Investor Relations:
John Lawlor
613-738-3503
Media Contact:
Sean Reid, Cognos
613-738-1440
Cognos® Reports Record Fourth Quarter and Full Year Results
Cognos ReportNet™ Delivers $30 Million in License Revenue in the Quarter
Ottawa, ON & Burlington, MA, March 25, 2004 – Cognos Incorporated (Nasdaq: COGN; TSX: CSN – all figures in U.S. dollars), the world leader in business intelligence (BI) and corporate performance management solutions, today announced record results for the Company’s fourth quarter and full fiscal year 2004, ended February 29, 2004.
Revenue for the quarter was $202.1 million, an increase of 23 percent from the fourth quarter of last year, when revenue was $163.7 million.
Net income for the fourth quarter of fiscal 2004 was $46.1 million, resulting in diluted earnings per share of $0.50. This was 56 percent higher than in the fourth quarter of the prior fiscal year, when net income was $29.6 million and diluted earnings per share were $0.33. Net income was favorably impacted in the quarter by an improvement in the tax rate from 25 percent to 16 percent for fiscal 2004, resulting from the completion of tax audits that reduced overall tax exposure for the corporation. Net income in the quarter was reduced by a one-time, pre-tax cost of $1.75 million related to a patent litigation settlement. Excluding the favorable change in tax rate and the one-time cost, pro forma diluted earnings per share in the quarter were $0.39.
Revenue for the full fiscal year 2004 was $683.1 million, an increase of 24 percent compared with revenue of $551.0 million for the previous year. Net income for fiscal 2004 was $100.9 million, and diluted earnings per share were $1.10. This compares with the prior year’s net income of $73.1 million, or $0.81 per share. Excluding the favorable change in tax rate and the one-time cost, pro forma diluted earnings per share in fiscal 2004 were $0.99.
Cognos ReportNet™ continued its strong momentum, driving revenue growth in the quarter. BI revenue reached $195.1 million, an increase of 26 percent from $155.3 million in the fourth quarter of last year. Total license revenue increased 18 percent to $93.5 million, compared to $79.6 million in the same period last year.
Highlights of the Quarter
o | $30 million of license revenue for Cognos ReportNet in the fourth quarter alone |
o | Over 1,000 ReportNet transactions in the quarter from leading organizations such as AT&T, Fiducia, Georgia Pacific Corporation, Lockheed Martin, Raytheon, Ricoh, Sun Chemical, Telus Communications, Trillium Health Centre, and the U.S. Army |
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o | Introduction of Cognos ReportNet 1.1 delivers tight integration with PowerPlay® and drives continued strong momentum and positive customer response for this clear leader in industrial-strength enterprise reporting |
o | Breakout quarter for Cognos Enterprise Planning (EP), doubling license revenue from Q3 level and driving 24 percent overall EP revenue growth for the full year |
o | Introduction of Cognos Enterprise Planning 7.2 provides high level of integration with the full Cognos product family and extends the richness of the Cognos corporate performance management solution |
o | 13 contracts greater than $1 million, an all-time high for the Company; 37 contracts greater than $1 million for the full fiscal year 2004 |
The Company’s balance sheet remains strong. Cash flow from operations was $80.5 million. As a result, the Company exited the quarter with $388.2 million in cash, cash equivalents, and short-term investments.
“We are extremely pleased with the results for the fourth quarter and the full year,” said Cognos Chief Executive Officer Ron Zambonini. “It was rock solid by every objective measure. Cognos employees are executing flawlessly, driving our competitive success. ReportNet is on fire. Our product portfolio – powered by unmatched innovation – is the strongest in the industry, and getting stronger.
“The outlook and opportunities for Cognos are excellent. Through fiscal 2004 we extended our leadership position in business intelligence and corporate performance management. We enter fiscal 2005 with superior momentum. Company fundamentals and our competitive position have never been better.
“I am proud of the hard work and dedication of the Cognos team and their accomplishments last year, and throughout my tenure with the Company, and I thank them sincerely for their unswerving commitment to the success of Cognos.”
Business Outlook
Management offers the following outlook for the first quarter of fiscal 2005, ending May 31, 2004:
o | Revenue is expected to be in the range of $169 million to $171 million; |
o | Diluted earnings per share are expected to be in the range of $0.19 to $0.20. |
For the full fiscal year 2005 management expects revenue to be around $770 million and diluted earnings per share to be around $1.18, assuming a tax rate of 21 percent in fiscal year 2005.
Cognos management will host a Webcast and conference call to present results for the fourth quarter of fiscal year 2004 at 5:15 p.m. Eastern Time, today, March 25, 2004. The conference call may be accessed at 416-640-1907. The Webcast and archive may be accessed athttp://www.cognos.com/company/investor/events/fy04q4/index.html. A replay of the conference call may be accessed at 416-640-1917 until April 2, 2004. The passcode for the replay is 21039256#.
