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SPSS reports 2008 third quarter financial results with solid operating margin

November 05, 2008

SPSS Inc. (Nasdaq:SPSS) a global provider of Predictive Analytics software and solutions, today announced results for the quarter and nine months ended September 30, 2008. SPSS reported third quarter revenues of $74.9 million, a 4 per cent increase from $72.3 million in the third quarter of 2007. Net income was $10.5 million, up 25 per cent from $8.4 million in the same quarter last year, with diluted earnings per share (EPS) of $0.55, a 34 per cent increase from $0.41 in the third quarter of 2007. License revenues were $33.7 million, down 2 per cent from $34.5 million in the third quarter of 2007. Operating income increased 3 per cent to $12.8 million, or 17 per cent of total revenues, from $12.5 million, or 17 per cent of total revenues, in the third quarter of 2007. Charges for share-based compensation were $0.06 and $0.03 per share in the third quarter of 2008 and 2007, respectively. Also included in the 2008 third quarter EPS results was a $0.02 charge related to cost management initiatives launched during the quarter. The effective income tax rate for the third quarter of 2008 was 24 per cent, compared with 42.5 per cent in the same quarter last year. Approximately 58 per cent of total revenues in the third quarter of 2008 came from outside the United States. Excluding the effects of currency exchange rates, total revenues were up 1 per cent over the third quarter of 2007.

“In the midst of these very challenging economic times, we met our revenue and earnings expectations for the third quarter,” said Jack Noonan, SPSS chairman, CEO and president. “With continuing declines in the global economy and unfavourable moves in foreign currency rates, we anticipated a difficult quarter. Yet, with our loyal customer base, we were able to offset much of the slowdown in larger, multi-user transactions with an increase in smaller and single-user license sales. In particular, we benefited from the 2008 third quarter release of our upgraded flagship product SPSS Statistics 17.0. Attracted by this version’s broader functionality, customers adopted SPSS Statistics 17.0 more quickly than they did with the release of SPSS 16.0 last year.”

Noonan added, “As a recognised market leader in Predictive Analytics, SPSS is well-positioned to manage through the current economic downturn. We have better aligned our sales organisation around core distribution channels to leverage the strength and efficiencies of our inside sales organisation. And, we will continue to focus on maintaining our healthy balance sheet and cash flow.”

Revenues for the nine months ended September 30, 2008, totalled $228.8 million, an 8 per cent increase from $211.4 million in the same period last year. Net income was $28.2 million, up 19 per cent from $23.7 million in the 2007 nine-month period, with EPS of $1.47, a 27 per cent increase from $1.16 in 2007. License revenues were $107.0 million, up 5 per cent from $101.8 million in the 2007 nine-month period. Operating income was $37.6 million, or 16 per cent of revenues compared to $34.8 million, or 16 per cent of revenues in the 2007 nine-month period. Charges for share-based compensation were $0.20 and $0.17 per share in the 2008 and 2007 nine-month periods, respectively. The effective income tax rate for the 2008 nine-month period was 32 per cent, compared with 39 per cent in the same period last year. Approximately 60 per cent of total revenues in the 2008 nine-month period came from outside the United States. Excluding the effects of currency exchange rates, total revenues were up 3 per cent over the 2007 nine-month period.

At September 30, 2008, cash and cash equivalents totalled $307.0 million. SPSS generated $16.7 million in cash from operations in the third quarter of 2008 compared with $16.9 million in the same quarter last year. Cash provided by operating activities in the first nine months of 2008 was $45.5 million, after payment of $7.4 million of a year-end 2007 accrued payable related to the Company’s share repurchase program, compared to $51.5 million for the same period in 2007.

Outlook and Guidance

“Although we anticipated a strengthening U.S. dollar and continuing slowdown in the economy, few expected the extensive changes in the global markets that have occurred over recent months,” said Raymond Panza, SPSS executive vice president and CFO. “Consistent with our demonstrated financial discipline, we have initiated actions to ensure continued solid operating margins and profitability, including a global staff reduction of nearly 10 per cent to be completed during the fourth quarter.”

Panza added, “Looking to the 2008 fourth quarter, we expect continuing pressure from foreign exchange rates and a further slowing global economy to result in revenues of between $73.0 million and $78.0 million. Before considering estimated charges of between $3.5 million and $4.5 million, or $0.12 to $0.16 per share, related to the cost management and staff reduction initiatives, we expect 2008 fourth quarter EPS in the range of $0.41 to $0.49. For the 2008 fiscal year, we expect revenues of between $302.0 million and $308.0 million, with EPS in the range of $1.90 to $1.98, again before considering the special charges. This guidance assumes an effective income tax rate of 32 per cent for the fourth quarter and fiscal year.

“Annual savings from the cost management initiatives and staff reductions are expected to exceed $10.0 million,” said Panza. “In 2009, we will continue to focus on the preservation of capital and the alignment of expenses to our revenue expectations. Specific guidance for 2009 will be provided with the announcement of our 2008 fiscal year results.”

About SPSS Inc.

SPSS Inc. (Nasdaq: SPSS
For press enquiries please contact:
Anna White or Victoria Collinson at LEWIS
Tel: +44 (0) 20 7802 2626
Fax: +44 (0) 20 7802 2627
Email: spssuk@lewispr.com
Website: www.lewispr.com

Executive quote

“In the midst of these very challenging economic times, we met our revenue and earnings expectations for the third quarter,” said Jack Noonan, SPSS chairman, CEO and president. “With continuing declines in the global economy and unfavourable moves in foreign currency rates, we anticipated a difficult quarter. Yet, with our loyal customer base, we were able to offset much of the slowdown in larger, multi-user transactions with an increase in smaller and single-user license sales. In particular, we benefited from the 2008 third quarter release of our upgraded flagship product SPSS Statistics 17.0. Attracted by this version’s broader functionality, customers adopted SPSS Statistics 17.0 more quickly than they did with the release of SPSS 16.0 last year.”

About the company

About SPSS Inc.
SPSS Inc. (Nasdaq: SPSS) is a leading global provider of Predictive Analytics software and solutions. The company’s Predictive Analytics technology improves business processes by giving organizations forward visibility for decisions made every day. By incorporating Predictive Analytics into their daily operations, organizations become Predictive Enterprises – able to direct and automate decisions to meet business goals and achieve a measurable competitive advantage. More than 250,000 public sector, academic and commercial customers rely on SPSS technology to help increase revenue, reduce costs and detect and prevent fraud. Founded in 1968, SPSS is headquartered in Chicago, Illinois. For more information, please visit www.spss.com.

Contact details

For further press information and photography please contact:
Victoria Collinson at LEWIS
Tel: +44 (0) 20 7802 2626
Email: spssuk@lewispr.com
Website: www.lewispr.com

For enquiries about SPSS please contact:
Emma Bennett at SPSS
Tel: +44 (0) 1483 719 200
Email: ebennett@spss.com
Website: www.spss.com

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SPSS reports 2008 third quarter financial results with solid operating margin

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