Cognos reports Q2 profit rise

Revenue for the second quarter was $252.4 million, compared with $229.9 million for the same period last fiscal year, an increase of 10 percent. License revenue was $87.0 million, compared with $78.0 million in the second quarter of last fiscal year, an increase of 12 percent.

Net income on a U.S. GAAP basis in the quarter was $26.5 million, compared with $23.8 million for the same period last fiscal year, an increase of 12 percent. Net income on a non-GAAP basis (excluding amortization of acquisition-related intangible assets and stock-based compensation expense) for the quarter was $34.7 million, compared with $30.0 million for the same period last fiscal year, an increase of 15 percent. Earnings per diluted share (EPS) on a U.S. GAAP basis for the quarter was $0.31, compared with $0.26 for the same period last fiscal year, an increase of 19 percent. EPS on a non-GAAP basis (excluding amortization of acquisition-related intangible assets and stock-based compensation expense) for the quarter was $0.40, compared with $0.33 for the same period last fiscal year, an increase of 21 percent.

"I am pleased with our performance in the second quarter," said Cognos president and chief executive officer, Rob Ashe. "We saw solid growth across both our Cognos 8 BI and Financial Performance Management solutions. On the strength of our growth, a continuing strong product cycle going forward, a healthy market and significantly increased sales and customer service capacity, we are heading into the seasonally strong second half of our fiscal year with confidence.

"As the independent leader in performance management, our focus is to deliver innovation and expertise for our customers. The current momentum of our solution offering reflects continued emphasis of these themes, with recent announcements of Cognos 8 BI Analysis for Excel, the Cognos 8 Version 8.3 beta cycle, our recently expanded relationship with Informatica, and new solution offerings with IBM. This momentum grew even stronger with our announcement of a definitive agreement to purchase Applix. Response from customers and the market to this announcement has been extremely positive, as customers see the combined value of this important acquisition."

Recent Highlights:

• 9 contracts greater than $1 million in the second quarter
• 411 sales representatives, the highest level ever - an increase of 21 from the end of the first quarter and 45 from Q2 of last fiscal year
• Signed worldwide reseller agreement with Informatica for its data quality software
• Appointed Phillip Beniac President, Cognos Asia-Pacific
• Announced the execution of a definitive agreement to acquire Applix

Revenue for the first six months of fiscal year 2008, ended August 31, 2007, was $489.0 million, compared with $446.9 million for the same period last fiscal year, an increase of 9 percent. Net income on a U.S. GAAP basis for the first six months was $48.9 million, compared with $38.3 million for the same period last fiscal year, an increase of 28 percent. Net income on a non-GAAP basis (excluding amortization of acquisition-related intangible assets and stock-based compensation expense) for the first six months was $63.9 million, compared with $49.8 million for the same period last fiscal year, an increase of 28 percent. Earnings per diluted share (EPS) on a U.S. GAAP basis for the first six months was $0.55, compared with $0.42 for the same period last fiscal year, an increase of 31 percent. EPS on a non-GAAP basis (excluding amortization of acquisition-related intangible assets and stock-based compensation expense) for the first six months was $0.72, compared with $0.55 for the same period last fiscal year, an increase of 31 percent.

Cognos' balance sheet remains strong. Second quarter operating cash flow was $22.3 million. The company exited the quarter with $439.4 million in cash, cash equivalents, and short-term investments. Days sales outstanding for accounts receivable was 57 days in the quarter.

Second quarter non-GAAP results differ from results measured under U.S. GAAP as they exclude $1.8 million of amortization of acquisition-related intangible assets and $7.9 million of stock-based compensation expense, before taxes. Compared to the GAAP results, this is an increase of $0.09 per share, in the aggregate, after the effect of taxes. Non-GAAP results for the first six months differ from results measured under U.S. GAAP as they exclude $3.6 million of amortization of acquisition-related intangible assets and $15.4 million of stock-based compensation expense before taxes. Compared to the GAAP results, this is an increase of $0.17 per share, in the aggregate, after the effect of taxes. A reconciliation of U.S. GAAP to non-GAAP results is included at the end of this press release.

Business Outlook

The company's outlook for the third quarter and full fiscal year 2008 assumes no significant changes in the economy, a U.S. GAAP tax rate of 21 percent, a Canadian dollar of $1.00 U.S., and a Euro of $1.42 U.S. for the remainder of the year. This outlook does not reflect the impact of the pending acquisition of Applix.

Management offers the following outlook for the third quarter of fiscal year 2008 ending November 30, 2007:

• Revenue is expected to be in the range of $270 million to $285 million
• U.S. GAAP diluted earnings per share are expected to be in the range of $0.36 to $0.44
• Non-GAAP diluted earnings per share are expected to be in the range of $0.45 to $0.53

Expected non-GAAP diluted earnings per share for the quarter ending November 30, 2007 exclude approximately $1.8 million of amortization of acquisition-related intangible assets and approximately $7.8 million of stock-based compensation expense, before taxes. This is an increase of approximately $0.09 per share, in the aggregate, after the effect of taxes.

Management offers the following outlook for the full fiscal year 2008 ending February 29, 2008:

• Revenue is expected to be in the range of $1.075 billion to $1.100 billion
• U.S. GAAP diluted earnings per share are expected to be in the range of $1.66 to $1.76
• Non-GAAP diluted earnings per share are expected to be in the range of $2.00 to $2.10

Expected non-GAAP diluted earnings per share for fiscal year 2008 ending February 29, 2008, exclude approximately $6.8 million of amortization of acquisition-related intangible assets and approximately $31.1 million of stock-based compensation expense, before taxes. This is an increase of approximately $0.34 per share, in the aggregate, after the effect of taxes.

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