ILOG Announces 2008 First Quarter Results

PARIS and SUNNYVALE, California, October 31 /PRNewswire/ --

ILOG(R) (Nasdaq: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced
results for the first quarter of fiscal 2008, ended September 30, 2007.
Revenues for the quarter were US$40.8 million compared with US$35.8 for the
first quarter last year. Diluted loss per share for the first quarter was
US$0.14 compared with earnings per share of US$0.07 in last year's first
quarter.

"ILOG's 14% year-over-year revenue growth is noteworthy, but the year
over year 6% drop in license sales had an immediate impact on our
profitability this quarter. The summer credit crisis led many of our banking
customers to postpone investment decisions. Maintenance and consulting
revenues, on the other hand, grew very well. Further, as many of the delayed
opportunities have matured, we enter the current quarter with a solid sales
pipeline. The strong Euro also hindered our profitability in the quarter, but
contributed to the strengthening of our cash position to US$62 million," said
ILOG Chairman and CEO, Pierre Haren. "While our costs were on target, we are
taking further steps to reduce their growth in order to maintain our fiscal
year guidance."

Haren added, "I'm very encouraged by customer response to the latest
versions of our products released in the September quarter such as a
JRules(TM) 6.6 trial that we believe will accelerate the penetration of our
business rule management systems (BRMS) within Global 2000 corporations and
with systems integrators, and the recent release of CPLEX(R) 11 with a
significant performance increase."

Other product-related events are expected to create new business
opportunities for ILOG in the coming quarters. The Company recently entered
into a reseller agreement with Adobe for ILOG Elixir(R), a new add-on
graphics toolkit developed specifically for Adobe's next-generation Flex
platform that capitalizes on market demand for rich Internet applications.

ILOG was also just added to Microsoft's exclusive list of Global ISV
partners, which will increase support and partnering opportunities connected
with Microsoft's Office business applications strategy.

Revenue Trends

While license growth across all geographies and product lines was weaker
compared with the same quarter last year, consulting revenues grew 38% and
maintenance revenues grew 24% as a result of the large installed base,
driving revenue growth in the Americas and Europe at 13% and 23%,
respectively. Asia revenues were down 11%; however, the well-attended ILOG
Asia Pacific User Conference held in August in Singapore demonstrated growing
interest in and support for ILOG's products in the region.

License and maintenance revenues for BRMS products grew a modest 3% and
were characterized by smaller deals and some delayed purchases. Notable BRMS
deals in the quarter included a U.S.-based global logistics company, which
will use ILOG JRules as part of a legacy modernization project, and the
largest Dutch civil servant pension fund for a retirement computation
application.

Optimization product revenues, which include ILOG's vertical applications
business, grew 9% due to high-profile deals with Airbus for a custom planning
and scheduling application connected with the new Airbus 380 aircraft and
with a soft drink's Mexican distributor for supply chain network design and
inventory optimization applications. Other optimization revenues included
royalty proceeds from supply chain ISV partners.

Highlights for visualization revenues, which grew 6% in the first
quarter, included the renewal of a large OEM deal with Oracle for ILOG
JViews(R). The product line also continued to benefit from the increasing
adoption of Ajax as a key technology enabler for Web 2.0 and "mashups" of Web
content.

Business Outlook

"Having fallen short of the license growth we had hoped for this quarter
will make reaching our full-year guidance more challenging. Nonetheless, we
stand behind our target of in excess of 20% full year revenue growth, along
with our U.S. GAAP operating profit to over US$10 million, assuming average
euro-dollar exchange rate of 1.35 to 1.40 for the year," said Haren.

Conference Call

ILOG management will be hosting a conference call today at 11 a.m.
Eastern Time or 4 p.m. Central European Time to discuss its first quarter
results. To listen, please visit http://www.ilog.com/corporate/investor and
utilize the WebCast link. To participate, please contact Gavin Anderson at
+44-20-7554-1400. A replay of the call will be available later.

About ILOG

ILOG delivers software and services that empower customers to make better
decisions faster and manage change and complexity. Over 3,000 corporations
and more than 465 leading software vendors rely on ILOG's market-leading
business rule management systems (BRMS), supply chain planning and scheduling
applications as well as its optimization and visualization software
components, to achieve dramatic returns on investment, create market-defining
products and services, and sharpen their competitive edge. ILOG was founded
in 1987 and employs more than 860 people worldwide. For more information,
please visit http://www.ilog.com.

Forward-looking Information

Many of the statements included in this release, as well as oral
statements that may be made by us or by officers, directors or employees
acting on behalf of us, constitute or are based on forward looking statements
within the meaning of the United States Securities laws. All statements other
than statements of historical facts, including, among others, statements
regarding the implementation of the Company's business strategy, trends in
the software industry, the Company's financial outlook, liquidity and working
capital, the creation of co-selling and co-marketing relationships and
strategic alliances, the increased penetration of the Company's existing
customers, the sale of the Company's service packages, the market risks
associated with exchange rates, changes in the balance of the classes of the
Company's business and other statements relating to the Company's plans,
objectives, expectations, intentions, future business development and
economic performance are or may be forward looking. In addition to statements
that are forward-looking by reason of context, other forward-looking
statements generally may be identified by the use of words such as "may",
"will", "should", "expect", "estimate", "anticipate", "intend", "plan",
"believe", "continue", "outlook", "judgment", "predict" or other similar
expressions, although the absence of such words does not necessarily mean
that a statement is not forward-looking. These forward-looking statements
involve a number of known and unknown risks, uncertainties and other factors
that could cause the Company's actual results and outcomes to be materially
different from historical results or from any future results expressed or
implied by such forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the sections
entitled "Item 3. Key Information - Risk Factors," "Item 4. Information on
the Company" and "Item 5. Operating and Financial Review and Prospects,"
including quarterly fluctuations in our operating results and the price of
our Shares or ADSs, factors adversely affecting any one of our three product
lines, the need to have sufficient consultants available to staff an
unpredictable demand for our consulting services, lost revenues due to
consultants with specialized technical expertise occupied on competing
consulting engagements, our investments in vertical products which carry high
implementation costs that we discount in order to promote customer purchases,
intense competition and consolidation in our industry, the extended length
and variability of our sales cycle and concentration of transactions in the
final weeks of a quarter, which could result in substantial fluctuations in
operating results and may prevent accurate forecasting of financial results,
the increasing number of consulting engagements, which are exposed to greater
risk of non-payment; our dependence on certain major independent software
vendors, changing market and technological requirements, our ability to
provide professional services activities that satisfy customer expectations,
the impact of currency fluctuations on our profitability, changes in tax laws
or an adverse tax audit, errors in our software products, the loss of key
personnel, logistical difficulties, cultural differences, product
localization costs, import and tariff restrictions, adverse foreign tax
consequences and fluctuations in currencies resulting from our global
operations, the impact of intellectual property infringement disputes, our
heavy dependence on our proprietary technology, risks related to consummation
and integration of acquisitions and minority investments, the incurrence of
debt and contingent liabilities and write-off of expenses resulting from
acquisitions or minority investments, the impact of dilutive share issuances,
the limitations imposed by French law or our by-laws that may prevent or
delay an acquisition by ILOG using its Shares, changes in accounting
principles that could affect our operating profits and reported results, and
other matters not yet known to us or not currently considered material by us.
All written and oral forward-looking statements attributable to us, or
persons acting on our behalf, are qualified in their entirety by these
cautionary statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as
of the date hereof. Unless required by law, ILOG undertakes no obligation to
revise these forward-looking statements to reflect new information or events,
circumstances, changes in our expectations or otherwise that arise after the
date hereof. Readers should carefully review the events and other matters
described in other documents we file or submit from time to time with the
United States Securities and Exchange Commission (the "SEC"), including
reports on Form 6-K submitted by us.

ILOG S.A.
                 Consolidated Income Statements (unaudited)
         In USGAAP in thousands of U.S. dollars and thousands of shares, 
                            except per share data



 
                                                  Three Months Ended
                                          September   September   September
                                              30          30          30
                                             2007        2006        2007
                                                                  (in euros)
    Revenues:
      License fees                         $15,275     $16,192      11,063
      Maintenance                           12,905      10,418       9,389
      Professional services                 12,655       9,160       9,187
        Total revenues                      40,835      35,770      29,639
    
    Cost of revenues:
      License fees                             339         230         247
      Maintenance                            1,203       1,237         870
      Professional services                 10,558       7,037       7,652
        Total cost of revenues              12,100       8,504       8,769
    
        Gross profit                        28,735      27,266      20,870
    
    Operating expenses:
      Marketing and selling                 16,422      14,029      11,873
      Research and development               9,727       7,528       7,017
      General and administrative             5,657       4,680       4,032
        Total operating expenses            31,806      26,237      22,922
    
