PARIS and SUNNYVALE, California, April 30 /PRNewswire/ --
ILOG(R) (Nasdaq: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced
its results for its fiscal third quarter ended March 31, 2008 with revenues
of US$46.1 million compared with revenues of US$40.0 million in the same
quarter last year. U.S. GAAP earnings per share (EPS) for the third quarter
were US$0.01 (diluted) compared with a diluted EPS of US$0.04 for the third
quarter last year.
"The strength of our business model, which relies on geographic and
channel diversity, helped license revenue growth in Europe, but was not
enough to offset the impact of the U.S. economic slowdown on the sales cycles
in this region," said ILOG Chairman and CEO, Pierre Haren.
ILOG had anticipated a weak level of Business Rule Management System
(BRMS) opportunities in the banking industry, especially in the U.S. However,
a number of large deals in the healthcare, transportation and insurance
industries also failed to materialize in a timely manner in the third
quarter. "The difficulties in the banking industry now generate more general
concerns over the economy, and our customers are taking more time to launch
their new projects powered by ILOG technology," added Haren. "Increased
delays in the signature of these deals have also impacted ILOG's professional
services margin, which is severely affected by underutilization of our
resources in the U.S."
Despite the strength of the euro, preemptive cost-saving measures and
strict hiring restraints enabled ILOG to achieve break-even at the operating
income level in the third quarter. The Company's cash position exceeded the
US$70 million mark at the end of the quarter.
Positive indicators in ILOG's third quarter included overall revenue
growth at 15% year over year, and license growth at 18%. Geographically,
Europe was noteworthy, growing at 23%, with 10% growth at constant currency
rate. The Americas grew below expectations at 7% due to the economic
slowdown, which deferred some IT spending across industries.
License and maintenance revenues for the Company's optimization tools and
engines grew 23%, reflecting royalties received from several OEM partners and
good demand for ILOG CPLEX(R). Key customers included a leading U.S. cable
broadcasting company, which is using ILOG CPLEX for advertising scheduling,
and the distribution arm of the world's leading diamond provider.
The BRMS product line grew 10% driven mostly by demand in Europe and
highlighted by large deals with IBM for a high-profile UK public sector
program and Groupama, a leading French insurer, for several CRM applications.
In the quarter, ILOG was named a resounding leader in the April 2008 report
"The Forrester Wave(TM): Business Rules Platforms, Q2 2008" from Forrester
Research, a leading IT research firm. ILOG also shipped its ILOG Rules for
.NET 3.0 product, with unparalleled integration with Microsoft(R) platforms
and products including Microsoft Office(R) 2007, Microsoft Visual Studio(R)
and Microsoft .NET(R) 3.0, and was named the sole leader in Business Rule
Platforms vendor for .NET developers by Forrester.
Highlights for the Company's vertical applications business was the
closing of a deal with a major U.S. pharmaceutical company for ILOG Plant
PowerOps(R) production planning and scheduling solution. The company also
launched the Carbon Footprint Extension for LogicNet Plus XE, which is
expected to capitalize on the growing demand for products that allow users to
evaluate the impact of various supply chain network configurations and
transportation strategies on their carbon footprint, allowing companies to
quickly and easily implement green supply chain initiatives.
LogicTools co-founder and MIT professor David Simchi-Levi was named Chief
Science Officer of ILOG. As Chief Science Officer, Simchi-Levi will be
charged with monitoring scientific and emerging technology trends to ensure
the maintenance of company leadership in the competitive landscape. He will
also oversee the links between ILOG and the academic world, conduct periodic
technical evaluations of ILOG technology and participate in product strategy
decisions.
Business Outlook
Due to the shortfall in license revenues in the third quarter as well as
expected continued pressure on licenses for the remainder of the year, ILOG
is now unlikely to meet its full-year target of 20% revenue growth, but
expects to achieve a double-digit increase in full-year revenues.
Furthermore, with lower margin from professional services and the continued
weakness of the dollar against the euro compounding the direct impact of the
license revenue shortfall on profitability, ILOG now expects to break even at
the operating income level, rather than achieve the US$6 million operating
income previously expected.
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 the contents of this
release. To listen, please visit http://www.ilog.com/corporate/investor and
utilize the WebCast link. To participate, 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, supply chain 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 850 people worldwide. For more information, please visit
http://www.ilog.com.
Forward-looking Information
All of the statements included in this release that are not statements of
historical fact, constitute "forward-looking statements" within the meaning
of the United States securities laws, and involve risks and uncertainties.
