PARIS and SUNNYVALE, California, January 31 /PRNewswire/ --
ILOG(R) (Nasdaq: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced
results for the second quarter of fiscal 2008, ended December 31, 2007,
highlighted by 22% revenue growth year-over-year. Revenues for the quarter
were US$48.0 million compared with US$39.4 million for the second quarter
last year. U.S. GAAP earnings per share were US$0.15 compared with US$0.05
last year.
"We had a good quarter in a tough environment with license growth at 23%
and significant improvement in our profitability both sequentially and
year-over-year," said ILOG Chairman and CEO, Pierre Haren. "The solid
sales pipeline resulted in strong growth in our optimization and supply chain
applications. We were able to grow our business rule management system (BRMS)
sales thanks to the diversification of our BRMS customer base away from
financial institutions, achieving notable wins in other industries including
transportation and through applications including commissioning, data
cleansing and loyalty programs. We were also pleased to meet our revenue
target without large deals this quarter, underscoring demand for our products
to address today's business challenges across industries and geographies."
Revenue Trends
In addition to 23% license growth, ILOG also achieved worldwide revenue
increases of 23% in maintenance and 18% in professional services. Revenue
growth across all geographies was evenly distributed: Europe revenues rose
25%, the U.S. grew 20% and Asia grew 19%.
Following the acquisition of LogicTools, ILOG's supply chain applications
business gathered momentum in the U.S., as witnessed by strong license growth
for LogicNet Plus XE(R) supply chain network planning product. New customers
included a leading U.S. chemical company and one of the most-recognized
supermarket dairy brands. LogicTools products are in a market development
phase in Europe following their official launch there early in the second
quarter.
Strong royalty revenues for ILOG's optimization technology and positive
momentum of the new release of CPLEX for planning and scheduling applications
resulted in 55% year-over-year growth for combined license and maintenance
revenues. In addition to revenues from two major Independent Software Vendors
and a CPLEX renewal with Areva, the French nuclear energy leader, key
optimization deals were signed with a large Spanish water utility and a major
German automotive manufacturer.
ILOG's visualization products had 8% combined license and maintenance
revenue growth with several notable deals including Alcatel Lucent in Italy
for a telecom network management application. ILOG's visualization product
line benefits from current trends in the industry for Rich Internet
Applications (RIA) and interactive visualization to support Web 2.0 and
business intelligence (BI) initiatives. Early in the second quarter, the
company unveiled ILOG Elixir(R), a new graphical data display library built
on the Adobe Flex(R) platform, which further strengthens the product line's
RIA relevance.
The ILOG BRMS product line achieved combined license and maintenance
revenue growth of 9% on top of a very strong comparison base in the second
quarter of fiscal year 2007, when growth in that business had neared 40%. In
the current year's fiscal quarter, strong demand for BRMS products from a
diverse customer base more than offset the dip in the mortgage business in
the U.S. Key deals for BRMS in the quarter included repeat business from
Greek banking leader Eurobank EFG, which will be further leveraging ILOG
JRules for additional applications as the bank expands its business process
management (BPM) initiatives. In the U.S., the company also had good
diversification across industries outside of financial services for its BRMS
products, illustrated by deals with a leading U.S. airline for a loyalty
management program and with AT&T. Asia also had strong BRMS demand with a
sizeable deal with a large Singapore Ministry and from China Pacific
Insurance Co., Ltd.
"We're seeing growing interest from customers in leveraging our
technologies to enhance BI platforms, including BRMS related to operational
BI," added Haren. "We look forward to developing this new business
opportunity throughout 2008 as we further diversify our BRMS business to
supplement their essential nature for BPM and service-oriented-architecture
(SOA) markets."