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Forward-Looking Statements
Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
This press release contains forward-looking statements relating to, among other things, the Company’s expectations concerning future revenues and earnings, product demand and growth opportunities; business outlook and business momentum; purchasing environment; new product introductions and customer reaction and acceptance of the Cognos ReportNet product; market positioning, business model and technology strategies and execution.
These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements. Factors that may cause such differences include, but are not limited to: the Company’s ability to maintain revenue growth or to anticipate a decline in revenue from any of its products or services; the Company’s ability to develop and introduce new products and enhancements that respond to customer requirements and rapid technological change; new product introductions and enhancements by competitors; the Company’s ability to compete in an intensely competitive market; the Company’s ability to select and implement appropriate business models and strategies; fluctuations in its quarterly and annual operating results based on historical patterns; currency fluctuations; tax rate fluctuations; the impact of global economic conditions on the Company’s business; unauthorized use of the Company’s intellectual property; claims by third parties that the Company’s software infringes their intellectual property; the risks inherent in international operations, such as currency exchange rate fluctuations; the Company’s ability to identify, hire, train, motivate, and retain highly qualified management and other key personnel; and the Company’s ability to identify, pursue, and complete acquisitions with desired business results; as well as the risk factors discussed in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the United States Securities and Exchange Commission, as well as other periodic reports filed with the SEC. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any obligation to publicly update or revise any such statement to reflect any change in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.
Cognos may provide pro forma or non-GAAP measures as defined by SEC Regulation G to provide greater comparability regarding Cognos’ ongoing operating performance. If discussed, these measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States (“U.S. GAAP”). These pro forma measures are unlikely to be comparable to pro forma information provided by other issuers. In accordance with SEC Regulation G, if such pro forma or non-GAAP measures are provided, a reconciliation of the Cognos U.S. GAAP information to the pro forma information will be provided in the table attached. We will also make available on the investor relations page of our web site atwww.cognos.com this press release, a replay of the Webcast, slides used in the Webcast, non-GAAP financial measures that may be discussed on the Webcast, as well as the most directly comparable GAAP financial measures and a reconciliation of the difference between the GAAP and non-GAAP financial measures.
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About Cognos:
Cognos, the world leader in business intelligence and corporate performance management solutions, delivers software that helps companies drive, monitor and understand corporate performance.
Cognos delivers the next level of competitive advantage – Corporate Performance Management (CPM) – achieved through the strategic application of BI on an enterprise scale. Our integrated CPM solution helps customers drive performance through planning; monitor performance through scorecarding; and understand performance through business intelligence.
Cognos serves more than 22,000 customers in over 135 countries. Cognos enterprise business intelligence solutions and services are also available from more than 3,000 worldwide partners and resellers. For more information, visit the Cognos Web site at<http://www.cognos.com>.
Cognos, the Cognos logo, PowerPlay, and ReportNet are trademarks or registered trademarks of Cognos Incorporated in the United States and/or other countries. All other names are trademarks or registered trademarks of their respective companies.
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RECONCILIATION OF PRO FORMA INFORMATION:
