EX-99.1 2 cognos991_12623.htm PRESS RELEASE Exhibit 99.1
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® Reports Second Quarter Results

— Cognos 8 Business Intelligence Receives Strong Customer Reviews —

Ottawa, Ontario & Burlington, Massachusetts, September 21, 2005—Cognos Incorporated (Nasdaq: COGN; TSX: CSN) (all figures in U.S. dollars and in accordance with U.S. GAAP), the world leader in business intelligence (BI) and corporate performance management (CPM) solutions, today announced results for the second quarter of fiscal year 2006, ended August 31, 2005.

Revenue for the second quarter was $212.0 million, an increase of 14 percent compared with revenue of $185.2 million in the second quarter of last fiscal year. License revenue was $78.6 million, an increase of 4 percent from $75.4 million for the same period of last fiscal year.

Net income in the quarter was $28.7 million, an increase of 4 percent compared with $27.6 million in the second quarter of last fiscal year, resulting in diluted earnings per share of $0.31 in the second quarter of fiscal year 2006, versus $0.30 in the same period last fiscal year.

Revenue for the first six months of fiscal year 2006, ended August 31, 2005, was $412.1 million, an increase of 15 percent compared with revenue of $358.8 million for the first six months of last fiscal year. Net income for the first six months of this fiscal year was $52.5 million or $0.56 per share. This represents an increase of 10% from net income of $47.7 million or $0.51 per share in the first six months of last fiscal year.

“Cognos delivered a solid second quarter,” said Rob Ashe, president and chief executive officer of Cognos. “We performed well in the quarter leading up to the launch of Cognos 8 Business Intelligence, and we are now focused on capitalizing on the opportunity that product represents. The significant marketing activity during the quarter and the strong customer reaction to Cognos 8 BI puts us in a very strong position going forward.”

Highlights of the Quarter

•   Nine contracts greater than a million dollars, up from seven contracts for the same period last year

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

•   Previewed Cognos 8 Business Intelligence for more than 2,000 customers, partners and analysts at Cognos Forum 2005, and drew over 5,000 participants for the product’s September 14th worldwide launch

•   Named top business intelligence and corporate performance management vendor in Business 2.0 magazine’s top 100 ranking of the world’s best performing technology companies

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“Cognos 8 Business Intelligence is the most important product release in the history of Cognos and the BI industry. Customer feedback has been tremendous,” continued Mr. Ashe. “Cognos 8 BI brings together the full strength of our BI capabilities on a single, modern and proven services-oriented architecture. This product redefines the standard for business intelligence – today and for years to come.”

Cognos’ balance sheet remains strong. Operating cash flow for the quarter was $28.8 million. Cognos repurchased $23.7 million of its shares in the second quarter. The Company exited the quarter with $501.3 million in cash, cash equivalents, and short-term investments.

Business Outlook

Management offers the following outlook for the third quarter of fiscal year 2006:

•   Revenue is expected to be in the range of $230 million to $237 million;

•   Diluted earnings per share are expected to be in the range of $0.36 to $0.39.

Management offers the following outlook for the full fiscal year 2006, ending February 28, 2006:

•   Revenue is expected to be in the range of $915 million to $930 million;

•   Diluted earnings per share are expected to be in the range of $1.52 to $1.58.

Cognos management will hold a webcast and conference call to present results for the second quarter of fiscal year 2006 and business outlook at 5:15 p.m. Eastern Time today, September 21, 2005. The webcast and an archive of the webcast may be accessed at www.cognos.com/company/investor/events/fy06q2/index.html. The conference call may be accessed at 416-640-1907. The replay can be accessed at 416-640-1917. The passcode for the replay is 21150821#.

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 Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements relate to, among other things, the Company’s expectations with respect to future growth and business outlook, including revenue and earnings for the third quarter of fiscal year 2006 and the full fiscal year ending February 28, 2006; expectations with respect to the Company’s release of Cognos 8 Business Intelligence; the strength of the Company’s balance sheet; and the Company’s market position.

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: a continuing increase in the number of larger customer transactions and the potential for a related lengthening of sales cycles; continued BI market consolidation and other competitive changes in the BI market; the incursion of enterprise resource planning companies into the BI market; currency fluctuations; the Company’s ability to maintain or accurately forecast revenue growth or to anticipate and accurately forecast a decline in revenue from any of its products or services; the Company’s ability to compete in an intensely competitive market; the Company’s ability to develop and introduce new products and enhancements on schedule that respond to customer requirements and rapid technological change; customer acceptance and implementation of Cognos 8 Business Intelligence; new product introductions and enhancements by competitors; the Company’s ability to select and implement appropriate business models, plans and strategies and to execute on them; the Company’s ability to identify, hire, train, motivate, and retain highly qualified management and other key personnel; fluctuations in the Company’s quarterly and annual operating results; fluctuations in the Company’s tax exposure; the impact of global economic conditions on the Company’s business; the impact of Hurricane Katrina on the overall economic condition of North America; unauthorized use or misappropriation 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 the impact of the laws of foreign jurisdictions; the Company’s ability to identify, pursue, and complete acquisitions with desired business results; and the existence of regulatory barriers to integration; as well as the risk factors discussed in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports 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.

