SPSS Reports Record Revenues in 2005 Third Quarter

Kurt Peters

New License Revenues Up 22 Percent with Increased Profitability; Increases Guidance for Annual Revenue and Earnings

CHICAGO, Ill. (USA), November 1, 2005 - SPSS Inc. (NASDAQ: SPSS), a worldwide provider of predictive analytics software, today announced results for the quarter ended September 30, 2005. The company reported its fourth consecutive quarter of record revenues, with third quarter 2005 net revenues of $58.3 million, compared to $53.5 million in the third quarter of 2004, and earnings per diluted share (EPS) of $0.22, compared with $0.05 in the same period last year. The third quarter 2005 net earnings include a $1.0 million, or $0.05 per diluted share, non-cash income tax charge representing an adjustment of the global deferred income tax provision.

New license revenues increased 22 percent to $27.4 million from the third quarter of 2004. This increase was driven by double-digit growth in both the company’s tools and applications offerings. Operating income in the 2005 third quarter was $8.2 million, or 14 percent of total revenues, compared to $1.2 million, or 2 percent of total revenues, in the same quarter last year.

For the nine months ended September 30, 2005, net revenues totaled $173.8 million, with EPS of $0.55, compared with $163.6 million and $0.11, respectively, for the same period last year. New license revenues increased 14 percent to $77.8 million for the first nine months of 2005. Operating income totaled $19.4 million for the first nine months of 2005, or 11 percent of total revenues, up from $2.9 million, or 2 percent of total revenues, for the same period in 2004. Operating expenses declined by 4 percent from the prior year, reflecting the company’s improved productivity gained through cost management and more efficient revenue generation.

Cash totaled $59.1 million, as of September 30, 2005, up from $37.1 million as of December 31, 2004. Net cash flow from operating activities was $34.1 million for the nine months ended September 30, 2005, compared with $8.5 million for the same period last year.

“With four solid quarters in a row, we’re feeling pretty confident about the business,” said SPSS President and CEO Jack Noonan. “Our sales and marketing execution continues to improve while we steadily build upon our established technological leadership. The company is very well positioned to take advantage of the heightened demand from leading organizations worldwide for predictive analytics.”

Significant Transactions

SPSS signed software license or service agreements with several organizations during the 2005 third quarter, including: AbsolutData Technologies, Inc.; Achmea; AZ Direct GmbH; Career Education Corporation; Centers for Disease Control and Prevention, Support Center for Infectious Disease; Covenant Healthcare; E & J Gallo Winery; Federal Bureau of Investigation; Giorgio Armani S.p.A.; Harley-Davidson Motor Company; Humana, Inc.; Interpolis; LexisNexis; MBS Direct LLC.; Mizuno USA, Inc.; NIFTY; Northeastern University; O2 (Germany) GmbH & Co. OHG; Oregon Lottery; OTX; Parnassia; Saga Holidays Ltd.; Tesco; TotalWorks, Inc.; United States Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives; and United States Naval Special Warfare Command.

SPSS 14.0 Released to Extend Predictive Analytics Power Enterprise-Wide
A highlight in the third quarter of 2005 was the successful launch of a significantly enhanced version of the company’s flagship statistical software package, SPSS 14.0, which further extends the reach and power of predictive analytics. Organizations worldwide now understand that harnessing these technologies involves a shift from isolated desktop environments to enterprise-level, open and integrated systems. SPSS 14.0 facilitates and accelerates this process with greater openness through new integration with external programming languages, enhanced visualization techniques for communicating analytical results to executives, increased capabilities for scoring and deployment of predictions, and advanced algorithms for rapidly and effectively analyzing very large data sets.

Outlook and Guidance
“Our third-quarter results further validate the soundness of our operating strategies and commitment of this management team to deliver on its stated objectives,” said SPSS Executive Vice President and Chief Financial Officer Raymond Panza. “With disciplined management and process improvements, we are building a solid financial foundation for future success. While we continue to take costs out of the business, the critical driver going forward will be revenue growth in a challenging, but exciting environment.”

Panza continued, “In the fourth quarter of 2005, we expect revenues of between $61 million and $64 million, with reported earnings per diluted share of between $0.22 and $0.28. For the full year 2005, we are increasing our revenue guidance from a range of $230 million to $235 million to a range of between $235 million and $238 million, and raising our EPS guidance from $0.70 to $0.75 to a range of between $0.77 and $0.83. This guidance takes into consideration an expected 2005 effective income tax rate of 41 percent, which includes a base 35 percent effective tax rate.”

Conference Call
The company will host a conference call at 9:00 a.m. CT on November 2, 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 800-299-7098 in the United States and 617-801-9715 internationally. The live call passcode is 55251673. 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 36343591 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.

Safe Harbor Statement
This press release contains forward-looking information made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by phrases such as "anticipates," "believes," "estimates," "expects," "plans," "intends," "could," "designed," "should be" and other similar expressions which denote expectations of future events rather than statements of fact. These forward-looking statements involve factors that are subject to risks and uncertainties. These risks and uncertainties, which may not be currently ascertainable and many of which are beyond the Company`s control, may cause the Company`s actual results, performance or achievements to be materially different than the results, performance or achievements expressed in or implied by the forward-looking statements. These risks and uncertainties are described in the Company`s filings with the Securities and Exchange Commission ("SEC"). Copies of these filings are available either on the SEC`s website at www.sec.gov or from the Company`s investor relations department. In light of these risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as a representation by the Company that any future results, performance or achievements will be attained. These forward-looking statements speak only as of the date on which they are made. The Company assumes no obligation to update the forward-looking statements contained in this press release.

Marc Brailov


business finance, Generally Accepted Accounting Principles, Net profit, revenue, SPSS