Business Outlook
ILOG continues to expect meeting its 20% revenue growth target for fiscal
year 2008. However, two factors have had a negative impact on margins: the
weaker dollar and the less favorable IT spending environment. Thus ILOG now
believes that it is unlikely to overcome in the remaining two quarters of
fiscal year 2008 the entire operating profit shortfall from the quarter ended
September 30, 2007. Therefore, rather than the US$10 million target stated
earlier, ILOG now expects to achieve a fiscal year 2008 U.S. GAAP operating
profit in excess of US$6 million, or 3% of revenues.
Conference Call
ILOG management will be hosting a conference call today at 10 a.m.
Eastern Time or 4 p.m. Central European Time to discuss second fiscal 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 today.
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
For purposes herein, ILOG is also referred to as "us", "we" and/or the
"Company". 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 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 Forms 20F and 6-K submitted by
us which are on file with the SEC and available at the SEC's website at
http://www.sec.gov/.
ILOG S.A.
Consolidated Income Statements (unaudited)
In U.S. GAAP in thousands of U.S. dollars and thousands of shares,
except per share data
Three Months Ended
December 31 December 31 December 31 December 31
2007 2006 2007 2006
(in euros) (in euros)
Revenues:
License fees $23,202 $18,871 15,962 14,446
Maintenance 13,275 10,796 9,158 8,365
Professional services 11,473 9,685 7,896 7,474
Total revenues 47,950 39,352 33,016 30,285
Cost of revenues:
License fees 280 251 193 192
Maintenance 1,353 1,376 928 1,061
Professional services 9,717 7,456 6,698 5,761
Total cost
of revenues 11,350 9,083 7,819 7,014
Gross profit 36,600 30,269 25,197 23,271
Operating expenses:
Marketing and selling 19,106 15,872 13,047 12,259
Research and
development 8,900 7,641 6,058 5,982
General and
administrative 6,074 5,668 4,227 4,304
Total operating
expenses 34,080 29,181 23,332 22,545
Income (loss)
from operations 2,520 1,088 1,865 726
Net interest
income and other 489 558 317 414
Income (loss)
before taxation 3,009 1,646 2,182 1,140
Income taxes expense 232 675 158 510
Net income of fully
consolidated
subsidiaries 2,777 971 2,024 630
Equity (loss) in
earnings of
affiliates 68 (79) 47 (60)
Net income $2,845 $892 2,071 570
Earnings per share
- Basic $0.15 $0.05 0.11 0.03
- Diluted $0.15 $0.05 0.11 0.03
Share and share
equivalents used
in per share
calculations
- Basic 18,560 18,225 18,560 18,225
- Diluted 18,409 18,607 18,421 18,598
ILOG S.A.
Consolidated Income Statements (unaudited)
In U.S. GAAP in thousands of U.S. dollars and thousands of shares,
except per share data
Six Months Ended
December 31 December 31 December 31 December 31
2007 2006 2007 2006
(in euros) (in euros)
Revenues:
License fees $38,478 $35,063 27,025 27,154
Maintenance 26,180 21,214 18,547 16,542
Professional services 24,128 18,845 17,083 14,667
Total revenues 88,786 75,122 62,655 58,363
Cost of revenues:
License fees 619 481 440 372
Maintenance 2,555 2,613 1,798 2,028
Professional services 20,276 14,492 14,350 11,280
Total cost
of revenues 23,450 17,586 16,588 13,680
Gross profit 65,336 57,536 46,067 44,683
Operating expenses:
Marketing and selling 35,528 29,901 24,920 23,200
Research and
development 18,628 15,169 13,075 11,862
General and
administrative 11,732 10,348 8,259 7,934
Total operating
expenses 65,888 55,418 46,254 42,996
Income (loss)
from operations (552) 2,118 (187) 1,687
Net interest
income and other 1,097 1,136 740 852
Income (loss)
before taxation 545 3,254 553 2,539
Income taxes expense 380 1,036 266 793
Net income of fully
consolidated
subsidiaries 165 2,218 287 1,746
Equity (loss) in
earnings of
affiliates 112 (79) 78 (60)
Net income $277 $2,139 365 1,686
Earnings per share
- Basic $0.01 $0.12 0.02 0.09
- Diluted $0.02 $0.12 0.02 0.09
Share and share
equivalents used
in per share
calculations
- Basic 18,549 18,143 18,549 18,143
- Diluted 18,390 18,476 18,415 18,459
ILOG S.A.
