SPSS - News Room

News Release

February 13, 2008

SPSS reports strong 2007 fourth quarter, full year results

SPSS, the global provider of predictive analytics software and solutions, today announced record revenues, operating income and earnings for its fourth quarter and fiscal year ended December 31, 2007.

The Company reported fourth quarter revenues of $79.6 million, up 12 per cent from $71.1 million in the same quarter of 2006. New license revenues were $42.1 million, up 18 per cent from $35.8 million in the fourth quarter of 2006. Operating income increased 26 per cent to $14.7 million, or 18 per cent of total revenues, from $11.7 million, or 16 per cent of total revenues, in the same quarter of 2006. These results include charges for share-based compensation of $2.2 million and $1.7 million in 2007 and 2006, respectively. Results for the fourth quarter of 2007 also include $2.7 million in charges for previously announced organizational restructuring and research and development (R&D) facilities consolidation compared with $0.9 million of similar charges in the same 2006 quarter.

Net income for the fourth quarter of 2007 was $10.0 million, or diluted earnings per share (EPS) of $0.50, compared to $2.0 million, or $0.10 EPS, for the same period in 2006. Results for the fourth quarter of 2006 included a non-cash, non-operating income tax charge of $6.9 million, or $0.33 EPS.

“The fourth quarter was a good end to a good year,” said Jack Noonan, SPSS chairman, president and CEO. “Revenue growth in the quarter was powered by new sales of our data mining tools, which augmented another solid increase in new licenses of our statistical products. These trends were evident across all major geographies. We also completed sizable transactions in the quarter with customers across a broad range of industries focused on leveraging their customer relationships. This was highlighted by a 14 per cent increase in new revenue from contracts over $100,000 and a 10 per cent increase in the average value for such contracts. This growing revenue from enterprise-level deployments reflects continued interest in and demand for predictive analytics at the executive level. Favourable currency exchange rates also accounted for a somewhat higher growth in revenue and earnings than in previous 2007 quarters.”

The Company reported maintenance revenues in the 2007 fourth quarter of $30.5 million, up 10 per cent from $27.8 million in the same quarter of 2006. This increase was primarily driven by the timing of the initial renewals of maintenance for new license agreements, good renewal rates of existing licenses, and foreign currency effects. Maintenance revenues in the 2007 fiscal year were $118.3 million, 41 per cent of total revenues and an 8 per cent increase from $109.3 million in 2006.

For the 2007 fiscal year, revenues were $291.0 million, an 11 per cent increase from $261.5 million in the 2006 fiscal year. New license revenues were $144.0 million, up 15 per cent from $125.0 million in 2006. Operating income for the 2007 fiscal year increased 44 per cent to $49.5 million, or 17 per cent of total revenues, from $34.3 million, or 13 per cent of total revenues, for the 2006 fiscal year. These results include charges for share-based compensation of $7.8 million and $6.7 million in 2007 and 2006, respectively. Results for the 2007 fiscal year also include charges of $4.6 million for organizational restructuring and R&D facilities consolidation compared with similar charges in 2006 of $2.2 million, including $1.3 million for the write-off of obsolete purchased software.

Net income in 2007 was $33.7 million, or $1.65 EPS, compared to 2006 net income of $15.1 million, or $0.73 EPS. Fiscal year 2006 results included a non-cash, non-operating income tax charge of $6.9 million, or $0.34 EPS.

Noonan continued, “The year was marked by several trends in our business that we believe will continue into 2008. The first was strong growth in revenues from our market-leading predictive analytics statistical and data mining tools. Second, revenue growth was highest among commercial customers, as evidenced by major deals completed with firms in industries with large direct customer bases such as consumer products, insurance and telecommunications. The third trend was a growing number of transactions done with our alliances and partners, confirming the validity of our partnering strategy and demonstrating the value that SPSS predictive analytics technology adds to other strategic applications.”

Cash at December 31, 2007 was $306.9 million, up from $140.2 million at December 31, 2006 and $297.1 million at September 30, 2007. Cash flow from operations in the fourth quarter of 2007 was $33.4 million compared to $22.3 million for the same quarter in 2006. For the 2007 fiscal year, cash flow from operations was $84.9 million up from $48.2 million for the 2006 fiscal year.

Share Buy-Back
As previously announced, the SPSS Board of Directors authorised the Company to repurchase up to a maximum of two million shares of issued and outstanding common stock and up to $20.0 million principal amount of issued and outstanding convertible notes. This authorisation extends until December 31, 2008. In the fourth quarter of 2007, the Company purchased 607,200 shares of its issued and outstanding common stock pursuant to this repurchase program. This purchase was in addition to the 1.5 million shares purchased in the first quarter of 2007 in connection with the convertible debt offering, bringing total shares purchased during 2007 to 2.1 million, or 11 per cent of the shares outstanding at December 31, 2006. The shares purchased during 2007 were acquired at an average price of $33.79 per share for a total cash cost of $71.8 million.

Since December 31, 2007, the Company has purchased an additional 853,800 shares of its issued and outstanding common stock pursuant to the repurchase program. Currently, 539,000 shares of common stock remain available for repurchase under this program. Repurchases are not mandatory and will be made from time to time based on the availability of alternative investment opportunities and market conditions.

Outlook and Guidance
“In addition to solid execution by our sales organization and improved operating performance, we benefited in the fourth quarter from productivity gains and cost management initiatives as well as favourable currency exchange rates,” said Raymond Panza, SPSS executive vice president and chief financial officer. “Margin expansion continued into the fourth quarter as growth in revenue was efficiently realized through lower costs resulting in higher operating income. Even with restructuring charges, costs related to facility closures, and higher share-based compensation expense, we achieved record operating margins for both the quarter and full fiscal year. Our balance sheet has become stronger and we are generating sustainable cash flow.”

Panza continued, “While cautious about 2008 given the current economic environment, we believe demand for predictive analytics software will continue to grow and, in 2008, total revenue will grow at approximately the same rate as in 2007, excluding the effects of currency. For the 2008 first quarter, revenues are expected to be between $73.0 million and $75.0 million with EPS in the range of $0.40 to $0.45. For the 2008 fiscal year, we expect revenues of between $305.0 million and $315.0 million, with EPS in the range of $1.85 to $1.95. This guidance assumes an expected effective income tax rate of 39 per cent and includes expected expense for share based compensation of $0.07 and $0.26 per share for the 2008 first quarter and fiscal year, respectively.”