EX-99.1 3 c80444exv99w1.txt SPSS PRESS RELEASE [SPSS LOGO] FOR IMMEDIATE RELEASE: Oct. 28, 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 THIRD QUARTER 2003 RESULTS CHICAGO, IL. (USA), Oct. 28, 2003 - SPSS Inc. (Nasdaq: SPSS), the leading provider of predictive analytics technology and services, today announced results for its third quarter ended Sept. 30, 2003. Revenues and diluted earnings per share were $52.1 million and $0.19 in the quarter, as compared to $52.7 million and a loss per share of $(0.26) in the same period last year, respectively. Operating income improved to $4.6 million in the quarter from an operating loss of $(7.4) million in the same period last year. Included in the results for the quarter ended Sept. 30, 2002, were technology write-offs, restructuring costs and other nonrecurring charges of $10.9 million. The company's improved profitability was primarily due to expense reduction programs implemented in the third quarter 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 $18.8 million in the first nine months of the year, up from $13.4 million in the first half of 2003 and $(1.5) million in the same nine month period last year. "We saw no changes this quarter in closure rates, sales cycles or transaction values," said Jack Noonan, SPSS Inc. president and chief executive officer. "And despite increased activity in almost every part of our business, there was still little sense of urgency exhibited by customers in making purchasing decisions. Some evidence suggests that organizations will be more motivated in the coming quarters. While we are prepared for this possible change, we are not counting on it." Revenues and diluted earnings per share for the first nine months of 2003 were $152.5 million and $0.39, as compared to $155.3 million and a loss per share of $(0.42) in the same period last year, respectively. Operating income improved to $10.2 million in the first nine months of 2003 from an operating loss of $(13.5) million in the same period last year. Included in the results for the nine months ended Sept. 30, 2002, were technology write-offs, restructuring costs and acquisition and other nonrecurring charges of $16.5 million. SUMMARY OF RESULTS (Unaudited; in millions, except for share and per share data)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------ ------------------------------------------ 2003 2002* % CHANGE 2003 2002** % CHANGE ---------- ---------- -------- ---------- ---------- --------- NET REVENUES $ 52.1 $ 52.7 -1% $ 152.5 $ 155.3 -2% OPERATING INCOME (LOSS) $ 4.6 $ (7.4) - $ 10.2 $ (13.5) -- NET INCOME (LOSS) $ 3.4 $ (4.3) - $ 7.0 $ (7.1) -- DILUTED EPS $ 0.19 $ (0.26) - $ 0.39 $ (0.42) -- WEIGHTED SHARES OUTSTANDING 18,058 16,840 7% 17,797 16,791 6%
*Includes technology write-offs, restructuring costs, and other non-recurring charges of $10.9 million **Includes technology write-offs, restructuring costs and acquisition and other non-recurring charges of $16.5 million - more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 2 ------------------------------------------------------------------------------- "Federal sales were strong this quarter, particularly for homeland security and fraud detection applications," Noonan continued. "There was also a nice rebound in Japan and good improvement in revenues from higher education customers in North America. These positives, however, were offset by weak performance throughout Europe and continued lower sales to state and local governments in the United States." Noonan said, "A genuine bright spot in the quarter was provided by sales of our text mining technology, which were the highest since our acquisition of LexiQuest Inc. in Jan. 2002. Homeland security is a current driver of these revenues, along with corporate and academic customers in the United States and Japan. This increased interest in text mining is understandable, since nearly 80 percent of all data today is in an unstructured form, such as text in e-mails or call center notes. SPSS technologies make it possible to analyze both structured and unstructured data, enabling organizations to get more complete views of their enterprise, transform business processes and improve returns on investments. "Three new OEM agreements were another positive in the quarter," Noonan concluded. "The largest was signed with HP (NYSE: HPQ), which will use our Clementine(R) data mining workbench and real-time