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About Cognos

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

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

Cognos serves more than 23,000 customers in over 135 countries. Cognos enterprise business intelligence and performance management solutions and services are also available from more than 3,000 worldwide partners and resellers. For more information, visit the Cognos web site at www.cognos.com.

Cognos and the Cognos logo are registered trademarks of Cognos Incorporated in the United States and/or other countries.

Note to Editors: Copies of previous Cognos press releases and corporate and product information are available on the Cognos web site at www.cognos.com, and at PR Newswire’s site at www.prnewswire.com.

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SUPPLEMENTARY INFORMATION (unaudited):

FY2005 FY2006
Q2 Q3 Q4 Q1 Q2
Total License Revenue ($000s) 75,362  91,580  129,946  71,146  78,649
 
Year-Over-Year License Revenue Growth 21%  26%  39%  8%  4% 
 
Geographic Distribution:
  Total Revenue ($000s)
  Americas 110,240  121,503  141,189  115,516  122,593
  Europe 57,952  69,308  94,145  66,461  67,596
  Asia/Pacific 17,028  19,555  20,992  18,098  21,853
 
  % of Total
  Americas 60%  58%  55%  58%  58% 
  Europe 31%  33%  37%  33%  32% 
  Asia/Pacific 9%  9%  8%  9%  10% 
 
  Year-Over-Year Revenue Growth - Total
  Americas 15%  26%  23%  10%  11% 
  Europe 22%  18%  26%  21%  17% 
  Asia/Pacific 17%  13%  63%  31%  28% 
 
  Pro Forma Year-Over-Year Revenue Growth - In Local Currency
  Americas 14%  25%  22%  9%  10% 
  Europe 11%  7%  19%  17%  17% 
  Asia/Pacific 10%  7%  61%  26%  22% 
 
Orders (License, Support, Services)
  >$ 1M 7  15  18  6  9 
  >$200K 109  127  208  104  124 
  >$ 50K 655  709  1,215  668  754 
 
Average Selling Price (License Orders Only) ($000s)
  >$ 50K 176  183  207  175  172 
 
New vs Existing License Revenue - % of Total
  New 38%  32%  37%  32%  31% 
  Existing 62%  68%  63%  68%  69% 
 
Channel — License Revenue - % of Total
  Direct 73%  74%  77%  68%  74% 
  Third Party 27%  26%  23%  32%  26% 
 
Other Statistics
Cash, cash equivalents, and short-term investments ($000s) 440,410  439,367  522,900  496,036  501,252 
Days sales outstanding 56  61  67  63  60 
Total employees 3,062  3,346  3,393  3,408  3,453 

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COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME

(US$000s except share amounts, U.S. GAAP)
(Unaudited)

    Three Months Ended   Six Months Ended
    August 31,   August 31,
    2005   2004   2005   2004  
Revenue          
   Product license   $  78,649   $  75,362   $149,795   $141,432  
   Product support  92,062   76,156   180,567   150,943  
   Services  41,331   33,702   81,755   66,464  
Total revenue  212,042   185,220   412,117   358,839  
Cost of revenue 
   Cost of product license  1,409   546   2,631   1,167  
   Cost of product support  8,797   7,074   17,679   14,249  
   Cost of services  32,511   27,457   64,601   52,932  
Total cost of revenue  42,717   35,077   84,911   68,348  
Gross margin  169,325   150,143   327,206   290,491  
Operating expenses 
   Selling, general, and administrative  106,241   90,371   209,254   181,016  
   Research and development  28,526   25,382   57,400   49,707  
   Amortization of acquisition-related intangible assets  1,637   1,228   3,274   2,464  
Total operating expenses  136,404   116,981   269,928   233,187  
Operating income  32,921   33,162   57,278   57,304  
Interest and other expenses  (506 ) (8 ) (845 ) (79 )
Interest income  3,557   1,781   6,676   3,185  
Income before taxes  35,972   34,935   63,109   60,410  
Income tax provision  7,253   7,336   10,565   12,686  
Net income  $  28,719   $  27,599   $  52,544   $  47,724  
Net income per share 
   Basic  $0.32   $0.31   $0.58   $0.53  
   Diluted  $0.31   $0.30   $0.56   $0.51  
Weighted average number of shares (000s) 
   Basic  90,740   90,382   90,909   90,237  
   Diluted  92,806   92,849   93,350   92,771  

