EX-99.1 3 c78628exv99w1.txt PRESS RELEASE EXHIBIT 99.1 [SPSS(R) LOGO] FOR IMMEDIATE RELEASE: July 29, 2003 Contact: Edward Hamburg Nicole Junas SPSS Inc. SPSS Inc. Executive VP/CFO Investor Relations 312.651.3000 800.457.0161 e-mail: INVEST@SPSS.COM SPSS INC. REPORTS SECOND QUARTER 2003 RESULTS CHICAGO, IL. (USA), July 29, 2003 -- SPSS Inc. (Nasdaq: SPSS), a global provider of predictive analytics technology and services, today announced results for its second quarter ended June 30, 2003. Revenues and diluted earnings per share were $51.3 million and $0.13 in the quarter, as compared to $53.0 million and a loss per share of $(0.02) in the same period last year, respectively. Operating income improved to $3.7 million in the quarter from an operating loss of $(1.3) million in the same period last year. Included in the results for the quarter ended June 30, 2002, were acquisition and other nonrecurring charges of $2.8 million, or 11 cents per diluted share. The company's improved profitability was primarily due to expense reduction programs implemented in the second half of 2002, which included a field operations restructuring, the downsizing or closing of certain facilities, and the termination of certain investments. SPSS also increased its cash flow from operations to $13.4 million in the first half of 2003, up from $0.5 million in the same period last year. "We saw improvement in the predictability of business following the March quarter," said Jack Noonan, SPSS Inc. president and chief executive officer, "but not any rebound in the closure rate of sales. As a result, the company is adapting to an extended period of longer sales cycles and smaller average transactions. We can make this adjustment, particularly with our expenses under control and marketplace interest in predictive analytics steadily building." Revenues and diluted earnings per share for the first six months of 2003 were $100.4 million and $0.21, as compared to $102.6 million and a loss per share of $(0.17) in the same period last year, respectively. Operating income improved to $5.7 million in the first six months of 2003 from an operating loss of $(6.1) million in the same period last year. Included in the results for the six months ended June 30, 2002, were acquisition and other nonrecurring charges of $7.4 million, or 26 cents per diluted share. SUMMARY OF RESULTS (Unaudited; in millions, except for per share)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2003 2002* % CHANGE 2003 2002** % CHANGE NET REVENUES $ 51.3 $ 53.0 -3% $ 100.4 $ 102.6 -2% OPERATING INCOME (LOSS) $ 3.7 $ (1.3) -- $ 5.7 $ (6.1) -- NET INCOME (LOSS) $ 2.2 $ (0.3) -- $ 3.6 $ (2.8) -- DILUTED EPS $ 0.13 $(0.02) -- $ 0.21 $(0.17) -- WEIGHTED SHARES OUTSTANDING 17,395 16,821 3% 17,347 16,801 3%
* Includes acquisition and other non-recurring charges of $2.8 million, or 11 cents per diluted share ** Includes acquisition and other non-recurring charges of $7.4 million, or 26 cents per diluted share - more - SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 2 "We made progress in the quarter," Noonan continued. "There was an increase in sales of our enterprise data mining tools and NetGenesis(R) Web analytics application, as well as growth in revenues from the SPSS(R) line of statistical analysis tools. Most of these improved results were from the commercial verticals in the United States, with uneven performance in Europe and the Pacific Rim. "We also licensed a high-scale solution based on our PredictiveMarketing(TM) technology," said Noonan. "Designed for a global business services provider, this solution will operate in a Linux cluster and automatically deploy over one thousand unique models that generate billions of response propensity scores for more effectively targeted direct mail campaigns." Noonan observed, "More organizations are coming to SPSS for such increasingly sophisticated predictive analytic solutions. Guided by their requirements, we are developing mission critical applications that similarly involve clustered computing power, a range of predictive models, and the daily analysis of millions of records to measurably improve new customer acquisition, existing client retention, and ongoing fraud detection initiatives. These forward-thinking companies truly understand the power of predictive analytics to transform business processes and better realize returns on information technology investments." REVENUE PERFORMANCE SOFTWARE LICENSES Revenues from new software licenses declined 5 percent to $21.4 million in the quarter from $22.6 million in the same period last year. This decrease was primarily due to a drop in new sales of the company's ShowCase business intelligence products and applications for market research, partially offset by increased revenues from the NetGenesis Web analytics application, higher sales of SPSS data mining and statistical analysis tools, and changes in currency exchange rates. The quarter included sales of NetGenesis to major financial services firms, such