EX-99.1 2 cognosex99_176055.htm PRESS RELEASE Cognos 2004 News Releases

Exhibit 99.1

Investor Relations Contact:
John Lawlor, Cognos
613-738-3503
john.lawlor@cognos.com
 
Media Relations Contact:
Sean Reid, Cognos
613-738-1440 Ext. 3260
sean.reid@cognos.com

Cognos® Delivers Record Second Quarter Revenue and Earnings

21 Percent Growth in License Revenue Drives 52 Percent Increase in Net Income

Ottawa, ON & Burlington, MA, September 22, 2004 – Cognos Incorporated (Nasdaq: COGN; TSX: CSN – all figures in U.S. dollars), the world leader in business intelligence (BI) and corporate performance management (CPM) solutions, today announced record results for its second quarter of fiscal year 2005, ended August 31, 2004.

Revenue for the quarter was $185.2 million, an increase of 17 percent from the second quarter of last fiscal year, when revenue was $158.2 million. Net income for the quarter was $27.6 million, resulting in diluted earnings per share of $0.30. This is an increase of 52 percent compared with net income of $18.2 million and diluted earnings per share of $0.20 in the second quarter of last fiscal year.

License revenue achieved strong growth in the quarter, reaching $75.4 million. This was an increase of 21 percent compared with license revenue of $62.2 million in the second quarter of last fiscal year.

Revenue for the first six months of fiscal year 2005, ended August 31, 2004, was $358.8 million, an increase of 16 percent compared with revenue of $308.7 million for the first six months of last fiscal year. Net income for the first six months of this fiscal year was $47.7 million or $0.51 per share. This compares to net income of $30.5 million or $0.33 per share in the first six months of last fiscal year.

Highlights of the Quarter

•   Outstanding customer response to Cognos ReportNet™ driving continued strong momentum – more than $100 million in ReportNet license revenue in its first four quarters of general availability

•   109 contracts greater than $200,000 and 655 contracts greater than $50,000, an increase of 22 percent in each case, from the second quarter of last fiscal year

•   Double-digit percentage revenue growth in all three major geographies – the Americas, Europe, and Asia-Pacific

•   Major customer wins at Alinta, Deutsche Post World Net, Georgia Department of Education, Georgia Pacific, Hertz, Johnson & Johnson, JPMorgan Chase & Co., Kaiser Permanente, Purdue University, Shiseido, and the U.S. Air Force

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•   Three percentage point gain in operating margin to 17.9 percent, from 14.8 percent in the second quarter of last fiscal year

•   Offer to acquire Frango; Frango’s leading consolidation and reporting products combined with the Cognos business intelligence, planning, and scorecarding solutions, will deliver the broadest and deepest corporate performance management solution in the industry.

“The Cognos team delivered another superb quarter, with record revenue and profitability, excellent operating margin performance, and BI market-leading license revenue growth,” said Cognos President and CEO Rob Ashe. “We extended our leadership in the enterprise BI and CPM market.

“Execution was strong on all fronts, as we continue to drive operational effectiveness. Our product portfolio – powered by ReportNet – is delivering unparalleled value and performance to our customers and driving major enterprise standardization wins. The outlook for Cognos is excellent – company fundamentals and our competitive position are the strongest ever.”

Cognos further strengthened its balance sheet in the quarter. The Company increased cash, cash equivalents, and short-term investments by $24.0 million to exit the quarter with $440.4 million. This included operating cash flow of $29.4 million.

Business Outlook

Management offers the following outlook, excluding the impact of the pending acquisition of Frango.

For the third quarter of fiscal 2005, ending November 30, 2004:

•   Revenue is expected to be in the range of $196 million to $198 million;

•   Diluted earnings per share are expected to be in the range of $0.32 to $0.34.

For the full fiscal year 2005, ending February 28, 2005:

•   Revenue is expected to be about $780 million;

•   Diluted earnings per share are expected to be about $1.28.