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COGNOS INCORPORATED
CONSOLIDATED BALANCE SHEETS

(US$000s, U.S. GAAP)
(Unaudited)

  August 31,
2005		   February 28,
2005		  
Assets      
Current assets  
  Cash and cash equivalents   $405,112   $   378,348  
  Short-term investments  96,140   144,552  
  Accounts receivable  140,941   189,602  
  Prepaid expenses and other current assets  17,986   18,941  
  Deferred tax assets  1,601   3,856  
   661,780   735,299  
Fixed assets, net  74,357   73,566  
Intangible assets, net  24,019   27,234  
Other assets  6,564   6,378  
Goodwill  220,488   221,490  
  $987,208   $1,063,967  
Liabilities  
Current liabilities 
  Accounts payable  $  21,229   $     30,705  
  Accrued charges  24,131   31,047  
  Salaries, commissions, and related items  58,595   91,010  
  Income taxes payable  1,335   21,148  
  Deferred revenue  188,210   217,153  
  293,500   391,063  
Deferred income taxes  13,680   17,083  
  307,180   408,146  
Stockholders' Equity  
Capital stock 
  Common shares and additional paid-in capital  267,248   252,561  
       (August 31, 2005 - 90,571,423; February 28, 2005 - 91,070,967) 
  Treasury shares  (915 ) (1,199 )
       (August 31, 2005 - 37,640; February 28, 2005 - 46,375) 
  Deferred stock-based compensation  (21 ) (277 )
Retained earnings  409,100   402,020  
Accumulated other comprehensive income  4,616   2,716  
  680,028   655,821  
  $987,208   $1,063,967  

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COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(US$000s, U.S. GAAP)
(Unaudited)

    Three Months Ended   Six Months Ended
    August 31,   August 31,
    2005   2004   2005   2004  
Cash flows from operating activities          
  Net income  $   28,719   $   27,599   $   52,544   $   47,724  
  Non-cash items 
    Depreciation and amortization  7,240   6,504   14,405   13,002  
    Amortization of deferred stock-based compensation  167   220   335   405  
    Amortization of other deferred compensation  --   --   --   7  
    Deferred income taxes  1,863   1,285   (2,026 ) 2,301  
    Loss on disposal of fixed assets  186   123   273   124  
  38,175   35,731   65,531   63,563  
  Change in non-cash working capital 
    Decrease (increase) in accounts receivable  (1,871 ) (8,472 ) 44,964   36,461  
    Decrease (increase) in prepaid expenses and other current assets  (586 ) (699 ) 837   171  
    Decrease in accounts payable  (981 ) (18 ) (9,024 ) (6,985 )
    Increase (decrease) in accrued charges  2,629   1,298   (5,374 ) (1,897 )
    Increase (decrease) in salaries, commissions, and related items  5,615   8,468   (30,518 ) (7,275 )
    Increase (decrease) in income taxes payable  (1,348 ) 2,048   (19,291 ) (44 )
    Decrease in deferred revenue  (12,821 ) (8,942 ) (23,646 ) (21,491 )
Net cash provided by operating activities  28,812   29,414   23,479   62,503  
Cash flows from investing activities  
  Maturity of short-term investments  118,610   99,081   246,535   244,674  
  Purchase of short-term investments  (96,140 ) (85,566 ) (198,123 ) (156,961 )
  Additions to fixed assets  (6,161 ) (4,637 ) (10,917 ) (7,710 )
  Additions to intangible assets  (196 ) (460 ) (441 ) (529 )
  Increase in other assets  (365 ) --   (120 ) --  
  Acquisition costs, net of cash and cash equivalents  --   --   131   --  
Net cash provided by investing activities  15,748   8,418   37,065   79,474  
Cash flows from financing activities  
  Issue of common shares  6,246   8,983   18,553   19,272  
  Purchase of treasury shares  (177 ) (335 ) (177 ) (335 )
  Repurchase of shares  (23,694 ) (9,866 ) (48,948 ) (19,855 )
Net cash used in financing activities  (17,625 ) (1,218 ) (30,572 ) (918 )
Effect of exchange rate changes on cash  751   727   (3,208 ) (1,107 )
Net increase in cash and cash equivalents  27,686   37,341   26,764   139,952  
Cash and cash equivalents, beginning of period  377,426   327,441   378,348   224,830  
Cash and cash equivalents, end of period  405,112   364,782   405,112   364,782  
Short-term investments, end of period  96,140   75,628   96,140   75,628  
Cash, cash equivalents, and short-term investments, end of period  $ 501,252   $ 440,410   $ 501,252   $ 440,410  

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