Bitstream Inc. Reports Quarterly and Fiscal Year Results for 2007

CAMBRIDGE, MA — March 3, 2008 — Bitstream Inc. (NASDAQ: BITS) today reported financial results for its fourth quarter and fiscal year ended December 31, 2007.

Bitstream Reports Record Annual Revenue and GAAP and Non-GAAP Net Income in Fiscal Year 2007

In the fiscal year ended December 31, 2007, Bitstream achieved record revenue of $23,618,000, compared to $20,248,000 in fiscal 2006, an increase of $3,370,000 or 17%. 

Bitstream’s annual GAAP net income increased 23% to $3,991,000 for the fiscal year ended December 31, 2007, compared to $3,234,000 in fiscal 2006. Bitstream’s annual non-GAAP net income was $4,504,000 for the fiscal year ended December 31, 2007, as compared to $3,091,000 in fiscal 2006.

GAAP diluted earnings per share for fiscal 2007 were $0.36, compared to $0.30 in fiscal 2006.  Non-GAAP diluted earnings per share for fiscal 2007 were $0.41, compared to $0.29 in fiscal 2006.

Bitstream Reports Record Revenue in Fourth Quarter

In the quarter ended December 31, 2007, Bitstream achieved record total revenue of $6,283,000, as compared to $5,548,000 of total revenue for the quarter ended December 31, 2006, an increase of $735,000 or 13.2%. The Company’s cash and cash equivalents at December 31, 2007 totaled $16,420,000, an increase of $1,191,000 from $15,229,000 at September 30, 2007 and an increase of $5,878,000 from $10,542,000 at December 31, 2006. 

Our GAAP income from operations increased $555,000 or 117% to $1,028,000 for the three months ended December 31, 2007 as compared to $473,000 for the three months ended December 31, 2006, while GAAP net income increased $544,000 or 86% to $1,174,000 or $0.11 per diluted share for the three months ended December 31, 2007 as compared to GAAP net income of $630,000 or $0.06 per diluted share for the three months ended December 31, 2006. 

Our Non-GAAP income from operations not including the effect of stock-based compensation expense, increased $560,000 or 94% to $1,156,000 for the three months ended December 31, 2007 as compared to $596,000 for the three months ended December 31, 2006. Non-GAAP net income increased $549,000 or 73% to $1,302,000 or $0.12 per diluted share for the three months ended December 31, 2007 as compared to non-GAAP net income of $753,000 or $0.07 per diluted share for the three months ended December 31, 2006.

A reconciliation of GAAP and non-GAAP results is provided at the end of this press release.

“We achieved our highest level of revenue as compared to any previous quarter, our highest total annual revenue level to date and our highest GAAP income from operations and net income for any year since going public,” said Anna M. Chagnon, President and Chief Executive Officer. “We also exceeded the $23.5 million revenue mark for the first time since becoming a publicly-held company. We continued to improve our operating performance generating GAAP operating income of $1,028,000 for the fourth quarter of 2007, which increased GAAP operating income to $3,442,000 or 39% for the fiscal year ended December 31, 2007 as compared to fiscal 2006. GAAP net income for the fiscal year ended December 31, 2007 was $3,991,000 or $0.36 per share, an improvement of $0.06 per diluted share as compared to $0.30 per share for fiscal 2006.”

“Based on our strong performance in 2007, we feel that we are again in a position to strive for a record setting year of double digit revenue growth while we increase our investments in infrastructure and sales and marketing personnel across all of our product lines. In particular, we plan to use the profit generated from our business to significantly enhance our resources for our browsing product line as we believe that such investments will increase shareholder value in the long term.”   

FOURTH QUARTER 2007 HIGHLIGHTS

December 19, 2007 – Bitstream announced that the U.S. Patent and Trademark Office has awarded the Company a third patent for its ThunderHawk technology. This patent covers the technology that controls how web pages are retrieved and displayed on mobile devices, and is the foundation of the Company’s ThunderHawk product. 

December 10, 2007 – Bitstream announced that its Board of Directors authorized the repurchase of up to $2.5 million of the Company’s issued and outstanding common stock.

December 4, 2007 – The Company announced that the Adobe Type Library is available for purchase and download at the MyFonts.com website (www.myfonts.com). These version 2 OpenType fonts bring together state-of-the-art OpenType technology and typographic excellence. 

November 14, 2007— The Company announced that WebsitesForPrinters.com has chosen the Company’s Pageflex product line as the new engine behind uDesignIT, a variable data tool to enable a new level of customization for commercial printers

October 23, 2007 - Bitstream announced the release of the ThunderHawk mobile browser for the BREW application development platform, as well as updates to the Java Edition.

October 23, 2007 - Bitstream announced the release of the QTopia Font Plug-In for Embedded Linux Devices. This high-performance plug-in for the QTopia application platform utilizes Bitstream’s Font Fusion® rendering engine to deliver superior text display capabilities on Linux devices.

CONFERENCE CALL REMINDER

Today, March 3, 2008, at 4:30 p.m. EST, Bitstream will host a conference call with the financial community to discuss its results for the quarter ended December 31, 2007:

• Domestic Dial-in number: 1-866-814-1917
• International Dial-in number: 1-703-639-1361

           
Call into the conference number 5-10 minutes prior to the start time. An operator will request that you provide your name and organization and ask you to wait until the call begins.  If you have any difficulty connecting with the conference call number, please contact at Bitstream: (617) 497-6222.

A replay of the conference call will be available through March 13, 2008 (access code): 1206075

• Domestic Replay number:  1-888-266-2081
• International Replay number: 1-703-925-2533

Forward Looking Statements Disclosure
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the Company’s products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company’s filings with the Securities and Exchange Commission, including Bitstream’s Annual Report on Form 10-K for the year ended December 31, 2006.