Cognos will host a Webcast and conference call to present results for its second quarter of fiscal year 2005 at 5:15 p.m. Eastern Time, today, September 22, 2004. The Webcast may be accessed at http://www.cognos.com/company/investor/events/fy05q2/index.html. The conference call may be accessed at 416-640-1907. A replay of the Webcast will also be available from the Company’s Web site, or, until October 6, 2004, by telephone at 416-640-1917, pass code 21092797#.

Safe Harbor for Forward-looking Statements

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

This press release contains forward-looking statements relating to, among other things, the Company’s expectations concerning future revenues and earnings, product demand and growth opportunities; business outlook and business momentum; new product introductions and customer reaction and acceptance of the Cognos ReportNet product; expectations concerning future benefits to be derived from the acquisition of Frango; the growth, strategic importance and acceptance of corporate performance management and business intelligence; business model and technology strategies and execution.

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These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements. Factors that may cause such differences include, but are not limited to: the Company’s ability to maintain revenue growth or to anticipate a decline in revenue from any of its products or services; the Company’s ability to develop and introduce new products and enhancements that respond to customer requirements and rapid technological change; new product introductions and enhancements by competitors; the Company’s ability to compete in an intensely competitive market; the Company’s ability to select and implement appropriate business models and strategies; fluctuations in its quarterly and annual operating results based on historical patterns; currency fluctuations; tax rate fluctuations; the impact of global economic conditions on the Company’s business; unauthorized use of the Company’s intellectual property; claims by third parties that the Company’s software infringes their intellectual property; the risks inherent in international operations, such as currency exchange rate fluctuations; the Company’s ability to identify, hire, train, motivate, and retain highly qualified management and other key personnel; the Company’s ability to identify, pursue, and complete acquisitions with desired business results; the failure to complete the Frango acquisition by reason of a condition to the transaction not having been met; the Company’s ability to efficiently integrate Frango and the ease in which Frango can be integrated; the existence of regulatory barriers to integration; and the Company’s ability to retain Frango personnel; as well as the risk factors discussed in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, filed with the United States Securities and Exchange Commission, as well as other periodic reports filed with the SEC. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any obligation to publicly update or revise any such statement to reflect any change in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.

Cognos may provide pro forma or non-GAAP measures as defined by SEC Regulation G to provide greater comparability regarding Cognos’ ongoing operating performance. If discussed, these measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States (“U.S. GAAP”). These pro forma measures are unlikely to be comparable to pro forma information provided by other issuers. In accordance with SEC Regulation G, if such pro forma or non-GAAP measures are provided, a reconciliation of the Cognos U.S. GAAP information to the pro forma information will be provided in the table attached. We will also make available on the investor relations page of our web site at www.cognos.com this press release, a replay of the Webcast, slides used in the Webcast, non-GAAP financial measures that may be discussed on the Webcast, as well as the most directly comparable GAAP financial measures and a reconciliation of the difference between the GAAP and non-GAAP financial measures.

About Cognos

Cognos, the world leader in business intelligence and corporate performance management, delivers software that helps companies drive, monitor and understand corporate performance.

Cognos delivers the next level of competitive advantage – Corporate Performance Management – achieved through the strategic application of business intelligence on an enterprise scale. Our integrated CPM solution helps customers drive performance through planning; monitor performance through scorecarding; and understand performance through business intelligence.

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Cognos serves more than 22,000 customers in over 135 countries. Cognos enterprise business intelligence solutions and services are also available from more than 3,000 worldwide partners and resellers. For more information, visit the Cognos Web site at http://www.cognos.com.

Cognos, the Cognos logo, and ReportNet are trademarks or registered trademarks of Cognos Incorporated in the United States and/or other countries. All other names are trademarks or registered trademarks of their respective companies.

