Recent Developments

In the first quarter of fiscal 2002, we reduced our headcount by 37 employees and expect to take a pre-tax restructuring charge of approximately $925,000. We anticipate that first quarter revenue will be in the $5.0 to $6.0 million range with a net loss exclusive of the aforementioned restructuring charge in the range of $(.07) to $(.04) per share.

Results of Operations

The following table sets forth, for the periods indicated, certain financial data as a percentage of revenues:



   

Year Ended March 31,
    2001   2000   1999

Revenues

  

100.0%

  

100.0%

  

100.0%

Cost of revenues

  

70.0

  

74.5

  

61.5

Gross profit

  

30.0

  

25.5

  

38.5

Operating expenses:

            

   Sales and marketing

  

14.2

  

9.2

  

6.7

   General and administrative

  

20.3

  

21.1

  

13.3

   Restructuring expense

  

1.0

  

–

  

–

     Total operating expenses

  

35.5

  

30.3

  

20.0

Income (loss) from operations

  

(5.5)

  

(4.8)

  

18.5

Interest income, net

  

6.3

  

5.2

  

1.9

Income before provision for income taxes

  

0.8

  

0.4

  

20.4

Provision for income taxes

  

0.7

  

0.3

  

8.8

Net income

  

0.1%

  

0.1%

  

11.6%


Variability of Operating Results

Variations in our revenues and operating results have occurred from quarter to quarter and may continue to occur as a result of a number of factors. Quarterly revenues and operating results can depend on:

  • the number, size and scope of customer projects commenced and completed during a quarter,
  • changes in employee utilization rates,
  • changes in average billing rates,
  • the number of working days in a quarter,
  • the timing of introduction of new service offerings, both by us and our competitors,
  • changes in pricing, both by us and our competitors,
  • loss of a significant customer,
  • increased competition from our competitors,
  • loss of key personnel,
  • other factors that adversely impact the financial services industry,
  • general economic conditions,
  • potential acquisitions and our ability to successfully integrate the acquired business or technologies into our existing business and operations, and
  • our ability to develop and introduce new service offerings, improve existing service offerings and develop and maintain the skills necessary to keep pace with changing technologies.

The timing of revenues is difficult to forecast because our sales cycle is relatively long, ranging from one to six months for new projects with existing customers and three to six months for new customers, and may depend on factors such as the size and scope of projects or other factors that adversely impact the financial services industry and general economic conditions. In addition, the relatively long length of our sales cycle may negatively impact the operating results for any particular quarter as a result of increased sales and marketing expenses without associated increases in revenues in the particular quarter. Furthermore, many of our projects are, and may be in the future, terminable without customer penalty. An unanticipated termination of a major project or loss of a major customer could require us to maintain or terminate underutilized employees, resulting in a higher than expected number of unassigned persons or higher than expected severance expenses.