Condensed Consolidated Balance Sheets (unaudited)
In thousands of U.S. dollars
December 31 June 30 December 31 June 30
2007 2007 2007 2007
(in euros) (in euros)
Assets
Current assets:
Cash and cash
equivalents $62,872 $46,040 43,017 40,781
Short-term
investments 21 8,616 - -
Accounts
receivable 39,708 42,161 26,973 31,219
Other receivables
and prepaid
expenses 14,318 12,873 8,890 8,656
Total current
assets 116,919 109,690 78,880 80,656
Long-term assets:
Tangible and
intangible assets
- net 16,019 16,480 10,881 12,204
Other long-term
assets 21,611 18,958 16,820 16,346
Total long-term
assets 37,630 35,438 27,701 28,550
Total assets $154,549 $145,128 106,581 109,206
Liabilities and
Shareholders'
Equity
Current liabilities:
Accounts payable
and other current
liabilities $28,963 $28,465 19,674 21,266
Current portion of
capital lease
obligations 103 206 70 153
Deferred revenue 32,195 32,884 21,875 24,353
Total current
liabilities 61,261 61,555 41,619 45,772
Long-term
liabilities:
Long-term portion
of capital lease
obligations - 17 - 12
Other long-term
liabilities 4,063 2,536 2,727 1,690
Total long-term
liabilities 4,063 2,553 2,727 1,702
Total
liabilities 65,324 64,108 44,346 47,474
Shareholders'
equity:
Paid-in capital 101,893 98,962 52,359 50,635
Treasury stock (9,000) (8,511) (7,300) (6,912)
Accumulated
deficit and
other (3,668) (9,431) 17,176 18,009
Total
Shareholders'
equity 89,225 81,020 62,235 61,732
Total
liabilities
and
shareholders'
equity $154,549 $145,128 106,581 109,206
ILOG S.A.
Condensed Consolidated Statements of Cash Flow (unaudited)
In thousands of U.S. dollars
Six Months Ended
December 31 December 31 December 31 December 31
2007 2006 2007 2006
(in euros) (in euros)
Cash flows from
operating activities:
Net Income $277 $2,139 365 1,686
Depreciation and
amortization 1,999 1,189 1,403 1,008
Share-based
compensation 1,865 1,244 946 665
Deferred income taxes 139 867 102 723
Unrealized (gain) loss
on derivative
instruments (121) (102) (79) (75)
(Gain) loss of equity
in affiliates (112) 79 (78) 60
Change in working
capital 1,233 (5,977) 1,310 (4,459)
Net cash provided
(used) by operating
activities 5,280 (561) 3,969 (392)
Cash flows from
investing activities:
Acquisition of fixed
assets and business (1,522) (7,463) (1,082) (5,822)
Loans and interests on
loans (590) - (402) -
Sale (Purchase) of
short term
investments, net 8,731 (127) - -
Net cash (used in)
provided by investing
activities 6,619 (7,590) (1,484) (5,822)
Cash flows from
financing activities:
Repayment of capital
lease obligations (135) (193) (95) (152)
Cash proceeds from
issuance of shares 1,066 1,933 777 1,503
Purchase of treasury
stock (489) (1,358) (389) (1,044)
Net cash provided by
financing activities $442 $382 293 307
Impact of exchange
rate changes on cash
and cash equivalents 4,491 1,588 (542) (363)
Net increase
(decrease) in cash,
cash equivalents 16,832 (6,181) 2,236 (6,270)
Cash and cash
equivalents,
beginning of period 46,040 61,442 40,781 54,469
Cash and cash
equivalents, end of
period $62,872 $55,261 43,017 48,199
Discussion of Income Statement for the Quarter Ended December 31, 2007
Revenues and Gross Margin
Revenues in the quarter increased to US$48.0 million from US$39.4
million, or by 22%, compared to the same quarter in the previous year.
