SPSS Reports Solid Second Quarter 2005 Results

Paul Demery

License Revenues Increase 17 Percent Over Prior Year Quarter

CHICAGO, Ill. (USA), August 2, 2005 - SPSS Inc. (NASDAQ: SPSS), a leading worldwide provider of predictive analytics software, today announced results for the quarter ended June 30, 2005. Net revenues totaled $58.1 million compared to $53.0 million in the second quarter of 2004, with earnings per diluted share of $0.21, compared to a loss per share of $0.05 in the same period last year.

New license revenues were $24.4 million in the second quarter of 2005, up 17 percent from $21.0 million in the second quarter of 2004. This increase was driven by continued double-digit growth in the core tools business supported by our integrated applications strategy.

The company’s operating margin in the second quarter of 2005 was 13 percent. Reported operating income for the second quarter of 2005 increased $9.6 million to $7.3 million, compared to a loss of $2.3 million in the prior-year period. Operating expenses for the quarter dropped by over 8 percent from the same period last year. During the second quarter of 2005, SPSS incurred $0.3 million in unusual pre-tax charges related to its ongoing effort to restructure costs. Results for the second quarter of 2004 included approximately $2.5 million of pre-tax charges related to the company’s accounting review and restatement and downsizing of certain European field operations.

For the six months ended June 30, 2005, net revenue totaled $115.5 million compared with $110.1 million for the same period in 2004. New license revenue for the first half of the year was $50.4 million, an increase of 10 percent from $45.8 million in the same period in 2004.

Operating income for the six months ended June 30, 2005 was $11.3 million with an operating margin of 10 percent. During the first half of 2005, the company incurred $2.0 million in planned unusual pre-tax charges related to restructuring for future cost savings. Operating income for the six months ended June 30, 2004 was $1.7 million, including unusual pre-tax charges of $2.5 million.

Reported earnings per diluted share for the six months ended June 30, 2005 was $0.34, compared with $0.06 for the same period in 2004.

As of June 30, 2005, cash totaled $54.2 million, up from $37.1 million as of December 31, 2004. Cash flow from operating activities was $26.6 million for the six months ended June 30, 2005, compared with $8.6 million for the same period in 2004.

“We clearly had a good second quarter,” said SPSS President and CEO Jack Noonan. “The numbers are positive and the factors driving them are even more significant. The quarter’s solid results were fueled by better sales and marketing execution. This success, combined with our ongoing focus on cost controls and cash management, resulted in the highest operating margin achieved in the last five years.”

New Deals in Q2 2005

During the quarter, SPSS signed software license or service agreements with several organizations, including: Australian Government Department of Defence; Australian Transport Safety Bureau; BT; Cajamar; Centro Leasing; Capital One Services, Inc.; Churchill Downs; CSK Marketing Corporation; Florida Department of Revenue; Greenwich Associates; Harley-Davidson Motor Company; The Hospitals Contribution Fund of Australia Ltd.; IFF Research; JTB Global Marketing & Travel Inc.; Nationale-Nederlanden, part of ING Group; Ontario Ministry of Health and Long-Term Care; Orix Credit Corporation; OTP Bank Hungary; Peermont Global (East Rand); Procter & Gamble; SLM Corporation; United States Army Combat Readiness Center; United States Department of Justice`s Bureau of Justice Statistics; and Vodafone Hungary.

Major Product Launches and More Industry Commendation for SPSS Leadership

Highlights from 2005’s second quarter include significant new product launches and continuing industry recognition for SPSS’ technological leadership.

In May, SPSS unveiled a new solution to reduce insurance fraud, improve the claims process and cut costs. SPSS PredictiveClaims™, an application based on real-time predictive analytic technology, integrates with existing claims-management systems to instantly determine which claims qualify for immediate approval and which are potentially fraudulent. PredictiveClaims automatically analyzes all claims entering the system, from any channel, against risk profiles and external fraud databases.

Also in May, SPSS announced the availability of the latest version of Dimensions™, Dimensions 3.0, a comprehensive suite for survey design, data collection, data management, analysis and publishing of survey results. Dimensions 3.0 represents a significant technological breakthrough with the introduction of a new survey scripting language that enables users to continue their current work practices while providing new opportunities to create richer surveys that improve the overall respondent experience. Dimensions 3.0 is based entirely on a single integrated set of underlying technologies that support a wide range of survey research, from multi-lingual, multi-model research to smaller, one-of-a-kind projects.

In June, SPSS released a significantly upgraded version of the business intelligence components within its ShowCase® Suite 7.0, the leading business intelligence and data mining solution for organizations using the IBM® eServer iSeries™ (AS/400®) computing platform. SPSS ShowCase Suite 7.0 includes major enhancements to ShowCase Essbase®, ShowCase Analyzer™, and ShowCase Enterprise Reporting™.

Also, SPSS was recently honored 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. Approximately 2,500 qualifying surveys were collected by CRMGuru.com. SPSS was honored for marketing automation over Epiphany, Inc., SAS, Unica Corporation and the marketing automation portion of all multi-function vendors.

Outlook and Guidance

“This is the third consecutive quarter of continued improvements in revenue, cost controls and cash. While three quarters still don’t constitute a trend, the financial results further validate our strategy and demonstrate the management team’s commitment to achieve what we set out to accomplish and deliver shareholder value,” said SPSS Executive Vice President and Chief Financial Officer Raymond Panza. “We’re pleased by the continuing improvements in revenue growth and cost-efficiencies; however, we still have more work to do. We remain focused on increasing productivity and taking costs out of the business, but recognize that cost management alone is insufficient. Improvement in our bottom line and long-term success will be most dependent on continued revenue growth.” Panza continued, “In the third quarter of 2005, we expect revenues of between $57.0 million and $60.0 million, with reported earnings per diluted share of between $0.15 and $0.22. These estimates anticipate both cost savings and further charges resulting from cost-management activities. For the full year 2005, we are maintaining our revenue guidance of between $230 million and $235 million, and changing our earnings guidance from a range of $0.65 to $0.75 to a range of between $0.70 and $0.75 per diluted share.” Conference Call

The company will host a conference call at 9:00 a.m. CT on August 3, 2005, to discuss its financial results. The live call will be broadcast online at www.spss.com/invest. Those interested in participating in the live call should dial 800-510-9834 in the United States and 617-614-3669 internationally. The live call pass code is 91157738. 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 10186411 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 strategic action by drawing reliable conclusions about current conditions and critical 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.

Contact: Marc Brailov, SPSS


business, business finance, Customer relationship management, SPSS