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SUPPLEMENTARY INFORMATION (unaudited):

  FY2004 FY2005
 
       Q2      Q3      Q4      Q1      Q2
Revenue Statistics ($000s)
  Total License 62,234  72,551  93,542  66,070  75,362 
 
Year-Over-Year Revenue Growth Statistics
  Total License 13%  17%  18%  14%  21% 
 
Geographic Distribution
 
  Total Revenue ($000s)
  Americas 96,168  96,079  114,564  104,831  110,240 
  Europe 47,459  58,838  74,701  54,989  57,952 
  Asia/Pacific 14,554  17,310  12,881  13,799  17,028 
 
  % of Total
  Americas 61%  56%  57%  60%  60% 
  Europe 30%  34%  37%  32%  31% 
  Asia/Pacific 9%  10%  6%  8%  9% 
 
  Year-Over-Year Revenue Growth - Total
  Americas 19%  14%  20%  16%  15% 
  Europe 21%  34%  32%  17%  22% 
  Asia/Pacific 60%  67%  10%  3%  17% 
 
  Pro Forma Year-Over-Year Revenue Growth - In Local Currency
  Americas 18%  12%  17%  15%  14% 
  Europe 9%  16%  14%  7%  11% 
  Asia/Pacific 46%  42%  -8%  -9%  10% 
 
  Pro Forma Year-Over-Year Revenue Growth - Due to Foreign Currency
  Americas 1%  2%  3%  1%  1% 
  Europe 12%  18%  18%  10%  11% 
  Asia/Pacific 14%  25%  18%  12%  7% 
 
New vs Existing License Revenue - % of Total
  New 32%  33%  31%  31%  38% 
  Existing 68%  67%  69%  69%  62% 
 
Channel — License Revenue - % of Total
  Direct 69%  70%  80%  73%  73% 
  Third Party 31%  30%  20%  27%  27% 
 
Other Statistics
Cash, cash equivalents, and short-term investments ($000s) 284,442  320,895  388,241  416,362  440,410 
Days sales outstanding 62  62  68  55  56 
Total employees 3,011  3,001  2,966  3,027  3,062 

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COGNOS INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME
(US$000s except share amounts, U.S. GAAP)
(Unaudited)

  Three months ended  
August 31,  		 Six months ended  
August 31,  
  2004   2003    2004   2003   
Revenue
   Product license $ 75,362    $ 62,234   $141,432    $120,035  
   Product support 76,156    66,162   150,943    130,289  
   Services 33,702    29,785   66,464    58,420  
Total revenue 185,220    158,181   358,839    308,744  
Cost of revenue
   Cost of product license 546    1,106   1,167    2,217  
   Cost of product support 7,074    6,887   14,249    13,742  
   Cost of services 27,457    21,503   52,932    42,362  
Total cost of revenue 35,077    29,496   68,348    58,321  
Gross margin 150,143    128,685   290,491    250,423  
Operating expenses
   Selling, general, and administrative 90,230    81,495   180,739    161,733  
   Research and development 25,382    21,714   49,707    45,008  
   Amortization of intangible assets 1,369    1,991   2,741    4,096  
Total operating expenses 116,981    105,200   233,187    210,837  
Operating income 33,162    23,485   57,304    39,586  
Interest expense (8)   (154)  (79)   (325) 
Interest income 1,781    1,543   3,185    2,587  
Income before taxes 34,935    24,874   60,410    41,848  
Income tax provision 7,336    6,716   12,686    11,299  
Net income $  27,599    $  18,158   $  47,724    $  30,549  
Net income per share
   Basic $0.31   $0.20   $0.53   $0.34  
   Diluted $0.30   $0.20   $0.51   $0.33  
Weighted average number of shares (000s)
   Basic 90,382   89,181   90,237   88,854  
   Diluted 92,849   91,806   92,771   91,365  

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COGNOS INCORPORATED

CONSOLIDATED BALANCE SHEETS
(US$000s, U.S. GAAP)