as: - UK-based Standard Life Assurances Company, which will optimize content delivery on its external Web site; and - JP Morgan Chase (NYSE: JPM) Credit Card Services, which will adopt Predictive Web Analytics(TM), an integration of Clementine(R) and NetGenesis, to provide predictive customer intelligence that improves the effectiveness of its online marketing efforts and generates higher returns on its Web investment. New sales of the company's Clementine data mining workbench increased 15 percent from the same period last year, and included licenses to: - A Japanese automaker for predicting purchasing behavior; - A wireless telecommunications firm in New Zealand to maintain and develop customer relationships; - A Munich-based developer of semiconductors to analyze manufacturing quality; and - Credit Saison, a leading Japanese credit card firm, to provide retailers with value-added services for developing customer relationships. Other new sales during the quarter involved high-value integrations between Clementine and other SPSS technologies. CIM01, a Paris-based firm that conducts surveys for pharmaceutical companies, will combine Clementine with SPSS LexiQuest text mining technology to unlock information contained in previously unanalyzed responses to open-ended survey questions. Additional licenses for these integrated technologies were signed with Biznet, a Japanese online retailer of office supplies, and credit card provider Kyushu Card. - more - SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 3 New license revenue from SPSS statistical analysis tools increased 2 percent from the second quarter 2002. Contributing to this increase was an agreement with The United States Department of Health and Human Services/National Institutes of Health for an enterprise-wide license for a broad range of SPSS statistical tools. This agreement was made in conjunction with SPSS partner, Northrop Grumann. New sales of ShowCase business intelligence products were down 56 percent from the same period last year, primarily due to the absence of seven-figure transactions in the current quarter. Significant transactions involving ShowCase tools included purchases by: - The U.S. and U.K. operations of the Fortis Group, an international financial services company in the fields of banking, insurance, and investment, to improve data analysis and reporting capabilities; and - Thomson Learning, a division of the Thomson Corporation (NYSE: TOC) providing integrated information solutions to business and professional customers, to improve its financial reporting. New revenues from the SPSS applications for market research declined by 9 percent compared to the second quarter of 2002. Significant sales included an enterprise license agreement with Millward Brown, one of the world's leading market research firms. The drop in market research revenues was primarily due to a sizable agreement made with Procter and Gamble in June 2002. MAINTENANCE AND SERVICES Revenues from maintenance agreements and renewals of annual licenses increased 3 percent to $21.6 million in the quarter from $20.9 million in the same period last year. This growth was due to strong renewal rates for the company's major offerings as well as changes in currency exchange rates. Maintenance revenues increased as a percentage of total revenues to 42 percent in the current quarter from 39 percent in the same period last year. Service revenues declined 12 percent to $8.3 million in the quarter from $9.5 million in the same period last year. This decrease was primarily due to the fall off in ShowCase implementation services as well as a drop in training revenues. Revenues from the SPSS Online (AOL) business were flat sequentially and compared to the second quarter of 2002. Service revenues declined as a percentage of total revenues to 16 percent in the current quarter from 18 percent in the same period last year. FINANCIAL COMMENTARY Speaking to other aspects of the second quarter, Edward Hamburg, SPSS executive vice president and chief financial officer, said, "The company's internal rate of revenue growth was down about eight percent from the second quarter in 2002. Much of this decline was due to the difference in the number of large transactions completed in the periods. We closed six transactions over $500,000 in June 2002, compared to half as many in the current quarter. We also never expected to see the same surge in sales from the higher education market that occurred in the second quarter last year. "In addition, staff turnover contributed to a 9 percent drop in new revenues in the United Kingdom from a year ago," he said, "and the fall-off in ShowCase sales was steeper than anticipated. We are now back to full-strength in the UK, while an experienced group of account managers are targeting the healthy pipeline for our ShowCase technology." - more - SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 4 Hamburg continued, "Expenses in the quarter again came in as expected. The company's