    Income (loss) from operations           (3,071)      1,029      (2,052)
      Net interest income (loss) 
        and other                              609         578         423
    Income (loss) before taxation           (2,462)      1,607      (1,629)
      Income taxes expense (income)            149         360         108
    Net income (loss) of fully            
     consolidated subsidiaries              (2,611)      1,247      (1,737)
      Equity in earnings of affiliates          43           -          31
    Net income (loss)                      $(2,568)     $1,247      (1,706)
    
    Earnings per share
              - Basic                       $(0.14)      $0.07       (0.09)
              - Diluted                     $(0.14)      $0.07       (0.09)
    
    Share and share equivalents used in   
     per share calculations
              - Basic                       18,539      18,061      18,539
              - Diluted                     18,447      18,406      18,482

ILOG S.A.
               Condensed Consolidated Balance Sheets (unaudited)
                       In thousands of U.S. dollars

                                          September      June     September
                                              30          30          30
                                             2007        2007        2007
                                                                  (in euros)
    Assets
    Current assets:
      Cash and cash equivalents            $61,840     $46,040      43,928
      Short-term investments                    20       8,616           -
      Accounts receivable                   33,492      42,161      23,621
      Other receivables and prepaid      
       expenses                             13,545      12,873       8,207
         Total current assets              108,897     109,690      75,756
    
    Long-term assets:
      Tangible and intangible assets - net  16,447      16,480      11,599
      Other long-term assets                18,240      18,958      15,570
         Total long-term assets             34,687      35,438      27,169
    
           Total assets                   $143,584    $145,128     102,925
    
    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and other current 
       liabilities                         $28,095     $28,465      19,814
      Current portion of capital lease   
       obligations                             159         206         112
      Deferred revenue                      29,964      32,884      21,137
         Total current liabilities          58,218      61,555      41,063
    
    Long-term liabilities:
      Long-term portion of capital lease 
       obligations                               2          17           1
      Other long-term liabilities            2,523       2,536       1,774
         Total long-term liabilities         2,525       2,553       1,775
         Total liabilities                  60,743      64,108      42,838
    
    Shareholders' equity:
       Paid-in capital                     100,704      98,962      51,724
       Treasury stock                       (8,905)     (8,511)     (7,238)
       Accumulated deficit and other     
        comprehensive income                (8,958)     (9,431)     15,601
         Total shareholders' equity         82,841      81,020      60,087
    
         Total liabilities and           
          shareholders' equity            $143,584    $145,128     102,925

ILOG S.A.
              Condensed Consolidated Statements of Cash Flow (unaudited)
                         In thousands of U.S. dollars

                                                  Three Months Ended
                                           September   September   September
                                               30          30          30
                                              2007        2006        2007
                                                                   (in euros)
    Cash flows from operating activities:
      Net Income (loss)                     $(2,568)    $1,247      (1,706)
      Depreciation and amortization             586        598         429
      Share-based compensation                  742        328         357
      Deferred income taxes                      80        220          61
      Unrealized gain (loss) on derivative   
       instruments                               54         33          40
      Result or depreciation of equity in    
       affiliates                               (43)         -         (31)
      Change in working capital               6,166     (2,148)      4,547
    Net cash provided by operating         
     activities                               5,017        278       3,697
    
    Cash flows from investing activities:
      Acquisition of fixed assets and        
       business                                (911)      (497)       (660)
      Sale (Purchase) of short term          
       investments, net                       8,731       (308)          -
    Net cash used in (provided by)         
     investing activities                     7,820       (805)       (660)
    
    Cash flows from financing activities:
      Repayment of capital lease obligations    (72)       (99)        (52)
      Cash proceeds from issuance of shares   1,000        692         732
      Purchase of treasury stock               (394)      (477)       (327)
    Net cash provided by financing         
     activities                                $534       $116         353
    
    Impact of exchange rate changes on cash
     and cash equivalents                     2,429       (194)       (243)
    
    Net increase (decrease) in cash, cash  
     equivalents                             15,800       (605)      3,147
    Cash and cash equivalents, 
      beginning of period                    46,040     61,442      40,781
    Cash and cash equivalents, 
       end of period                        $61,840    $60,837      43,928



Discussion of Income Statement for the Quarter Ended September 30, 2007

Revenues and Gross Margin

Revenues in the quarter increased to US$40.8 million from US$35.8 million, 
or by 14%, compared to the same quarter in the previous year. Because of a 
stronger euro, at an average exchange rate of euro 1 = US$1.37 compared to 
euro 1 = US$1.27 in the same quarter last year, revenues 
expressed at prior year constant currency rates increased by a lower 
percentage of 10%.

