PARIS and SUNNYVALE, Calif., