SPSS Reports 2008 First Quarter Results

SPSS Inc. (Nasdaq: SPSS), a global provider of Predictive Analytics software and solutions, today announced results for the quarter ended March 31, 2008. The Company reported total revenues of $78.2 million, up 12 percent from $70.2 million in the first quarter of 2007. Net income was $9.8 million, up 21 percent from $8.2 million in the first quarter last year, with diluted earnings per share (EPS) of $0.51, a 31 percent increase from $0.39 in the 2007 first quarter. New license revenues were $38.4 million, up 10 percent from $35.0 million in the first quarter of 2007. Operating income increased 15 percent to $13.9 million, or 18 percent of revenues, from $12.1 million, or 17 percent of revenues, in the same quarter last year. Charges for share-based compensation were $0.07 and $0.06 in the first quarters of 2008 and 2007, respectively. Approximately 60 percent of total revenues in the 2008 first quarter came from outside of the United States. Excluding the effects of currency exchange rates, total revenues were up 5 percent over the 2007 first quarter. "Given the economic environment, we were pleased to see new license revenue growth of 13 percent in the United States, improved maintenance revenues, and higher service revenues primarily driven by increased training deliveries,” said Jack Noonan, SPSS chairman, CEO and president. "Once again, the diversity of our product line, customer base, and geographic markets enabled us to perform in an uncertain economy. Sales growth in the first quarter was strongest in the government and education sectors. At the same time, an increased number of lower-priced transactions and partnership arrangements also contributed to our success.” Noonan added, "Our good start in 2008 was supported by our multiple distribution channels and disciplined financial focus. We believe that we are well-positioned to meet the short-term economic challenges, while driving long-term profitable growth.” At March 31, 2008, cash and cash equivalents totaled $294.6 million. Cash provided by operating activities in the quarter was $14.1 million, after the payment of a $7.4 million year-end 2007 accrued expense related to the Company’s share repurchase program, compared to $21.3 million for the same period in 2007. During the first quarter of 2008, the Company continued its share repurchase program, acquiring 853,800 shares at a cost of $27.9 million. Pursuant to the previously announced Board authorization allowing the Company to repurchase up to 2 million shares of its issued and outstanding common stock, 539,000 shares remain available for repurchase under this program. Repurchases are not mandatory and will be made from time to time based on the availability of alternative investment opportunities and market conditions. Outlook and Guidance "The Company continues to drive revenue growth on an increasingly efficient basis,” said Raymond Panza, SPSS executive vice president and CFO. "Even with larger investments in marketing activities and higher non-cash charges for amortization expense of capitalized software, first quarter 2008 operating income and margin improved over the same quarter last year. Contributing to this increased profitability were lower R&D costs, a result of initiatives to consolidate software development centers, and expand operations in China. Such previous and ongoing productivity improvements should continue to drive further growth in operating income and margins.” Panza continued, "In the 2008 second quarter, we expect revenues of between $74.0 million and $78.0 million, with EPS in the range of $0.40 to $0.48. Looking further ahead based on our first quarter results, we are raising guidance for the 2008 fiscal year. We now expect revenues of between $310.0 million and $320.0 million, with EPS in the range of $1.90 to $2.00. Guidance for the second quarter and full year assumes charges for share-based compensation of $0.08 and $0.26 per share, respectively, and an expected effective income tax rate of 39 percent.” Conference Call The Company will host a conference call at 5 p.m. CT on Tuesday, April 29, 2008, 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 866-277-1182 in the United States and 617-597-5359 internationally. The live call pass-code is 58454489. 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 74003103 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 global provider of Predictive Analytics software and solutions. The Company’s offerings improve 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. Safe Harbor Statement In addition to historical information, this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions or future strategies that are signified by the words "expects,” "anticipates,” "intends,” "believes,” "estimates” or similar language. All forward-looking statements included in this document are based on information available to the Company on the date hereof. The Company cautions investors that its business and financial performance and the matters described in these forward-looking statements are subject to substantial risks and uncertainties. Because of these risks and uncertainties, some of which may not be currently ascertainable and many of which are beyond the Company’s control, actual results could differ materially from those expressed in or implied by the forward-looking statements. The potential risks and uncertainties that could cause results to differ materially include, but are not limited to: the Company’s ability to predict revenue, the Company’s ability to respond to rapid technological changes, a potential loss of relationships with third parties from whom the Company licenses certain software, fluctuations in currency exchange rates, the impact of new accounting pronouncements, increased competition and risks associated with product performance and market acceptance of new products. A detailed discussion of other risk factors that affect the Company’s business is contained in the Company’s Annual Reports on Form 10-K, particularly under the heading "Risk Factors.” The Company does not intend to update these forward-looking statements to reflect actual future events.           SPSS Inc. and Subsidiaries Consolidated Statements of Income (unaudited)     For the Three Months Ended March 31, Percent % of Net Revenues   2008   2007   Change   2008   2007 (in thousands, except per share amounts) Net revenues: License $ 38,417 $ 34,972 10 % 49 % 50 % Maintenance 32,147 28,926 11 % 41 % 41 % Services 7,677   6,268     22 %   10 %   9 % Net revenues 78,241   70,166     12 %   100 %   100 % Operating expenses: Cost of license and maintenance revenues 5,299 4,247 25 % 7 % 6 % Sales, marketing and services 39,160 33,629 16 % 50 % 48 % Research and development 11,381 12,271 -7 % 15 % 17 % General and administrative 8,536   7,944     7 %   10 %   12 % Operating expenses 64,376   58,091     11 %   82 %   83 % Operating income 13,865   12,075     15 %   18 %   17 % Other income (expense): Net interest and investment income 1,820 1,506 21 % 2 % 2 % Other 300   (784 )   NM     0 %   -1 % Other income 2,120   722     194 %   2 %   1 % Income before income taxes 15,985 12,797 25 % 20 % 18 % Income tax expense 6,155   4,646     32 %   7 %   6 % Net income $ 9,830   $ 8,151     21 %   13 %   12 % Basic net income per share $ 0.55   $ 0.42     31 % Diluted net income per share $ 0.51   $ 0.39     31 % Shares used in computing basic net income per share 17,916   19,604     -9 % Shares used in computing diluted net income per share 19,181   20,997     -9 % SPSS Inc. and Subsidiaries Consolidated Condensed Balance Sheets (unaudited)     March 31, December 31,     2008   2007 (in thousands) ASSETS Current assets: Cash and cash equivalents $ 294,586 $ 306,930 Accounts receivable, net 48,509 56,580 Inventories, net 739 698 Deferred income taxes 3,840 3,964 Prepaid income taxes 3,874 3,301 Other current assets   6,027   4,162   Total current assets   357,575   375,635   Net property, equipment and leasehold improvements, net 15,948 16,429 Capitalized software development costs, net 34,317 34,140 Goodwill 42,738 42,093 Intangibles, net 3,291 3,273 Noncurrent deferred income taxes 22,776 22,731 Other noncurrent assets   6,814   6,759   Total assets   $ 483,459   $ 501,060     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,678 $ 7,759 Income taxes and value added taxes payable 16,033 14,737 Deferred revenues 85,283 83,862 Other accrued liabilities   24,578   32,988   Total current liabilities   133,572   139,346   Long-term debt 150,000 150,000 Noncurrent deferred income taxes 939 784 Other noncurrent liabilities 1,450 1,577 Stockholders' equity: Common Stock 178 189 Additional paid-in capital 138,952 175,267 Treasury stock - (12,680 ) Accumulated other comprehensive income 4,657 2,696 Retained earnings   53,711   43,881   Total stockholders' equity   197,498   209,353   Total liabilities and stockholders' equity   $ 483,459   $ 501,060   SPSS Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited)     For the Three Months Ended March 31,     2008   2007 (in thousands) Cash flows from operating activities: Net income $ 9,830 $ 8,151 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,842 4,076 Deferred income taxes 382 2,255 Excess tax benefit from share-based compensation (148 ) (255 ) Amortization of share-based compensation 2,069 1,910 Changes in assets and liabilities: Accounts receivable 10,375 5,546 Inventories (36 ) (27 ) Prepaid and other assets (1,749 ) (1,518 ) Accounts payable (310 ) 1,211 Accrued expenses (8,621 ) (1,615 ) Income taxes 372 2,288 Deferred revenue (1,799 ) (1,163 ) Other, net   (1,064 )   461   Net cash provided by operating activities   14,143     21,320   Cash flows from investing activities: Capital expenditures (945 ) (693 ) Capitalized software development costs   (3,099 )   (3,584 ) Net cash used in investing activities   (4,044 )   (4,277 ) Cash flows from financing activities: Purchases of common stock (27,870 ) (49,998 ) Proceeds from stock option exercises and employee stock purchase plan 2,101 2,060 Tax benefit from stock option exercises 148 255 Proceeds from issuance of long-term debt - 150,000 Debt issuance costs   -     (4,281 ) Net cash provided by financing activities   (25,621 )   98,036   Effect of exchange rates on cash   3,178     798   Net change in cash and cash equivalents (12,344 ) 115,877 Cash and cash equivalents at beginning of period   306,930     140,203   Cash and cash equivalents at end of period   $ 294,586     $ 256,080   SPSS Inc. and Subsidiaries Supplemental Information--Effect of Share-Based Compensation on Operating Income (unaudited)           For the Three Months Ended March 31,   Reported--GAAP   Share-Based Compensation   Adjusted To Exclude Share-Based Compensation   2008   2007   2008   2007   2008   2007 (in thousands, except percent amounts) Net revenues $ 78,241     $ 70,166     $ -     $ -     $ 78,241     $ 70,166   Operating expenses: Cost of license and maintenance revenues 5,299 4,247 - - 5,299 4,247 Sales, marketing and services 39,160 33,629 409 476 38,751 33,153 Research and development 11,381 12,271 280 465 11,101 11,806 General and administrative 8,536     7,944     1,380     969     7,156     6,975   Operating expenses 64,376     58,091     2,069     1,910     62,307     56,181   Operating income $ 13,865     $ 12,075     $ (2,069 )   $ (1,910 )   $ 15,934     $ 13,985   Operating income as % of revenues 18 %   17 %           20 %   20 % Diluted net income per common share $ 0.51     $ 0.39     $ (0.07 )   $ (0.06 )   $ 0.58     $ 0.45   NOTE  - Share-Based Compensation On January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), Share-Based Payment ("SFAS No. 123(R)" or the "Statement") using the modified prospective method. SFAS No. 123(R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. Prior to the adoption of SFAS No. 123(R), the Company followed the intrinsic value method in accordance with APB No. 25 to account for its employee stock options and share-based awards issued before 2006. The Company has provided the effects of share-based compensation to show the effects of share-based compensation and the related effects on operating income and diluted net income per common share.