scoring technology to develop a module for its Fraud Management System (FMS). FMS enables telecommunications providers to more accurately detect and prevent fraud. We also made progress delivering predictive analysis capabilities to business users in the form of pre-packaged analytic applications. Through our partnership with Bull Systems, our joint application for predicting Medicaid fraud was selected during the quarter by Nassau County, N.Y., and submitted for legislative approval." REVENUE PERFORMANCE SOFTWARE LICENSES Revenues from new software licenses declined 1 percent to $21.5 million in the quarter from $21.8 million in the same period last year. This decrease was primarily due to lower sales of desktop products for scientific analysis, the impact of certain discontinued products on new sales and declines in revenues from the company's NetGenesis(R) Web analytics application and ShowCase(R) business intelligence tools. Partially offsetting this decline were higher sales of SPSS data mining tools, applications for market research and desktop statistical analysis tools, as well as changes in currency exchange rates. New sales of SPSS data mining tools increased by 26 percent from the third quarter in 2002, largely driven by new licenses of the company's text mining technology. Also contributing to this growth were higher new sales of Clementine and server versions of the SPSS statistical analysis tools. For example, Sallie Mae, the nation's leading provider of education funding, selected Clementine to better provide guaranteed student loans as well as information to students, parents and guidance professionals. DIRECTV, Inc., the nation's leading digital multi-channel television service provider, purchased LexiQuest(TM) to incorporate unstructured customer data from call center interactions into its overall CRM analysis initiatives. Other new licenses of SPSS data mining tools in the quarter included: - The United States Postal Service - MSN in the UK - The United States Army - Nifty, the largest Internet services provider (ISP) in Japan - The United States Department of Justice New license revenue from desktop SPSS statistical analysis tools increased 4 percent from the third quarter of 2002. This increase was primarily driven by the launch of a new release of these products, which featured enhanced data visualization and additional analytical capabilities. New revenues from the SPSS applications for market research increased by 10 percent compared to the third quarter of 2002. Significant sales included an enterprise license agreement with Research International, one of the world's leading market research firms. - more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 3 ------------------------------------------------------------------------------- New sales of ShowCase business intelligence tools were down 5 percent from the same period last year. SPSS released new versions of these offerings during the quarter. MAINTENANCE AND SERVICES Revenues from maintenance agreements and renewals of annual licenses increased 1 percent to $22.4 million in the quarter from $22.2 million in the same period last year. This growth was due to steady 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 43 percent in the current quarter from 42 percent in the third quarter of 2002. Service revenues declined 5 percent to $8.2 million in the quarter from $8.6 million in the same period last year. This was primarily due to a decrease in ShowCase implementation services as well as a drop in training revenues. Revenues from the SPSS Online (AOL) business were up sequentially and compared to the third quarter of 2002. Service revenues were constant at 16 percent of total revenues. FINANCIAL COMMENTARY Speaking to other aspects of the third quarter, Edward Hamburg, SPSS executive vice president and chief financial officer, said, "The company's internal rate of revenue growth was flat compared to the third quarter in 2002, which tells much of the story in the current quarter. In short, revenue increases in particular product lines, vertical markets or geographies were offset by decreases in others. Almost $2 million of growth in new sales of data mining tools countered the combined declines in revenues from services, discontinued products, NetGenesis and ShowCase. Japan made up for Europe, and in the United States, growth from federal and higher education sales matched