SPSS Analytical Solutions Revenues Increase 117 Percent

SPSS Inc, a worldwide provider of solutions that help organizations create more profitable customer relationships, announced results for the quarter ended June 30, 2000. Net revenues were $37.2 million and diluted earnings per share (EPS) were $0.42. The company's earnings reflect a one-time gain of approximately $1.4 million from the sale of its products for statistical quality control to Wonderware Corp completed in May.

"This was a challenging quarter due to a variety of factors," said Jack Noonan, SPSS president and CEO. "Yet we are encouraged by the continued impressive growth in our revenues from analytical solutions, which more than doubled compared to the same period in 1999. We are finding an increasing number of organizations are looking for analytical solutions to better understand the needs of their customers and more effectively predict what they will do.

"For example, we recently introduced CustomerCentric, an industry-specific, analytical solution based on proven technology and a business-driven implementation framework. With CustomerCentric, organizations can use their data to improve the ways they interact with their customers at all major touch-points: the Web, call center, mail or in person. CustomerCentric is the centerpiece of our analytical solutions business going forward. We have a sense, however, that it is already having an impact on our current revenue performance as our customers see that what they buy from us today can be incorporated into a comprehensive closed-loop system for customer intelligence."

Noonan continued, "Another important factor in our analytical solutions revenue growth was the increased demand for our data mining tools, particularly Clementine. In the second quarter, Clementine sales also more than doubled compared to its sales in the same period in 1999. Clementine is an integral component of our future analytical solutions like CustomerCentric, and this sales growth momentum is evidence of its increasing acceptance as the premier data mining tool in the marketplace."

New customers added in the quarter include: e-commerce software provider ClearCommerce, who will employ SPSS solutions to detect fraud for online merchants; Tokyo Electric Power, for segmenting customers to identify different rates of consumption; France Telecom CNET, to understand and reduce churn rates; and e-Dialog, a digital marketing agency, to determine marketing effectiveness.

"We knew initially that we confronted two impediments to increasing our revenues this quarter," said Edward Hamburg, SPSS Inc executive vice president and CFO. "First was the absence of about $500,000 in revenues from our divested quality product line. Second was the continuing change in foreign currency exchange rates, which worked against us in almost every major overseas market. Net of these factors, our revenue growth was six percentage points higher than our reported quarter-to-quarter growth rate, and the strong dollar alone cost us about five cents in earnings."

Hamburg also commented on the lack of growth in the statistics revenue category. He explained how much of this shortfall was due to flat sales for the company's science products and fall-offs in revenues from retail channel products. "SPSS Science has been reorganizing itself under new management since the beginning of the year," Hamburg said, "and the retail channel products were promoted less in the second quarter than in prior periods. While Science appears to be coming together again, we have to do a better job of attending to products in the statistics category so that they continue to support our drive to increase sales of analytical solutions."

He noted how the better-than-anticipated growth in revenues from analytical solutions helped offset much of the shortfall in statistics revenues, saying, "The combination of this performance, good growth in market research revenues and lower expenses enabled SPSS to increase operating income by 26 percent from the second quarter last year and meet analyst expectations in this regard."

Quarterly highlights

• To enable companies to create more profitable customer relationships, SPSS introduced CustomerCentric, a comprehensive analytical customer relationship management (CRM) solution. CustomerCentric applies advanced data mining techniques to provide organizations with an end-to-end customer intelligence system for more effective and profitable decisions at every point of customer contact. CustomerCentric integrates with operational CRM systems to drive personalized content delivery. In addition, it enables companies to deploy customer insight to managers and executives so that they can make informed, data-driven decisions.
• SPSS boosted its presence in Web-based predictive business intelligence with an equity investment in privately held e.Intelligence Inc The $1 million investment represents the second infusion of equity capital into e.Intelligence, including an investment made by JMI equity. In May 2000, SPSS and e.Intelligence announced plans to incorporate SPSS forecasting technology into e.Intelligence's business-to-business demand planning solution.
• To meet the demand of its rapidly growing analytical solutions business SPSS Inc named Wayne Smith senior vice president of services. In this newly created position, Smith will have worldwide responsibility for SPSS' consulting services, training and technical support. He assumed this role on May 22.
• Confirming its leadership in analytical customer relationship (CRM), SPSS Inc rose to No. 16 on the 2000 Soft-letter 100. The Soft-letter 100 is a ranking of the top 100 personal computer software companies in the U.S., based on calendar year revenues. On the 1999 survey, SPSS was ranked No. 23.

About SPSS Inc

SPSS Inc enables organizations to develop more profitable customer relationships by providing analytical solutions that discover what customers want and predict what they will do. The company delivers analytical solutions at the intersection of customer relationship management and business intelligence. SPSS analytical solutions integrate and analyze market, customer and operational data in key vertical markets worldwide including: telecommunications, health care, banking, finance, insurance, manufacturing, retail, consumer packaged goods, market research and the public sector.

Headquartered in Chicago, SPSS has more than 40 offices, over 900 employees and 1999 revenues of $142 million. The company also has won the following awards: No. 70 on Forbes 1999 list of the "200 best small companies" and as the 22nd most profitable company on the Nasdaq exchange by Equities magazine; 1999 World Class Solution award in business intelligence and named "best decision support system for business intelligence" in the 1999 RealWare award competition; No. 14 in DM Review's 1999 Data Warehouse Top 100; placed No. 16 on the 2000 Soft-letter 100, a ranking of the top 100 personal computer software companies in the United States; and No. 115 in the 2000 Software 500, a ranking of the world's largest software vendors by Software Magazine. For more information, visit www.spss.com.

Contact SPSS Inc, Edward Hambur, 312-651-3000, Susan Kalell, 800-457-0161, invest@spss.com.