Revenues by region were as follows (in thousands):
                           Three Months Ended
                      September 30  September 30          Change
                           2007         2006      As Reported   Constant $
      North America      $19,922      $17,682        13%            13%
      Europe              17,279       13,997        23%            14%
      Asia Pacific         3,634        4,091       -11%           -15%
    Total revenues       $40,835      $35,770        14%            10%



The revenue growth in the U.S. and in Europe was driven by a significant
increase of professional services and maintenance revenues, largely
offsetting the decrease in license revenues. In Asia, professional services
revenues did not match expectations and overall revenue declined.

License revenue decreased by 6% compared to the same quarter last year as
a result of the summer credit crisis that led to the postponement of
investment decisions by our customers especially in the banking sector.
Maintenance revenues grew 24% in the quarter compared to the same quarter
last year. This increase is the result of the ILOG's growing installed base,
and a very good rate of customer contract renewal.

Professional services revenues continued to grow, posting an increase of
38% in the quarter compared to the same quarter last year. This increase is
mainly the result of BRMS implementations across geographies and continued
support for existing ILOG customers. Related gross margin for the quarter is
17% compared to 23% in the same period in the preceding year due to a
temporarily lower utilization of ILOG consultants especially in Asia and for
supply chain applications.

Operating Expenses

The 21% increase in operating expenses over the same quarter last year is
in line with management forecast, and is primarily due to the addition of
LogicTools, as well as additional hiring in China and consulting staff,
salary increases that were applied in the second quarter of last year, and
also the stronger euro that mainly affects our French-based research and
development activities.

On September 30, 2007, the Company had 864 employees, compared to 747 one
year earlier. This increase is mainly due to the addition of LogicTools with
43 employees and the hiring in China of 46 people for the Shanghai
Development Center specialized in consulting and pre-sales activities. The
other hires are mainly consultants.

Income Taxes

The income tax expense amounted to US$0.1 million compared to US$0.4
million, year over year as a result of the loss of the quarter.

Balance Sheet and Cash Flow Discussion

Including short-term investments, ILOG's cash position totaled
US$61.9 million at September 30, 2007, up from US$54.7 million on June
30, 2007. Operating activities generated US$5.0 million as a result of
collection of accounts receivables recorded during the strong June quarter
and despite the loss for the quarter. Investing activities for the quarter,
excluding short-term investments in cash, amounted to US$0.9 million of IT
equipment purchases. Cash provided by financing activities netted US$0.5
million and included the acquisition of treasury stocks in the amount of
US$0.4 million offset by proceeds from issuance of shares under exercise of
stock options in the amount of US$1.0 million. Accounts receivable as of
September 30, 2007 were stable at 76 days sales outstanding compared to June
30, 2007.

As of September 30, 2007, shareholders' equity was US$82.8 million, an
increase of US$1.8 million from US$81.0 million at June 30, 2007, mainly as a
result of the impact of the stronger euro on currency translation adjustments
as well as issuance of shares in the quarter and despite the loss for the
quarter. On September 30, 2007, the Company had 19,194,098 shares issued and
outstanding, compared to 19,062,464 at June 30, 2007, due to the exercise of
131,634 stock options and warrants.

Accounting Principles

The Company's financial statements in U.S. dollars are prepared in
accordance with accounting principles generally accepted in the United States
(U.S. GAAP). Figures presented in euros have been prepared in accordance with
International Financial Reporting Standards ("IFRS").

Constant Exchange Rates

Where constant exchange rates are referred to in the above discussion,
current period results for entities reporting in currencies other than U.S.
dollars are converted into U.S. dollars at the prior year's exchange rates,
rather than the exchange rates for the current period. This information is
provided in order to assess how the underlying business performed before
taking into account currency exchange fluctuations.

Press Release for French Shareholders

A translation of this press release in the French language is also
available.

ILOG and LogicTools are registered trademarks of ILOG. ILOG JViews, ILOG
Elixir, LogicNet Plus, ILOG JRules and CPLEX are trademarks of ILOG S.A. and
ILOG, Inc. All other trademarks referenced herein are the trademarks or
registered trademarks of their respective owners.

Web site: http://www.ilog.com