For example, the statements in the "Business Outlook" section of this
release, and in quotations from our management, are forward-looking
statements. Among the risk factors that could cause our actual results to
differ materially from what we expect are: fluctuations in demand for our
products and services; difficulties in matching our consultant resources with
unpredictable demand for our consulting services; uncertain success of our
investments in vertical products; intense competition and consolidation in
our industry; the length and unpredictability of our sales cycle; the
concentration of transactions in the final weeks of the quarter; the
increasing number of higher risk fixed price consulting engagements; 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 acquisitions and minority investments; 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, are qualified in
their entirety by these cautionary statements and others contained in our
filings with the U.S. Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements.
Unless required by law, the Company undertakes no obligation to revise these
forward-looking statements to reflect new information or events,
circumstances, changes in expectations or otherwise that arise after the date
hereof.
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
March 31 March 31 March 31 March 31
2008 2007 2008 2007
(in euros) (in euros)
Revenues:
License fees $21,193 $17,922 13,938 13,605
Maintenance 12,986 10,916 8,650 8,326
Professional services 11,884 11,200 7,840 8,519
Total revenues 46,063 40,038 30,428 30,450
Cost of revenues:
License fees 336 427 223 326
Maintenance 1,440 1,283 960 978
Professional services 10,597 8,793 7,028 6,691
Total cost of revenues 12,373 10,503 8,211 7,995
Gross profit 33,690 29,535 22,217 22,455
Operating expenses:
Marketing and selling 18,692 16,240 12,407 12,350
Research and development 9,236 9,269 6,205 6,933
General and
administrative 5,713 3,207 3,794 2,338
Total operating
expenses 33,641 28,716 22,406 21,621
Income (loss) from
operations 49 819 (189) 834
Net interest income and
other 517 590 326 434
Income (loss) before
taxation 566 1,409 137 1,268
Income taxes expense 166 300 103 224
Net income of fully
consolidated subsidiaries 400 1,109 34 1,044
Equity (loss) in
earnings of affiliates (235) (316) (152) (239)
Net income $165 $793 (118) 805
Earnings per share
- Basic $0.01 $0.04 (0.01) 0.04
- Diluted $0.01 $0.04 (0.01) 0.04
Share and share
equivalents used in per
share calculations
- Basic 18,475 18,173 18,475 18,173
- Diluted 18,054 18,774 18,055 18,840
Nine Months Ended
March 31 March 31 March 31 March 31
2008 2007 2008 2007
(in euros) (in euros)
Revenues:
License fees $59,672 $52,985 40,963 40,760
Maintenance 39,166 32,130 27,197 24,868
Professional services 36,012 30,045 24,923 23,185
Total revenues 134,850 115,160 93,083 88,813
Cost of revenues:
License fees 955 908 663 698
Maintenance 3,995 3,896 2,758 3,006
Professional services 30,872 23,285 21,378 17,971
Total cost of revenues 35,822 28,089 24,799 21,675
Gross profit 99,028 87,071 68,284 67,138
Operating expenses:
Marketing and selling 54,220 46,140 37,327 35,550
Research and development 27,864 24,439 19,279 18,795
General and
administrative 17,445 13,555 12,053 10,272
Total operating
expenses 99,529 84,134 68,659 64,617
Income (loss) from
operations (501) 2,937 (375) 2,521
Net interest income and
other 1,614 1,726 1,066 1,286
Income (loss) before
taxation 1,113 4,663 691 3,807
Income taxes expense 546 1,335 369 1,017
Net income of fully
consolidated subsidiaries 567 3,328 322 2,790
Equity (loss) in earnings
of affiliates (124) (396) (74) (299)
Net income $443 $2,932 248 2,491
Earnings per share
- Basic $0.02 $0.16 0.01 0.14
- Diluted $0.02 $0.16 0.01 0.13
Share and share
equivalents used in per
share calculations
- Basic 18,524 18,117 18,524 18,117
- Diluted 18,309 18,689 18,336 18,776
ILOG S.A.