(US$000s except per share amounts) | Three Months Ended the Last Day of February | Years Ended the Last Day of February | ||
2004 | 2003 | 2004 | 2003 | |
Net Income: | ||||
Net income as reported | $46,100 | $29,565 | $100,897 | $73,144 |
Special charges (included in operating expenses) | 1,750 | — | 1,750 | — |
Tax effect on special charges (25%) | (438) | — | (438) | — |
Change in tax rate (25% vs 16%) | (10,935) | — | (10,935) | — |
Pro forma net income | $36,477 | $29,565 | $ 91,274 | $73,144 |
Diluted net income per share: | ||||
Net income as reported | $0.50 | $0.33 | $1.10 | $0.81 |
Special charges (included in operating expenses) | 0.02 | — | 0.02 | — |
Tax effect on special charges (25%) | (0.01) | — | (0.01) | — |
Change in tax rate (25% vs 16%) | (0.12) | — | (0.12) | — |
Pro forma net income | $0.39 | $0.33 | $0.99 | $0.81 |
Weighted average number of shares (000s): | ||||
Diluted | 92,511 | 90,665 | 91,959 | 90,531 |
SUPPLEMENTARY INFORMATION (unaudited):
FY2003 | FY2004 | ||||
Q4 | Q1 | Q2 | Q3 | Q4 | |
Revenue Statistics ($000s) | |||||
BI | 155,265 | 143,684 | 150,143 | 164,682 | 195,134 |
Application development tools | 8,463 | 6,879 | 8,038 | 7,545 | 7,012 |
BI License | 77,281 | 56,683 | 59,862 | 70,564 | 91,877 |
Year-Over-Year Revenue Growth Statistics | |||||
BI | 16% | 29% | 25% | 26% | 26% |
Application development tools | (8%) | (19%) | (6%) | (3%) | (17%) |
BI License | 6% | 18% | 13% | 17% | 19% |
Geographic Distribution | |||||
Total Revenue ($000s) | |||||
North America | 95,362 | 90,117 | 96,168 | 96,079 | 114,564 |
Europe | 56,634 | 47,043 | 47,459 | 58,838 | 74,701 |
Asia/Pacific | 11,732 | 13,403 | 14,554 | 17,310 | 12,881 |
% of Total | |||||
North America | 58% | 60% | 61% | 56% | 57% |
Europe | 35% | 31% | 30% | 34% | 37% |
Asia/Pacific | 7% | 9% | 9% | 10% | 6% |
Year-Over-Year Revenue Growth - Total | |||||
North America | 9% | 14% | 19% | 14% | 20% |
Europe | 25% | 40% | 21% | 34% | 32% |
Asia/Pacific | 18% | 79% | 60% | 67% | 10% |
Pro Forma Year-Over-Year Revenue Growth - In Local Currency | |||||
North America | 8% | 13% | 18% | 12% | 17% |
Europe | 4% | 16% | 9% | 16% | 14% |
Asia/Pacific | 4% | 61% | 46% | 42% | (8%) |
Pro Forma Year-Over-Year Revenue Growth - Due to Foreign Currency | |||||
North America | 1% | 1% | 1% | 2% | 3% |
Europe | 21% | 24% | 12% | 18% | 18% |
Asia/Pacific | 14% | 18% | 14% | 25% | 18% |
New vs Existing BI License Revenue - % of Total | |||||
New | 31% | 31% | 33% | 34% | 32% |
Existing | 69% | 69% | 67% | 66% | 68% |
Channel — BI License Revenue - % of Total | |||||
Direct | 71% | 71% | 68% | 70% | 80% |
Third Party | 29% | 29% | 32% | 30% | 20% |
Other Statistics | |||||
Cash, cash equivalents, and short-term investments ($000s) | 242,258 | 263,896 | 284,442 | 320,895 | 388,241 |
Days sales outstanding | 76 | 63 | 62 | 62 | 68 |
Total employees | 2,989 | 3,016 | 3,011 | 3,001 | 2,966 |
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COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(US$000s except share amounts, U.S. GAAP)
Three Months Ended the Last Day of February | Years Ended the Last Day of February | |||
2004 | 2003 | 2004 | 2003 | |
(Unaudited) | ||||
Revenue | ||||
Product license | $ 93,542 | $ 79,600 | $286,128 | $246,697 |
Product support | 75,286 | 59,364 | 274,251 | 211,633 |
Services | 33,318 | 24,764 | 122,738 | 92,706 |
Total revenue | 202,146 | 163,728 | 683,117 | 551,036 |
Cost of revenue | ||||
Cost of product license | 932 | 757 | 4,270 | 2,927 |
Cost of product support | 7,283 | 5,785 | 28,076 | 20,467 |
Cost of services | 25,125 | 20,105 | 90,411 | 70,324 |
Total cost of revenue | 33,340 | 26,647 | 122,757 | 93,718 |
Gross margin | 168,806 | 137,081 | 560,360 | 457,318 |
Operating expenses | ||||
Selling, general, and administrative | 95,103 | 75,486 | 342,795 | 276,377 |
Research and development | 23,923 | 21,112 | 91,196 | 78,103 |
Amortization of intangible assets | 1,848 | 1,498 | 8,060 | 4,065 |
Special charges | 1,750 | — | 1,750 | — |
Total operating expenses | 122,624 | 98,096 | 443,801 | 358,545 |
Operating income | 46,182 | 38,985 | 116,559 | 98,773 |
Interest expense | (489) | (230) | (1,366) | (672) |
Interest income | 1,194 | 1,456 | 4,756 | 6,197 |
Income before taxes | 46,887 | 40,211 | 119,949 | 104,298 |
Income tax provision | 787 | 10,646 | 19,052 | 31,154 |
Net income | $ 46,100 | $ 29,565 | $100,897 | $ 73,144 |