operating margin grew sequentially, and noticeably improved year-over-year. Looking to the second half of the year, our overall cost structure will continue to be focused on additional operating margin improvement, our balance sheet should get stronger, and barring any dramatic changes, the effects of currency on profitability should remain immaterial." Hamburg also provided the following detail on other financial aspects of the quarter: TOPIC COMMENTS Cost of license and maintenance Decreased from the second quarter 2002 due to revenues lower cost of goods related to the decline in license revenues, lower Hyperion royalties, and lower amortization of purchased technology. Sales, marketing, and services Decreased as a result of the reduction in the costs number of sales and professional services personnel from the field reorganization implemented in August 2002; partially offset by increases due to changes in currency exchange rates. R&D costs Decreased due to reductions in the number of LexiQuest(TM) development personnel and lower consulting costs related to internal information technology projects; partially offset by increases due to changes in currency exchange rates. G&A costs Increased due to the addition of accounting professionals and changes in currency exchange rates, partially offset by reduced expenses associated with the cost reduction programs implemented in August 2002. Special G&A charges None in the current quarter, compared to second quarter 2002 costs associated with the LexiQuest and netExs acquisitions. Other income & income taxes Gains from currency translations due to the weakening of the $US against other major currencies; partially offset by net interest expense from line-of-credit borrowings, the decline in value of $US-denominated receivables held overseas, and approximately $200K of imputed interest related to the company's October 2001 transaction with AOL Time Warner. Thirty-six percent effective tax rate expected for 2003. Cash Increased from December 2002 primarily due to increased cash from operations generated from operating income. Decreased $1.2 from March 2003, while reducing accounts payable by $3.6 million and making $1.2 million in royalty payments. Days sales outstanding 78 days average rate, compared to 77 in March 2003 and 79 in December 2002. Intangibles, net Decreased from March 2003 and December 2002 due to the amortization of intangibles. Other assets Includes deferred tax assets related to net operating loss carry-forwards. Decreased from March 2003 and December 2002 due to a reduction in the deposit requirements related to the company's leased facility in Cambridge, Mass. Capitalized software Increased from December 2002 due to the purchase of third-party technologies. Includes the determined value of the technologies acquired in the netExs, NetGenesis, and LexiQuest acquisitions. Target capitalization for the fiscal year is 10-12% of research and development costs. Deferred revenues Increased from March 2003 and December 2002 to reflect growth in recurring revenues from renewals of annual licenses and maintenance agreements, as well as changes in currency exchange rates. Current liabilities Decreased as a result of reductions in accounts payable and accrued liabilities from acquisitions, as well as royalties and tax payments. Noncurrent liabilities Decreased from March 2003 and December 2002 due to the reduced balance of the AOL-related merger consideration; partially offset by a $1.1 million increase in note payable related to the company's credit agreement with Wells Fargo Capital (Foothill Capital). Staff 1,248 full-time employees as of June 30, 2003, with 227 sales representatives (185 quota-carrying). Compares to 1,263 full-time employees in December 31, 2002 (234 sales representatives, 195 quota-carrying), and pre-reorganization figures of 1,395 full-time employees in June 2002 (297 sales representatives, 226 quota-carrying). 58% are employed in North America (33% at headquarters in Chicago), 42% in international offices. -more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 5 OUTLOOK Hamburg concluded, "We are still working to understand demand conditions in the second half of the year. While our sales force and industry analysts are delivering more positive outlooks, the facts currently before us show a higher-end business that has not yet turned the corner and growing pipelines with extended sales cycles. Accordingly, we are adjusting our guidance on the company's 2003 performance to: - Revenues of between $210 to $220 million, down from $215 and $225 million; and - Diluted earnings per share of between $0.60 and $0.70, down from $0.65 and $0.75. The low end of these estimates assumes no improvement in the current business climate, while the high end considers increased third quarter spending by the United States federal government and improved fourth quarter spending by commercial organizations worldwide." The following summary table describes the company's performance during the trailing twelve months ended June 30, 2003, compared to 2002, as well as its current fiscal year and 2006 goals for productivity and profitability: PERFORMANCE VS. PRODUCTIVITY AND PROFITABILITY GOALS