Because of a stronger euro, at an average exchange rate of 1 euro = US$1.45
compared to 1 euro = US$1.29 in the same quarter last year, revenues
expressed at prior year constant currency rates increased by a lower
percentage of 16%.
Revenues by region were as follows (in thousands):
Three Months Ended
December 31 December 31 Change
2007 2006 As Reported Constant US$
North America $21,420 $17,905 20% 20%
Europe 22,038 17,657 25% 13%
Asia Pacific 4,492 3,790 19% 11%
Total revenues $47,950 $39,352 22% 16%
License fee revenues increased by 23% compared to the same quarter last
year as a result of strong activity across all geographies and industries, in
particular for our optimization product line. Maintenance revenues grew 23%
in the quarter compared to the same quarter last year. This increase is the
ongoing result of ILOG's growing installed base and an excellent renewal rate
of our maintenance contracts.
Professional services revenues continued to grow, posting an increase of
18% in the quarter compared to the same quarter last year. This overall
growth of our professional services revenues was lower than in the previous
quarters due to slower growth in North America as a consequence of a lower
number of engagements. The level of utilization of our consultants has been
negatively impacted by the rapid decrease of our mortgage-related consulting
contracts. The resulting underutilization of our consulting resources
affected the related gross margin for the quarter at 15% compared to 23% for
the same period in the preceding year.
Operating Expenses
The 17% increase in operating expenses over the same quarter last year is
in line with management forecasts, and is primarily due to the addition of
LogicTools, as well as additional hiring in China and consulting staff, and
also the stronger euro that mainly affects our French-based research and
development activities.
On December 31, 2007, ILOG had 865 employees, at the same level as
September 30, 2007, and higher than 775 one year earlier. This increase is
mainly due to the integration of LogicTools' 43 employees and the hiring in
China of 30 people for the Shanghai Development Center specialized in
consulting and pre-sales activities.
Research and development costs include a French research tax credit in
the quarter for US$1.6 million, the same amount was recorded in the same
quarter last year. This US$1.6 million tax credit is recorded as a reduction
of the research and development costs and relates to research costs incurred
in calendar 2007. A new and more favorable tax law will be applicable in
calendar 2008. The portion of the tax credit calculated as a percentage of
the costs related to eligible research projects will significantly increase
and be more predictable. As a result, commencing in March 2008, we will
accrue for this portion of the 2008 calendar French research tax credit every
quarter.
ILOG also recorded as part of its general and administrative expenses an
accrual for a tax exposure related to sales taxes identified during the
quarter in Canada and estimated at US$0.4 million.
Income Taxes
The income tax expense amounted to US$0.2 million compared to US$0.7
million, in the same quarter last year. The income tax expense in the quarter
is comprised of a current tax charge of US$0.1 for the countries posting
pre-tax income and a deferred tax charge for US$0.1 million in France,
utilizing part of the US$1.5 million deferred tax benefit accounted for at
the end of June 2007. This deferred tax benefit represented part of the net
operating losses carried forward in France that ILOG is more likely than not
going to use in current and upcoming fiscal years.
Discussion of Income Statement for the Six Months Ended December 31, 2007
Revenues and Gross Margin
Revenues in the six-month period increased to US$88.8 million from
US$75.1 million, or by 18%, compared to the same period in the previous year.
Expressed at prior year constant currency rates, revenues increased by 13%.