Net income per share | ||||
Basic | $0.51 | $0.34 | $1.13 | $0.83 |
Diluted | $0.50 | $0.33 | $1.10 | $0.81 |
Weighted average number of shares (000s) | ||||
Basic | 89,946 | 87,997 | 89,325 | 87,936 |
Diluted | 92,511 | 90,665 | 91,959 | 90,531 |
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COGNOS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(US$000s, U.S. GAAP)
February 29, 2004 | February 28, 2003 | |
Assets | ||
Current assets | ||
Cash and cash equivalents | $224,830 | $162,588 |
Short-term investments | 163,411 | 79,670 |
Accounts receivable | 152,859 | 139,116 |
Prepaid expenses and other current assets | 16,668 | 8,884 |
Deferred tax assets | 2,445 | 5,427 |
560,213 | 395,685 | |
Fixed assets | 71,292 | 62,442 |
Intangible assets | 23,643 | 30,433 |
Goodwill | 172,323 | 169,991 |
$827,471 | $658,551 | |
Liabilities | ||
Current liabilities | ||
Accounts payable | $ 30,698 | $ 33,310 |
Accrued charges | 25,483 | 34,192 |
Salaries, commissions, and related items | 59,903 | 48,916 |
Income taxes payable | 5,875 | 4,395 |
Deferred revenue | 178,752 | 146,008 |
300,711 | 266,821 | |
Long-term liabilities | — | 1,647 |
Deferred income taxes | 18,098 | 13,561 |
318,809 | 282,029 | |
Stockholders’ Equity | ||
Capital stock | ||
Common shares and additional paid-in capital (2004 - 89,902,895; 2003 - 88,124,914) | 206,499 | 173,363 |
Treasury shares (2004 - 43,500; 2003 - 22,500) | (1,065) | (501) |
Deferred stock-based compensation | (730) | (1,243) |
Retained earnings | 305,399 | 213,527 |
Accumulated other comprehensive loss | (1,441) | (8,624) |
508,662 | 376,522 | |
$827,471 | $658,551 | |
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COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$000s, U.S. GAAP)
Three Months Ended the Last Day of February | Years Ended the Last Day of February | |||
2004 | 2003 | 2004 | 2003 | |
Cash provided by operating activities | (Unaudited) | |||
Net income | $ 46,100 | $ 29,565 | $100,897 | $ 73,144 |
Non-cash items | ||||
Depreciation and amortization | 8,405 | 6,623 | 30,123 | 21,870 |
Amortization of deferred stock-based compensation | 140 | 151 | 745 | 669 |
Amortization of other deferred compensation | 7 | 62 | 175 | 477 |
Deferred income taxes | 498 | 384 | 5,778 | 4,043 |
Loss on disposal of fixed assets | 55 | 65 | 594 | 174 |
55,205 | 36,850 | 138,312 | 100,377 | |
Change in non-cash working capital | ||||
Increase in accounts receivable | (32,164) | (15,683) | (5,983) | (41) |
Decrease (increase) in prepaid expenses and other current assets | (4,807) | (574) | (6,340) | 281 |
Increase (decrease) in accounts payable | 4,896 | 5,256 | (5,045) | 798 |
Increase (decrease) in accrued charges | 70 | (6,616) | (11,612) | (16,371) |
Increase in salaries, commissions, and related items | 14,379 | 1,299 | 7,238 | 2,234 |
Increase (decrease) in income taxes payable | (3,900) | 1,786 | 1,226 | (1,259) |
Increase in deferred revenue | 46,798 | 33,409 | 24,133 | 18,506 |
80,477 | 55,727 | 141,929 | 104,525 | |
Cash used in investing activities | ||||
Maturity of short-term investments | 25,121 | 109,182 | 230,594 | 299,414 |
Purchase of short-term investments | (34,097) | (25,079) | (311,542) | (253,868) |
Additions to fixed assets | (7,931) | (5,009) | (25,213) | (15,921) |
Additions to intangible assets | (203) | (117) | (1,270) | (533) |
Acquisition costs, net of cash and cash equivalents | (1,266) | (152,199) | (1,750) | (152,199) |
(18,376) | (73,222) | (109,181) | (123,107) | |
Cash provided by (used in) financing activities | ||||
Issue of common shares | 6,261 | 3,528 | 33,266 | 13,350 |
Purchase of treasury shares | — | (501) | (564) | (501) |
Repurchase of shares | (9,698) | — | (9,698) | (19,992) |
Decrease in long-term debt and long-term liabilities | — | (3,767) | (1,697) | (9,231) |
(3,437) | (740) | 21,307 | (16,374) | |
Effect of exchange rate changes on cash | (61) | 4,281 | 8,187 | 4,644 |
Net increase (decrease) in cash and cash equivalents | 58,603 | (13,954) | 62,242 | (30,312) |
Cash and cash equivalents, beginning of period | 166,227 | 176,542 | 162,588 | 192,900 |
Cash and cash equivalents, end of period | 224,830 | 162,588 | 224,830 | 162,588 |
Short-term investments, end of period | 163,411 | 79,670 | 163,411 | 79,670 |
Cash, cash equivalents, and short-term investments, end of period | $388,241 | $242,258 | $388,241 | $242,258 |
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