Q2 2003 * ITEM 2002* TRAILING TWELVE MONTHS 2003 2006 TARGET REVENUE PER EMPLOYEE ($000'S) $ 166,000 $ 166,000 $168 - $175K $200K Revenue ($000's) $ 209,300 $ 207,074 OPERATING INCOME (AS % OF REVENUE) Operating income (loss) -4.4% 1.2% Acquisition and nonrecurring charges -9.8% -6.4% ADJUSTED OPERATING INCOME 5.4% 7.6% 8% - 10% 18% EBITDA (AS % REVENUE) Net loss -3.8% -0.7% Net interest expense -0.5% -0.7% Income tax (expense) benefit 0.6% -1.3% Depreciation and amortization -8.4% -8.4% EBITDA 4.5% 9.7% Acquisition and nonrecurring charges -9.8% -6.4% ADJUSTED EBITDA 14.3% 16.1% 16% - 18% 25%
* Excludes acquisition and other nonrecurring charges of $20.5 million in 2002 and $13.2 million in the trailing twelve months ended Q2 2003 -more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 6 CONFERENCE CALL The company will host a conference call to discuss its second quarter results at 9:00 a.m. CDT on Wednesday, July 30. These proceedings will be broadcast online at www.spss.com/invest. Please dial 800.231.9012 in the United States or 719.457.2617 internationally to participate. A replay will be available for one week after the call and accessible by dialing 888.203.1112 in the United States or 719.457.0820 internationally; use access code 798846. An archived version of the conference call will also be made available online at www.spss.com/invest. ABOUT SPSS INC. SPSS Inc. (Nasdaq: SPSS) headquartered in Chicago, IL, USA, is a multinational computer software company providing technology that transforms data into insight through the use of predictive analytics and other data mining techniques. The company's solutions and products enable organizations to manage the future by learning from the past, understanding the present, as well as predicting potential problems and opportunities. For more information, visit www.spss.com. SAFE HARBOR STATEMENT The following constitutes the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended: Certain statements in this press release are forward-looking statements. Such statements can be identified by phrases such as "should be," "planning" and "expects." Such statements also involve known and unknown risks, including market conditions and competition, which may cause the company's actual results, performance, achievements, or industry results, to be materially different than any future results, performance or achievements expressed or implied in or by such forward-looking statements. By way of example and not limitation, known risks and uncertainties include changes in: market conditions, especially in Asia; changes and/or product demand and acceptance; the competitive environment; product release schedules; and currency fluctuations. In light of these and other risks and uncertainties, the inclusion of a forward-looking statement in this release should not be regarded as a representation by the company that any future results, performance or achievements will be attained. The company assumes no obligation to update the information contained in this press release. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's periodic reports (copies of which are available from SPSS upon request). -more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 7 SPSS Inc. Consolidated Statements of Operations (in thousands, except per share) (unaudited)
Three Months Ended June 30, --------------------------------------- % of Total Revenue Yr/Yr ----------------------- 2003 2002 % Chg. 2003 2002 -------- -------- -------- -------- -------- Net revenues: License $ 21,405 $ 22,623 -5% 42% 43% Maintenance 21,573 20,906 3% 42% 39% Service 8,349 9,464 -12% 16% 18% -------- -------- -------- -------- Total net revenues 51,327 52,993 -3% 100% 100% Operating expenses: Cost of license and maintenance revenues 3,940 5,419 -27% 8% 10% Sales, marketing, and services costs 28,089 30,627 -8% 55% 58% Research and development 10,999 11,994 -8% 21% 23% General and administrative 4,619 4,384 5% 9% 8% Special general and administrative - 1,537 -100% - 3% Merger-related - 357 -100% - 1% -------- -------- -------- -------- Operating expenses 47,647 54,318 -12% 93% 103% -------- -------- -------- -------- Operating income (loss) 3,680 (1,325) 378% 7% -3% Other income (expense): Net interest income (expense) (389) (42) 826% -1% - Other income 216 872 -75% 1% 2% -------- -------- -------- -------- Other income (expense) (173) 830 -121% - 2% -------- -------- -------- -------- Income (loss) before income taxes and minority interest 3,507 (495) 808% 7% -1% Income tax expense (benefit) 1,262 (178) 809% -3% - -------- -------- -------- -------- Income (loss) before minority interest 2,245 (317) 808% 4% -1% Minority interest - 58 -100% - - -------- -------- -------- -------- Net income (loss) $ 2,245 $ (259) 967% 4% -1% ======== ======== ======== ======== Basic net income (loss) per common share $ 0.13 $ (0.02) 750% Diluted net income (loss) per common share $ 0.13 $ (0.02) 750% Shares used in basic per share computation 17,272 16,821 3% Shares used in diluted per share computation 17,395 16,821 3%
