. The Company will fund capital expenditures and its planned technology investment for the remainder of the year largely from cash flows from operations. Days sales outstanding were 46 days at the end of the second quarter, compared to 43 days at the end of the first quarter 2003 and 50 days at the end of the second quarter 2002.

QRS accomplishments in 2003 to date include:

-- Deepening Our Relationships Within General Merchandise and Apparel (GMA). QRS reported continued strength in the Company`s traditional base of GMA retailers, brand marketers/manufacturers and suppliers, signing contracts in the second quarter of 2003 with companies including Boscov`s Department Stores, Jockey International Inc., Levi Strauss & Co., Marshall Field`s, The Leslie Fay Company, Von Maur and Wacoal Corporation.

-- Expanding to New Retail Segments. In the second quarter of 2003, Woolworth Germany signed an agreement with QRS to license QRS Sourcing(TM), as announced earlier this year, strengthening the Company`s growing presence in the European retail market. The Company also won business with companies in retail segments adjacent to GMA, including the consumer packaged goods, sporting goods, grocery, consumer electronics, and health and beauty segments.

-- Enhancing the Product Portfolio. The Company delivered new releases of QRS Sourcing(TM) and QRS Catalogue(TM) that offer increased functionality and value to QRS` general merchandise and apparel customers as well as the Company`s target retail adjacencies. At the same time, the Company is investing internally in the development of collaborative applications. Among the first of these applications will be an intelligent transaction manager, which will offer actionable intelligence into trading community transactions.

Conference Call Information

In conjunction with the earnings release, the Company will hold a conference call at 2:00 p.m. PT (5:00 p.m. ET) on July 29, 2003. The conference call can be accessed via telephone at 877-580-9103 (toll-free) and 610-794-9303 (international) with passcode QRS. The call will be webcast and can be accessed at www.qrs.com. Telephone replay will be available beginning July 29, 2003, after 4:00 p.m. PT (7:00 p.m. ET) at 800-731-6045 (toll-free) and 402-220-0349 (international). The replay of the webcast will also be available at www.qrs.com.

About QRS

QRS is a leading provider of collaborative commerce solutions for the global retail trading community. We enable companies to communicate electronically with their global trading partners; conduct cross-company transactions; synchronize and manage product data; collaboratively source, merchandise and import goods; and automatically detect and resolve supply chain issues. More than 8,000* retailers, brand marketers, manufacturers, suppliers, wholesalers and distributors from a variety of retail segments -- including Federated Department Stores Inc., Groupe Clarins USA, Jones Apparel Group Inc., The Kroger Company, Sears, Roebuck and Co., and Selfridges plc -- use QRS solutions to significantly improve their overall business performance. 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 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 products or services offered through or in conjunction with third parties; and dependence upon IBM for e-commerce services, among others. QRS disclaims any obligation to update the forward-looking information contained in this news release.

NOTE: QRS, the QRS logo, QRS Catalogue, and QRS Sourcing are registered trademarks or trademarks of QRS Corporation. All other trademarks belong to their respective owners.


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