2/20/06

SPSS Reports Record Revenues

Paul Demery , Managing Editor, B2B E-commerce

Strong Increases in Profitability and Cash Flow

CHICAGO, Ill. (USA), February 14, 2006 - SPSS Inc. (NASDAQ: SPSS), a leading worldwide provider of predictive analytics software, today announced results for its fourth quarter and fiscal year ended December 31, 2005. The Company reported record revenues of $62.2 million and diluted earnings per diluted share (EPS) of $0.30 for the fourth quarter of 2005, representing the highest single revenue quarter in its history. These results compare to revenues of $60.5 million and EPS of $0.20 in the fourth quarter of 2004. Operating income for the fourth quarter of 2005 increased to $8.6 million, or 14 percent of total revenues, from $3.7 million, or 6 percent of total revenues, in the same quarter last year.

Revenues for the 2005 fiscal year totaled $236.1 million with EPS of $0.85, compared to $224.1 million and $0.31, respectively, in 2004. New license revenues increased 12 percent to $107.6 million from $95.8 million in 2004. Operating income for the 2005 fiscal year reached $28.0 million, or 12 percent of total revenues, through the combination of record revenues and a 4 percent decrease in operating expenses resulting from widespread gains in productivity, cost management and more efficient revenue generation.

Cash totaled $84.4 million as of December 31, 2005, compared to $37.1 million at the end of the 2004 fiscal year. Net cash flow from operating activities in 2005 increased to $51.5 million from $12.3 million in 2004.

“SPSS concluded 2005 in the strongest position in its history,” said Jack Noonan, SPSS president and chief executive officer. “Our financial foundation is solid, and with our technological leadership and market success increasingly recognized, we’re well positioned for the future.”

Noonan continued, “There is mounting evidence that the future will involve a larger role for predictive analytics in enterprise IT implementations. SPSS is prepared to meet this demand with technology that easily scales from the desktop to the enterprise while providing increasing returns on investment for customers using our products in mission critical applications.”

SPSS signed software license or service agreements during the 2005 fourth quarter with organizations including: ABN AMRO; Alliance & Leicester plc; American Academy of Neurology; Avis Europe plc; Banco Popular North America; Center Parcs Europe N.V.; City of New York, Department of Information Technology & Telecommunications; Crédit Agricole (GIE Synergie); ENIGMA GfK Medien-u.Marketingforschung GmbH; Interior Health Authority (Canada); Janssen-Cilag GmbH; Marc Ecko Enterprises; Mothers Against Drunk Driving; MotorCity Casino; Navy Federal Credit Union; Publicis Groupe Media; RentWay; R.J. Reynolds Tobacco Co. Puerto Rico; Texas A&M; University; The Pennsylvania State University; The Stationery House; Turner Broadcasting System, Inc.; United Negro College Fund Special Programs Corporation; University of Arizona; Vattenfall Europe Hamburg AG; Vodafone K.K.; and Western Wats.

A Year of Successful Product Launches and Growing Industry Recognition

Two-thousand five was highlighted by successful product launches and growing industry recognition of SPSS’ leadership in the market for predictive analytics technology and services. The Company released SPSS 14.0, an enhanced version of its flagship statistical software package, and SPSS® Statistical Services for Microsoft® SQL Server 2005, which markedly expands the analytical options of major organizations by readily integrating with Windows Server System products.

In 2005 SPSS also released:

• A significantly upgraded version of its ShowCase® Suite 7.0, the leading business intelligence and data mining solution for organizations using the IBM® eServer iSeries™ (AS/400®) computing platform.

• PredictiveClaims™, a new solution to reduce insurance fraud, improve the claims process and cut costs, an application based on real-time predictive analytics technology that integrates with existing claims-management systems to instantly determine which claims qualify for immediate approval and which are potentially fraudulent.

• Dimensions™3.0, a significant upgrade of its comprehensive suite for survey design, data collection, data management, analysis and publishing of survey results.

An International Data Corporation (IDC) study released in early 2005 confirmed predictive analytics as a distinct software sector. IDC (http://www.idc.com/) projected that this sector will grow at a compound annual growth rate of 8 percent during the next five years.[1]

Nucleus Research (http://www.spss.com/home_page/NucleusResearch.htm) released the results of its independent study on SPSS predictive analytics solutions. Entitled, "The Real ROI from SPSS," the study concluded that 94 percent of SPSS` customers examined had achieved a positive return on investment (ROI) from their deployments after an average deployment time of 10.7 months. “This is one of the highest ROI scores Nucleus has ever seen in its Real ROI series of research reports,” the firm noted.

Based on a survey of users, SPSS was honored in 2005 by CRMGuru.com as the most customer-centric solution provider in marketing automation. CRMGuru.com is the world`s largest industry portal for business executives to learn about Customer Relationship Management (CRM). SPSS was one of seven CRM solution providers tapped for CRMGuru Summit Awards for CRM Solution Excellence based on a year-long study of CRM solution providers. SPSS was selected for marketing automation over Epiphany, Inc., the SAS Institute, and Unica Corporation.

Finally, Frost & Sullivan (www.frost.com) announced that it selected SPSS as the recipient of the 2005 Product Innovation Award for its pioneering role in predictive customer relationship management (CRM) analytics. Frost & Sullivan presents this award to companies demonstrating excellence in new products and technologies in their industries.

Outlook and Guidance

"Our 2005 results were driven by successful execution of a disciplined company-wide operational strategy," said Raymond Panza, SPSS executive vice president, corporate operations and chief financial officer. "That ongoing strategy is to sustain a culture of progress focused on increasing revenues, improving productivity and greater cost-efficiencies. With cash flow and cash at record levels, the company has both the financial strength and flexibility for achieving continued growth.”

Panza further stated, “2006 first quarter revenues are anticipated to be between $58 and $60 million. EPS for the quarter is expected to be in the range of $0.14 to $0.20. The 2006 EPS guidance includes the estimated effect of the adoption of FAS 123R – Share Based Payments, requiring the expensing of stock option compensation, which is expected to result in $0.03 per share additional expense in the first quarter. Reported revenue and earnings growth for the 2006 first quarter will be negatively impacted by foreign exchange rates reflecting a stronger dollar compared to the same period last year, and the expectation that more than 55 percent of our revenues will continue to be generated outside the United States.

For the 2006 fiscal year, we expect revenues to total between $248 and $254 million, with EPS in the range from $0.98 to $1.09. For the year 2006, the EPS guidance includes an expected charge in the range of $0.12 to $0.16 for the adoption of FAS 123R, expensing of stock options.”

Conference Call

The company will host a conference call at 5:00 p.m. CT on February 14, 2006, to discuss its financial results. A replay will be available via phone for one week after the call. To access it, participants should dial 888-286-8010 in the United States or 617-801-6888 internationally. Access code 38372926 is required for the replay. An archived version of the call will also be made available online at www.spss.com/invest approximately two hours after the live call.

About SPSS Inc.

SPSS Inc. (NASDAQ: SPSS) is a leading worldwide provider of predictive analytics software and solutions. 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 important processes, and detect and prevent fraud. More than 95 percent of the Fortune 1000 companies are SPSS customers. Founded in 1968, SPSS is headquartered in Chicago, Illinois. For additional information, please visit www.spss.com.

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Marc Brailov
Senior Director Corporate Communications
SPSS Inc.
233 S. Wacker Drive
11th Floor
Chicago, IL 60606
Phone: 312.651.3459
Fax: 312.264.3459

Topics:

business finance, Customer relationship management, Predictive analytics, SPSS, STATISTICA

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