flat revenues from corporate customers and lower sales to state and local government organizations. Overall, we are holding our own in a market characterized by continued uncertainty." Hamburg continued, "We also have the fundamentals of the business under control. Expenses are at levels that will enable us to benefit from any potential up-tick in revenues and our cash position has markedly improved from Dec. 2002. Moreover, the company's already strengthened balance sheet will get even stronger in the fourth quarter when it reflects the terms of our new agreement with AOL." - more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 4 ------------------------------------------------------------------------------- Hamburg also provided the following detail on other financial aspects of the quarterly periods: TOPIC COMMENTS Cost of license and maintenance Decreased from the third quarter 2002 due to revenues lower cost of goods related to lower license revenues, Hyperion royalties and amortization of purchased technology. Cost of license and maintenance None in the current quarter. Software write revenues software write-offs -offs of $5.8 million in the third quarter of 2002, were due to the termination of the company's consolidated non-core investment in Illumitek Corporation and replacement of technology acquired in the AOL transaction. Sales, marketing and services Decreased as a result of the reduction in the number of sales and professional services s cost 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 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 primarily to the addition of accounting professionals, costs associated with Sarbanes-Oxley compliance, and changes in currency exchange rates. Special G&A charges None in the current quarter,compared to $4.7 million in the third quarter of 2002 associated with the field operations restructuring and downsizing or closure of certain facilities. 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 and approximately $200K of imputed interest related to the company's October 2001 transaction with AOL. Thirty-six percent effective tax rate expected for 2003. Cash Increased $7.3 million and $1.0 million from December 2002 and June 2003, respectively, primarily due to increased cash from operations generated from operating income. Days sales outstanding 79 days average rate, compared to 78 in June 2003 and 79 in December 2002. Intangibles, net Decreased from December 2002 and June 2003 due primarily to the amortization of intangibles related to the AOL transaction. Other assets Includes deferred tax assets related to net operating loss carry-forwards and other future tax benefits. Capitalized software Increased from June 2003 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 $40.2 million, down from December 2002 to reflect seasonal decrease in recurring revenues from renewals of annual licenses and maintenance agreements; increased from $37.2 million in the third quarter of 2002. Current liabilities Decreased as a result of reductions in accounts payable and accrued liabilities related to the LexiQuest acquisition, field operations restructuring, capital lease obligations and royalties. Noncurrent liabilities Decreased from December 2002 and June 2003 due to the reduced balance of the AOL-related merger consideration. Staff 1,259 full-time employees as of September 30, 2003, with 237 sales representatives (188 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 THIRD QUARTER 2003 EARNINGS 5 ------------------------------------------------------------------------------- OUTLOOK Hamburg concluded, "Our current sense of the business suggests that the low-end to the mid-point of guidance for the company's performance in 2003 is achievable. Consistent with earlier disclosures of annual guidance, the low-end of these estimates assumes no improvement in the current business climate while the mid-point considers increased fourth quarter spending by organizations worldwide. " The following summary table describes the company's performance during the trailing twelve months ended Sept. 30, 2003, compared to 2002, as well as its current fiscal year and 2006 goals for productivity and profitability: PERFORMANCE VS. PROFITABILITY AND PRODUCTIVITY GOALS
