Cognos Reports Second Quarter Results

Cognos announced results for its second fiscal quarter, ending August 31, 1999. Total revenue for the quarter was $88.1 million compared to revenue of $70.6 million in the same period last year. Pretax income for the quarter was $17.8 million compared to $17.2 million in the second quarter of last fiscal year. Net income was $12.8 million and 30 cents per share compared to $14.1 million and 32 cents per share for the same period last year.

Revenue for the six months ended August 31, 1999 was $169.8 million compared to revenue of $137.9 million in the first six months of last fiscal year. Pretax income for the six months ended August 31, 1999 was $32.9 million and net income was $23.7 million and 54 cents per share. This compares with pretax income of $31.0 million and net income of $25.4 million and 57 cents per share in the first six months of last year. (All figures are stated in U.S. dollars and in accordance with U.S. GAAP.)

The Company believes that its position in enterprise business intelligence was strengthened during the quarter as a result of posting license revenue growth of 45 percent compared to the same quarter a year ago. These license revenues represented more than 90 percent of the Company's software sales in the second quarter. Total revenue from the Company's business intelligence products in the quarter, including support and services, was $73.9 million, an increase of 43 percent from the same period in the previous year. For the first six months of the fiscal year, business intelligence license revenue grew by 35 percent and total business intelligence revenue increased by 38 percent from the first half of the previous fiscal year.

Ron Zambonini, President and CEO of Cognos, stated, "We are very pleased with the company's performance this quarter. I believe that our results this quarter clearly show that the market for our business intelligence products is healthy and growing. As importantly, we successfully continued to recruit and add resources in the key areas of our business and are starting to see the results of the additional investments in resources that we have been making.

"The market recognizes the potential value that business intelligence solutions can bring to an organization. We believe that we are uniquely positioned to provide the end-to-end solutions necessary to deliver the maximum benefit from enterprise business intelligence. The number of large enterprise-level transactions this quarter supports this belief. Significant transactions with organizations like NCR, Rockwell, Pepsi, Boeing, and Allied Domecq were among over 270 orders in the quarter valued in excess of $50,000. This compares with 175 orders this size in the second quarter of last year."

Operationally, the second quarter results showed strong, balanced growth across major markets. "Geographically, we were very pleased with the level and profile of business intelligence sales in all of our key European, North American, and Asia/Pacific markets. Overall, North America accounted for 59 percent of our business intelligence revenue in the quarter, Europe was 32 percent, and the rest of the world contributed 9 percent. As a result of the health of these markets and what we believe is the strength of our position within the overall market, we added over 90 people to our field force around the world during the quarter," stated Zambonini.

Revenue in the second quarter from the Company's application development tools, PowerHouse and Axiant, was $14.2 million, compared to $18.7 million in the second quarter of last year. Zambonini added, "As a result of Y2K-related spending, we achieved year-over-year revenue growth from these products in each of the first three quarters of last fiscal year. While these customers remain committed to the use of these products, it is clear from the first two quarters of this year that the revenue from these products will continue to decline. While these products still represent about 16 percent of our total revenue, they currently account for less than 10 percent of our license sales."

Zambonini concluded, "The performance of the Company through the first half of this fiscal year has been strong. Looking forward, we believe that the market for business intelligence products is very healthy. We also believe that our product strategy and plans for the remainder of this fiscal year will continue to set the standard for enterprise solutions. As a result, we will continue to step up our investments in our products, distribution, and service strength and focus our actions on the opportunities for further growth."