-more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 8 SPSS Inc. Consolidated Statements of Operations (in thousands, except per share) (unaudited)
Six Months Ended June 30, ------------------------- % of Total Revenue Yr/Yr ------------------------- 2003 2002 % Chg. 2003 2002 --------- --------- ------- --------- --------- Net revenues: License $ 41,225 $ 44,302 -7% 41% 43% Maintenance 42,368 40,614 4% 42% 40% Service 16,784 17,687 -5% 17% 17% --------- --------- --------- --------- Total net revenues 100,377 102,603 -2% 100% 100% Operating expenses: Cost of license and maintenance revenues 7,762 11,267 -31% 8% 11% Sales, marketing, and services costs 56,443 61,381 -8% 56% 60% Research and development 21,926 20,102 9% 22% 20% General and administrative 8,573 10,344 -17% 8% 10% Special general and administrative - 3,192 -100% - 3% Merger-related - 2,260 -100% - 2% Acquired in-process technology - 150 -100% - - --------- --------- --------- --------- Operating expenses 94,704 108,696 -13% 94% 106% --------- --------- --------- --------- Operating income (loss) 5,673 (6,093) 193% 6% -6% Other income (expense): Net interest income (expense) (386) 52 -842% - - Other income 347 879 -61% - 1% --------- --------- --------- --------- Other income (expense) (39) 931 -104% - 1% --------- Income (loss) before income taxes and minority interest 5,634 (5,162) 209% 6% -5% Income tax expense (benefit) 2,028 (1,858) 209% -2% 2% --------- --------- --------- --------- Income (loss) before minority interest 3,606 (3,304) 209% 4% -3% Minority interest - 497 -100% - - --------- --------- --------- --------- Net income (loss) $ 3,606 $ (2,807) 228% 4% -3% ========= ========= ========= ========= Basic net income (loss) per common share $ 0.21 $ (0.17) 224% Diluted net income (loss) per common share $ 0.21 $ (0.17) 224% Shares used in basic per share computation 17,254 16,801 3% Shares used in diluted per share computation 17,347 16,801 3%
-more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 9 SPSS Inc. Consolidated Condensed Balance Sheets (in thousands) (unaudited)
JUNE 30, DECEMBER 31, 2003 2002 ---------- ------------ ASSETS Current assets Cash and cash equivalents $ 21,874 $ 15,589 Accounts receivable, net 45,587 49,917 Inventories 2,398 2,775 Other current assets 27,316 28,108 ---------- ---------- Total current assets 97,175 96,389 Property, equipment and leasehold improvements, net 35,149 37,630 Capitalized software development costs, net 29,123 27,629 Goodwill, net 53,560 53,560 Intangibles, net 12,466 14,153 Other noncurrent assets 15,706 19,375 ---------- ---------- Total assets $ 243,179 $ 248,736 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 2,500 $ 2,500 Accounts payable 9,869 11,764 Other current liabilities 32,244 41,068 Deferred revenues 46,468 43,603 ---------- ---------- Total current liabilities 91,081 98,935 Noncurrent liabilities 15,983 18,265 Stockholders' equity 136,115 131,536 ---------- ---------- Total liabilities and stockholders' equity $ 243,179 $ 248,736 ========== ==========
-more- SPSS INC. REPORTS SECOND QUARTER 2003 EARNINGS 10 SPSS Inc. Consolidated Condensed Statements of Cash Flows (in thousands) (unaudited)
SIX MONTHS ENDED JUNE 30, ----------------------- 2003 2002 -------- -------- Cash flows from operating activities: Net income (loss) $ 3,606 $ (2,807) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 8,779 8,896 Deferred income taxes 825 (2,837) Changes in assets and liabilities: Accounts receivable 5,260 7,827 Inventories 384 309 Restricted cash 733 28 Accounts payable (2,017) 280 Accrued expenses (6,683) (1,751) Accrued income taxes (2,834) (240) Deferred revenues 2,865 (5,805) Other 2,487 (3,434) -------- -------- Net cash provided by operating activities 13,405 466 -------- -------- Cash flows from investing activities: Capital expenditures, net (1,599) (8,777) Capitalized software development costs (4,308) (5,175) Consideration for AOL for transaction (3,625) (3,625) Consideration for LexiQuest - (2,500) Proceeds from maturities and sale of marketable securities - 9,792 Other financing activity - (497) -------- -------- Net cash used in investing activities (9,532) (10,782) -------- -------- Cash flows from financing activities: Net borrowings under line-of-credit agreements 1,146 5,575 Proceeds from issuance of common stock 700 832 -------- -------- Net cash provided by financing activities 1,846 6,407 -------- -------- Effect of exchange rates on cash 566 2,510 -------- -------- Net change in cash and cash equivalents 6,285 (1,399) Cash and cash equivalents at beginning of period 15,589 21,400 -------- -------- Cash and cash equivalents at end of period $ 21,874 $ 20,001 ======== ========
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