Condensed Consolidated Balance Sheets (unaudited)
In thousands of U.S. dollars
March 31 June 30 March 31 June 30
2008 2007 2008 2007
(in euros) (in euros)
Assets
Current assets:
Cash and cash
equivalents $70,225 $46,040 44,703 40,781
Short-term investments 18 8,616 - -
Accounts receivable 41,817 42,161 26,446 31,219
Other receivables and
prepaid expenses 15,407 12,736 8,961 8,656
Total current assets 127,467 109,553 80,110 80,656
Long-term assets:
Tangible and intangible
assets - net 15,937 16,480 10,078 12,204
Other long-term assets 24,175 19,095 17,273 16,346
Total long-term assets 40,112 35,575 27,351 28,550
Total assets $167,579 $145,128 107,461 109,206
Liabilities and
Shareholders' Equity
Current liabilities:
Accounts payable and
other current
liabilities $31,144 $28,465 19,697 21,266
Current portion of
capital lease
obligations 50 206 32 153
Deferred revenue 38,399 32,884 24,290 24,353
Total current
liabilities 69,593 61,555 44,019 45,772
Long-term liabilities:
Long-term portion
of capital lease
obligations - 17 - 12
Other long-term
liabilities 4,401 2,536 2,766 1,690
Total long-term
liabilities 4,401 2,553 2,766 1,702
Total liabilities 73,994 64,108 46,785 47,474
Shareholders' equity:
Paid-in capital 102,578 98,962 52,816 50,635
Treasury stock (10,727) (8,511) (8,455) (6,912)
Accumulated deficit
and other 1,734 (9,431) 16,315 18,009
Total
Shareholders' equity 93,585 81,020 60,676 61,732
Total
liabilities and
shareholders'
equity $167,579 $145,128 107,461 109,206
ILOG S.A.
Condensed Consolidated Statements of Cash Flow (unaudited)
In thousands of U.S. dollars
Nine Months Ended
March 31 March 31 March 31 March 31
2008 2007 2008 2007
(in euros) (in euros)
Cash flows from
operating activities:
Net Income $443 $2,932 248 2,491
Depreciation and
amortization 3,863 2,070 2,630 1,597
Share-based compensation 2,467 1,979 1,347 1,056
Deferred income taxes 145 1,084 100 818
Unrealized (gain) loss
on derivative instruments (206) (10) (126) (3)
(Gain) loss of equity
in affiliates 124 396 74 299
Change in working capital 4,123 (1,277) 3,642 (742)
Net cash provided (used) by
operating activities 10,959 7,174 7,915 5,516
Cash flows from
investing activities:
Acquisition of fixed
assets and business (1,902) (9,583) (1,339) (7,439)
Loans (1,029) - (700) -
Sale (Purchase) of
short term
investments, net 8,735 (270) - -
Net cash (used in) provided
by investing activities 5,804 (9,853) (2,039) (7,439)
Cash flows from financing
activities:
Repayment of capital lease
obligations (194) (289) (133) (221)
Cash proceeds from
issuance of shares 1,149 3,149 834 2,432
Purchase of treasury stock (2,216) (1,596) (1,543) (1,224)
Net cash provided by
financing activities $(1,261) $1,264 (842) 987
Impact of exchange rate
changes on cash and cash
equivalents 8,683 2,222 (1,112) (445)
Net increase (decrease) in
cash, cash equivalents 24,185 807 3,922 (1,381)
Cash and cash equivalents,
beginning of period 46,040 61,442 40,781 54,469
Cash and cash equivalents,
end of period $70,225 $62,249 44,703 53,088
Discussion of Income Statement for the Quarter Ended March 31,
2008
Revenues and Gross Margin
Revenues in the quarter increased to US$46.1 million from
US$40.0 million, or by 15%, compared to the same quarter in the previous
year. Because of the stronger euro, at an average exchange rate of
euro 1 = US$1.50 compared to euro 1 = US$1.31 in the same quarter last year,
revenues expressed at prior-year constant currency rates increased by 8%.
Revenues by region were as follows (in thousands US dollars):
Three Months Ended
March 31 March 31 Change
2008 2007 As Reported Constant $
North America $18,944 $17,714 7% 7%
Europe 22,394 18,238 23% 10%
Asia Pacific 4,725 4,086 16% 3%
Total revenues $46,063 $40,038 15% 8%
License fee revenues increased by 18% compared to the same quarter last
year as a result of strong activity in Europe, where large BRMS deals were
signed in the quarter. Maintenance revenues grew 19% in the quarter compared
to the same quarter last year. This increase is the ongoing result of ILOG's
growing installed base and a solid renewal rate of maintenance contracts.
Professional services revenues grew by 6% in the quarter compared to the
same quarter last year. The overall growth in professional services revenues
was lower than in the previous quarters as growth in Europe was offset by
stable revenues in North America and a decrease in Asia as a consequence of a
lower number of engagements especially in financial services for our BRMS
product line. The resulting underutilization of ILOG's consulting resources
affected the related gross margin for the quarter, which stood at
11% compared to 21% for the same period in the preceding year.
Operating Expenses
The 17% increase in operating expenses over the same quarter last year is
primarily due to the addition of LogicTools, additional hiring at the
Shanghai Development Center (SDC) in China and in North America, as well as
salary increases in January. In addition, the stronger euro affected ILOG's
French-based research and development activities, in particular. ILOG has put
in place strict restraints on additional hiring and is implementing
cost-saving measures across the organization in order to contain the increase
in operating expenses in an environment of slower-than-expected top-line
growth.