  August 31, 
2004 		 February 29, 
2004 
Assets (Unaudited)   
Current assets
  Cash and cash equivalents $364,782  $224,830 
  Short-term investments 75,628  163,411 
  Accounts receivable 114,824  152,859 
  Prepaid expenses and other current assets 16,495  16,668 
  Deferred tax assets 1,815  2,445 
  573,544  560,213 
Fixed assets 69,048  71,292 
Intangible assets 21,431  23,643 
Goodwill 172,323  172,323 
  $836,346  $827,471 
Liabilities
Current liabilities
  Accounts payable $ 23,741  $ 30,698 
  Accrued charges 23,349 

25,483 
  Salaries, commissions, and related items 52,231  59,903 
  Income taxes payable 5,550  5,875 
  Deferred revenue 155,759  178,752 
  260,630  300,711 
Deferred income taxes 20,176  18,098 
  280,806  318,809 
Stockholders’ Equity
Capital stock
  Common shares and additional paid-in capital
      (August 31, 2004 - 90,417,883;
      February 29, 2004 - 89,902,895) 		224,676  206,499 
  Treasury shares
      (August 31, 2004 - 46,375;
      February 29, 2004 - 43,500) 		(1,199) (1,065)
  Deferred stock-based compensation (771) (730)
Retained earnings 334,608  305,399 
Accumulated other comprehensive loss (1,774) (1,441)
  555,540  508,662 
  $836,346  $827,471 

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COGNOS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$000s, U.S. GAAP)
(Unaudited)

  Three months ended
August 31, 		Six months ended
August 31,
  2004   2003   2004   2003  
Cash flows from operating activities
   Net income $  27,599   $  18,158   $  47,724   $  30,549  
   Non-cash items
      Depreciation and amortization 6,504   7,318   13,002   14,466  
      Amortization of deferred stock-based
        compensation 		220   221   405   390  
      Amortization of other deferred compensation —   62   7   124  
      Deferred income taxes 1,285   7,007   2,301   4,053  
      Loss on disposal of fixed assets 123   9   124   463  
  35,731   32,775   63,563   50,045  
   Change in non-cash working capital
      Decrease (increase) in accounts receivable (8,472)   (5,109)  36,461   31,897  
      Decrease (increase) in prepaid expenses and
        other current assets 		(699)   (772)  171   (3,860) 
      Decrease in accounts payable (18)   (2,153)  (6,985)  (10,778) 
      Increase (decrease) in accrued charges 1,298   (1,263)  (1,897)  (7,072) 
      Increase (decrease) in salaries, commissions, and
        related items 		8,468   2,005   (7,275)  (13,788) 
      Increase (decrease) in income taxes payable 2,048   1,297   (44)  1,159  
      Decrease in deferred revenue (8,942)  (5,069)  (21,491)  (15,351) 
Net cash provided by operating activities 29,414   21,711   62,503   32,252  
Cash flows from investing activities
   Maturity of short-term investments 99,081   53,058   244,674   116,810  
   Purchase of short-term investments (85,566)  (88,339)  (156,961)  (133,039) 
   Additions to fixed assets (4,637)  (5,089)  (7,710)  (11,498) 
   Additions to intangible assets (460)  (365)  (529)  (686) 
   Business acquisition —   (122)  —   (230) 
Net cash provided by (used in) investing activities 8,418   (40,857)  79,474   (28,643) 
Cash flows from financing activities
   Issue of common shares 8,983   5,643   19,272   18,109  
   Purchase of treasury shares (335)  —   (335)  (564) 
   Repurchase of shares (9,866)  —   (19,855)  —  
   Decrease in long-term debt and long-term liabilities —   —   —   (1,697) 
Net cash provided by (used in) financing activities (1,218)  5,643   (918)  15,848  
Effect of exchange rate changes on cash 727   (985)  (1,107)  4,137  
Net increase (decrease) in cash and cash equivalents 37,341   (14,488)  139,952   23,594  
Cash and cash equivalents, beginning of period 327,441   200,670   224,830   162,588  
Cash and cash equivalents, end of period 364,782   186,182   364,782   186,182  
Short-term investments, end of period 75,628   98,260   75,628   98,260  
Cash, cash equivalents, and short-term investments, end of period $440,410   $284,442   $440,410   $284,442  

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