Q3 2003 * TARGET TARGET ITEM 2002* TRAILING TWELVE MONTHS 2003 2006 ---- ----- ---------------------- ---- ---- REVENUE PER EMPLOYEE ($000'S) $ 166,000 $ 164,000 $168 - $175K $200K Revenue ($000's) $ 209,300 $ 206,515 OPERATING INCOME (AS % OF REVENUE) Operating income (loss) -4.4% 7.0% Acquisition and nonrecurring charges -9.8% -0.6% ADJUSTED OPERATING INCOME 5.4% 7.6% 8% - 10% 18% EBITDA (AS % REVENUE) Net income (loss) -3.8% 3.0% Net interest expense -0.5% -0.9% Income tax (expense) benefit 0.6% -3.6% Depreciation and amortization -8.4% -8.8% EBITDA 4.5% 16.3% Acquisition and nonrecurring charges -9.8% -0.6% ADJUSTED EBITDA 14.3% 16.9% 16% - 18% 25%
* Excludes acquisition and other nonrecurring charges of $20.5 million in 2002 and $1.2 million in the trailing twelve months ended Q3 2003 - more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 6 ------------------------------------------------------------------------------- CONFERENCE CALL The company will host a conference call to discuss its results at 9:00 a.m. CDT on Wednesday, October 29, 2003. These proceedings will be broadcast online at www.spss.com/invest. Please dial 800.967.7140 in the United States or 719.457.2629 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 718181. 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] is the world's leading provider of predictive analytics technology and services. The company's predictive analytics technology connects data to effective action by drawing reliable conclusions about current conditions and future events. More than 250,000 commercial, academic, and public sector customers rely on SPSS technology to help increase revenue, reduce costs, improve processes, and detect and prevent fraud. Founded in 1968, SPSS is headquartered in Chicago, Illinois. For additional information, please 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 THIRD QUARTER 2003 EARNINGS 7 ------------------------------------------------------------------------------- SPSS Inc. Consolidated Statements of Operations (in thousands, except per share) (unaudited)
THREE MONTHS ENDED SEPT. 30, ---------------------------- % OF TOTAL REVENUE YR/YR ------------------- 2003 2002 % CHG. 2003 2002 ---- ---- ------ ---- ---- Net revenues: License $ 21,483 $ 21,809 -1% 41% 42% Maintenance 22,397 22,216 1% 43% 42% Service 8,227 8,641 -5% 16% 16% -------- -------- -------- -------- Total net revenues 52,107 52,666 -1% 100% 100% Operating expenses: Cost of license and maintenance revenues 4,040 4,185 -3% 8% 8% Cost of license and maintenance revenues--software write-offs - 5,751 -100% - 11% Sales, marketing, and services costs 28,287 30,567 -7% 54% 58% Research and development 10,537 11,322 -7% 20% 21% General and administrative 4,691 3,063 53% 9% 6% Special general and administrative - 4,663 -100% - 9% Illumitek shut-down charges - 518 -100% - 1% -------- -------- -------- -------- Operating expenses 47,555 60,069 -21% 91% 114% -------- -------- -------- -------- Operating income (loss) 4,552 (7,403) 161% 9% -14% Other income (expense): Net interest income (expense) (349) (36) 869% - - Other income 1,031 225 358% 1% - -------- -------- -------- -------- Other income (expense) 682 189 261% 1% - -------- -------- -------- -------- Income (loss) before income taxes 5,234 (7,214) 173% 10% -14% Income tax expense (benefit) 1,883 (2,897) 165% 4% -6% -------- -------- -------- -------- Net income (loss) $ 3,351 $ (4,317) 178% 6% -8% ======== ======== ======== ======== Basic net income (loss) per common share $ 0.19 $ (0.26) 173% Diluted net income (loss) per common share $ 0.19 $ (0.26) 173% Shares used in basic per share computation 17,331 16,840 3% Shares used in diluted per share computation 18,058 16,840 7%
SPSS Inc. - more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 8 ------------------------------------------------------------------------------- Consolidated Statements of Operations (in thousands, except per share) (unaudited)