Revenues by region were as follows:
Six Months Ended
December 31 December 31 Change
2007 2006 As Reported Constant US$
North America $41,343 $35,586 16% 16%
Europe 39,317 31,655 24% 14%
Asia Pacific 8,126 7,881 3% -3%
Total revenues $88,786 $75,122 18% 13%
License revenues increased by 10%, from US$35.1 million in the same
six-month period last year, to US$38.5 million this year. The growth is
primarily due to the addition of the LogicTools business, and to a lesser
extent to the other product lines. Overall maintenance revenues increased by
23% compared to last year, reflecting ILOG's growing installed base and
excellent renewal rates for our maintenance contracts.
Professional services increased by 28% for the period, year over year,
reflecting the excellent growth of this activity across our geographies, thus
mitigated by the slow-down in the December quarter in North America. For the
six-month period, gross margin for professional services decreased to 16%, as
compared to 23% last year. As explained above, the lower utilization of ILOG
consultants in North America as a result of the lower than expected activity
negatively impacted the margin. The gross margin had already been impacted in
the prior quarter by a lower utilization of ILOG consultants in Asia and in
supply chain applications.
Operating Expenses
The 19% increase in operating expenses over the prior year is primarily
due to additional hiring, salary increases that were applied in the second
quarter of last year and the stronger euro, affecting approximately half of
ILOG's expenses, which are denominated in euros. ILOG also recorded an
accrual for tax exposure identified during the quarter ending December 31,
2007 in Canada in the amount of US$0.4 million.
Income Taxes
The income tax expense amounted to US$0.4 million compared to US$1
million, in the same six-month period last year. The income tax expense in
the period is comprised of a current tax charge of US$0.3 million for the
countries posting pre-tax income and a deferred tax charge of US$0.1 million
in France, utilizing part of the US$1.5 million deferred tax benefit
accounted for at the end of June 2007. This deferred tax benefit represented
part of the net operating losses carried forward in France that ILOG is more
likely than not going to use in current and upcoming fiscal years.
Balance Sheet and Cash Flow Discussion
Including short-term investments, ILOG's cash position totaled US$62.9
million at December 31, 2007, up from US$54.7 million on June 30, 2007.
Collection of accounts receivable improved significantly to reach a record
low level of 60 days sales outstanding at the end of the second quarter
compared to 76 days in past quarters. Excluding short-term investments, net
cash used for investing activities during the six-month period amounted to
US$2.1 million, for the purchase of IT equipment and a cash advance to one of
our equity investments, Prima Solutions. Cash provided by financing
activities netted US$0.4 million and mainly included the acquisition of
treasury stocks in the amount of US$0.5 million offset by proceeds from
issuance of shares under exercise of stock options in the amount of US$1.1
million.
As of December 31, 2007, shareholders' equity was US$89.2 million, an
increase of US$8.2 million from US$81.0 million at June 30, 2007, mainly as a
result of the stronger euro on our currency translation adjustments and the
exercise of stock options and warrants. On December 31, 2007, ILOG had
19,200,848 shares issued and outstanding, compared to 19,062,464 at June 30,
2007, due to the exercise of 138,384 stock options and warrants.
Accounting Principles
ILOG's financial statements in U.S. dollars are prepared in accordance
with generally accepted accounting principles in the United States (U.S.
GAAP). Figures presented in euros have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). Following European
regulation 1606/2002 dated July 19, 2002, all EU-listed companies are
required to apply IFRS in preparing their financial statements for financial
years commencing January 1, 2005 and thereafter.
Following the rule issued by the SEC on December 21, 2007, ILOG decided
to stop preparing audited U.S. GAAP financial statements in U.S. dollars, and
will only prepare audited IFRS financial statements in euros for the year
ended June 30, 2008 without audited reconciliation to U.S. GAAP. As a
consequence, ILOG will gradually transition its financial reporting from U.S.
GAAP and U.S. dollar to IFRS and euros.
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 Inc. and ILOG S.A.
LogicNet Plus XE, ILOG Elixir, ILOG CPLEX and ILOG JRules are trademarks of
ILOG. All other trademarks are the property of their respective owners.
Web site: http://www.ilog.com
© PR Newswire Association LLC.
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