On March 31, 2008, ILOG had 856 employees, down nine people compared to
December 31, 2007, and higher than the 782 employees at the same time last
year. This increase is mainly due to the integration of LogicTools'
43 employees and the hiring in China of 25 people for the SDC, specializing
in consulting and pre-sales activities.
Research and development costs include a French research tax credit in
the quarter for US$1.4 million whereas no research tax credit was recorded in
the same quarter last year. This US$1.4 million tax credit is recorded as a
reduction of the research and development costs and represents an additional
tax credit identified for calendar 2007 for US$0.3 million and a portion of
the 2008 calendar year French research tax credit for US$1.1 million as a
result of a new tax law in France applicable in calendar 2008. The portion of
the tax credit calculated as a percentage of the costs related to eligible
research projects increases significantly and is more predictable. ILOG
therefore now accrues for this portion of the French research tax credit on a
quarterly basis.
Non-Operating Expenses
Net interest income and other amounted to US$0.5 million and included
foreign currency exchange gains as a result of the efficiency of the hedging
strategy to protect ILOG against the weakening dollar.
The income tax expense amounted to US$0.2 million compared to
US$0.3 million in the same quarter last year as a result of the overall
pre-tax profit decrease.
Discussion of Income Statement for the Nine Months Ended March
31, 2008
Revenues and Gross Margin
Revenues in the nine-month period increased to US$134.9 million from
US$115.2 million, or by 17%, compared to the same period in the previous
year. Expressed at prior year constant currency rates, revenues
increased by 11%.
Nine Months Ended
March 31 March 31 Change
2008 2007 As Reported Constant US$
North America US$60,288 US$53,301 13% 13%
Europe 61,711 49,892 24% 12%
Asia Pacific 12,851 11,967 7% -1%
Total revenues US$134,850 US$115,160 17% 11%
License revenues increased by 13%, from US$53.0 million in the same
nine-month period last year, to US$59.7 million this year. The growth is
primarily due to the Optimization product line with CPLEX and the addition of
the LogicTools business. Overall maintenance revenues increased by 22%
compared to last year, reflecting ILOG's growing installed base and excellent
renewal rates for maintenance contracts, especially in the Optimization and
BRMS product lines.
Professional services increased by 20% for the period, year over year,
attributable to the excellent growth of this activity in Europe thus
mitigated by a lower growth in the U.S. For the nine-month period, gross
margin for professional services decreased to 14%, as compared to 22% in the
same period last year. As explained above, the lower utilization of ILOG
consultants in North America and the lower number of engagements both in
North America and Asia in the third quarter negatively impacted the margin.
Operating Expenses
The 18% increase in operating expenses over the prior year is primarily
due to recruitments for the SDC in China, the addition of LogicTools, salary
increases that were applied in the second quarter of last year, higher use of
third parties in Europe, full-year impact of the office relocation in North
America and additional accrual of professional services fees mainly for the
Sarbanes-Oxley audit. In addition, the stronger euro affects 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.
Non-Operating Expenses
The income tax expense amounted to US$0.5 million compared to
US$1.3 million in the same nine-month period last year due to the lower
profit on the nine-month period.
Balance Sheet and Cash Flow Discussion
Including short-term investments, ILOG's cash position totaled
US$70.2 million at March 31, 2008, up from US$54.7 million on June 30, 2007.
Collection of accounts receivable improved to reach 72 days sales outstanding
at the end of the third quarter compared to 77 days at the end of fiscal year
2007. In addition, the increase in deferred revenue also resulted in a
US$3.0 million improvement in cash position. Excluding short-term
investments, net cash used for investing activities during the nine-month
period amounted to US$2.9 million, for the purchase of IT equipment and a
cash advance to one of ILOG's equity investments, Prima Solutions. Cash used
for financing activities netted US$1.3 million as a result of purchase of
treasury stocks in the amount of US$2.2 million offset by proceeds from
issuance of shares under exercise of stock options in the amount of
US$1.1 million, flat since the prior quarter as few stock options were
exercised during the quarter.
As of March 31, 2008, shareholders' equity was US$93.6 million, an
increase of US$12.6 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, the grant of additional stock-based incentives and the exercise
of stock options and warrants. On March 31, 2008, ILOG had 19,208,848 shares
issued and outstanding, compared to 19,062,464 at June 30, 2007, due to the
exercise of 146,384 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 will no
longer prepare audited U.S. GAAP financial statements in U.S. dollars, but
will rather 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, CPLEX, ILOG JRules, ILOG JViews and LogicNet Plus are registered
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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