NINE MONTHS ENDED SEPT. 30, --------------------------------------- % OF TOTAL REVENUE YR/YR ------------------ 2003 2002 % CHG. 2003 2002 ---- ---- ------ ---- ---- Net revenues: License $ 62,708 $ 66,111 -5% 41% 43% Maintenance 64,765 62,830 3% 42% 40% Service 25,011 26,328 -5% 17% 17% ---------- ---------- ---- ---- Total net revenues 152,484 155,269 -2% 100% 100% Operating expenses: Cost of license and maintenance revenues 11,802 15,452 -24% 8% 10% Cost of license and maintenance revenues--software write-offs - 5,751 -100% - 4% Sales, marketing and services costs 84,730 91,948 -8% 55% 59% Research and development 32,463 31,424 3% 21% 20% General and administrative 13,264 13,407 -1% 9% 9% Special general and administrative - 7,855 -100% - 5% Merger-related - 2,260 -100% - 2% Illumitek shut-down charges - 518 -100% - - Acquired in-process technology - 150 -100% - - ---------- ------------- ---- ---- Operating expenses 142,259 168,765 -16% 93% 109% ---------- ------------- ---- ---- Operating income (loss) 10,225 (13,496) 176% 7% -9% Other income (expense): Net interest income (expense) (735) 16 4694% -1% - Other income 1,378 1,104 25% 1% 1% ---------- ----------- ---- ---- Other income (expense) 643 1,120 -43% - 1% ---------- ----------- ---- ---- Income (loss) before income taxes and minority interest 10,868 (12,376) 188% 7% -8% Income tax expense (benefit) 3,911 (4,755) 182% 2% -3% ---------- ----------- ---- ---- Income (loss) before minority interest 6,957 (7,621) 191% 5% -5% Minority interest - 497 -100% - - ---------- ----------- ---- ---- Net income (loss) $ 6,957 $ (7,124) 198% 5% -5% ========== ============ ==== ==== Basic net income (loss) per common share $ 0.40 $ (0.42) 195% Diluted net income (loss) per common share $ 0.39 $ (0.42) 193% Shares used in basic per share computation 17,276 16,791 3% Shares used in diluted per share computation 17,797 16,791 6%
- more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 9 ------------------------------------------------------------------------------- SPSS Inc. Consolidated Condensed Balance Sheets (in thousands) (unaudited)
SEPT. 30, DEC. 31, 2003 2002 ---------- -------- ASSETS Current assets Cash and cash equivalents $ 22,910 $ 15,589 Accounts receivable, net 43,191 49,917 Inventories 2,558 2,775 Other current assets 27,011 28,108 -------- -------- Total current assets 95,670 96,389 Property, equipment and leasehold improvements, net 33,490 37,630 Capitalized software development costs, net 29,616 27,629 Goodwill, net 53,560 53,560 Intangibles, net 11,622 14,153 Other noncurrent assets 15,119 19,375 -------- -------- Total assets $239,077 $248,736 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 2,500 $ 2,500 Accounts payable 8,677 11,764 Other current liabilities 32,542 41,068 Deferred revenues 40,176 43,603 -------- -------- Total current liabilities 83,895 98,935 Noncurrent liabilities 13,857 18,265 Stockholders' equity 141,325 131,536 -------- -------- Total liabilities and stockholders' equity $239,077 $248,736 ======== ========
- more - SPSS INC. REPORTS THIRD QUARTER 2003 EARNINGS 10 ------------------------------------------------------------------------------- SPSS Inc. Consolidated Condensed Statements of Cash Flows (in thousands) (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 2003 2002 -------- --------- Cash flows from operating activities: Net income (loss) $ 6,957 $ (7,124) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 13,652 13,039 Deferred income taxes 824 (6,851) Write-off of software costs - 5,751 Illumitek shut-down charges - 518 Write-off of acquired technology - 150 Changes in assets and liabilities: Accounts receivable 7,981 12,206 Inventories 233 497 Restricted cash 1,394 528 Accounts payable (3,265) (1,247) Accrued expenses (8,599) (3,322) Accrued income taxes (846) (1,424) Deferred revenues (3,669) (9,374) Other 4,113 (4,851) -------- -------- Net cash provided by (used in) operating activities 18,775 (1,504) -------- -------- Cash flows from investing activities: Capital expenditures (1,934) (9,611) Capitalized software development costs (6,769) (7,173) Payment to AOL for direct marketing services (5,438) (5,438) Acquisition of LexiQuest - (2,500) Acquisition of netExs - (1,000) Proceeds from maturities and sale of marketable securities - 9,792 Other investing activity - (497) -------- -------- Net cash used in investing activities (14,141) (16,427) -------- -------- Cash flows from financing activities: Net borrowings under line-of-credit agreements 458 10,329 Proceeds from issuance of common stock 1,502 1,199 Other financing activity - 11 -------- -------- Net cash provided by financing activities 1,960 11,539 -------- -------- Effect of exchange rates on cash 727 1,544 -------- -------- Net change in cash and cash equivalents 7,321 (4,848) Cash and cash equivalents at beginning of period 15,589 21,400 -------- -------- Cash and cash equivalents at end of period $ 22,910 $ 16,552 ======== ========
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