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SPSS reports record Q3 revenue and earnings

new license revenue growth drives increase in operating income

November 02, 2007

SPSS, a worldwide provider of predictive analytics software, today announced results for the quarter and nine months ended September 30, 2007.

The company reported record third quarter revenues of $72.3 million, a 12 per cent increase from $64.7 million in the third quarter of 2006. New license revenues were $34.5 million, up 15 per cent from $30.0 million in the third quarter of 2006. Operating income increased 29 per cent to $12.5 million, or 17 per cent of total revenues, from $9.6 million, or 15 per cent of total revenues, in the third quarter of 2006. Reported operating income for the third quarter of 2007 includes $1.2 million in charges related to the previously announced R&D facility closures and consolidation.

Diluted earnings per share (EPS) in the 2007 third quarter were a record $0.41, compared to $0.28 for the same period last year. These results included charges for share-based compensation of $1.0 million and $1.9 million in the third quarter of 2007 and 2006, respectively.

"In the third quarter, we saw growth in all major geographies driven by solid new license revenue,” said SPSS president and CEO Jack Noonan . “Contributing to this improvement were strong sales of our statistics and data mining products, as well as several larger predictive analytic solutions deals. With the benefits of predictive analytics increasingly recognised in the marketplace along with the proven value of SPSS products, we remain positive about the future.”

Revenues for the nine months ended September 30, 2007 totaled $211.4 million, an 11 per cent increase from $190.4 million in the same period last year. New license revenues were $101.8 million, up 14 per cent from $89.2 million in the 2006 nine-month period. Operating income increased 54 per cent to $34.8 million, or 16 per cent of total revenues, from $22.6 million, or 12 per cent of total revenues, for the same period in 2006. Operating income in 2007 includes charges of $1.9 million for restructuring and R&D facility closures. Charges for share-based compensation were $5.5 million and $5.0 million in the first nine months of 2007 and 2006, respectively. EPS for the 2007 nine-month period was $1.16, compared to $0.63 for the same period in 2006. The effective income tax rate for the 2007 nine-month period was 39 per cent, compared with a 37 per cent effective tax rate in the same period last year.

Cash at September 30, 2007 was $297.1 million, up from $140.2 million on December 31, 2006. Cash flow from operations for the nine months ended September 30, 2007 totaled $51.5 million compared with $26.0 million for the same period last year.

Outlook and Guidance

"Strong revenue growth combined with the benefits from our ongoing productivity improvement efforts resulted in record earnings and operating margin for the 2007 third quarter despite the charges for restructuring and facility closures," said Raymond Panza, SPSS executive vice president and CFO. "Looking ahead, we remain focused on building upon the momentum of our revenue growth and further operational efficiencies to ensure we continue to capitalize on the increasing market adoption of predictive analytic technologies.”

Panza added, "We expect revenues for the 2007 fourth quarter of between $74.0 million and $76.0 million with reported EPS in the range of $0.34 to $0.40. EPS for the 2007 fourth quarter includes estimated charges of $0.06 for share-based compensation and $0.09 related to the previously announced R&D facility closures that will be completed by year-end. For the 2007 fiscal year, the total costs recognised relative to the restructuring and R&D facilities consolidations are estimated to be $5.0 million. It is expected that the resulting savings realized during 2008 will exceed those restructuring costs. Earnings guidance assumes an effective income tax rate of 39 per cent for fourth quarter and fiscal year."

Executive quote

SPSS president and CEO Jack Noonan "In the third quarter, we saw growth in all major geographies driven by solid new license revenue,”. “Contributing to this improvement were strong sales of our statistics and data mining products, as well as several larger predictive analytic solutions deals. With the benefits of predictive analytics increasingly recognised in the marketplace along with the proven value of SPSS products, we remain positive about the future.”

Raymond Panza, SPSS executive vice president and CFO "Strong revenue growth combined with the benefits from our ongoing productivity improvement efforts resulted in record earnings and operating margin for the 2007 third quarter despite the charges for restructuring and facility closures,". "Looking ahead, we remain focused on building upon the momentum of our revenue growth and further operational efficiencies to ensure we continue to capitalize on the increasing market adoption of predictive analytic technologies.”

About the company

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 additional information, please visit www.spss.com.

Contact details

For press enquiries please contact:
Anna Moseley at LEWIS
Tel: +44 (0) 20 7802 2626 Fax: +44 (0) 20 7802 2627
Email: annam@lewispr.com
Website: www.lewispr.com

For enquiries about SPSS please contact:
Emma Bennett
SPSS
Tel: +44 (0) 1483 719 200 Fax: +44 (0) 1483 719 290
Email: ebennett@spss.com

Website: www.spss.com

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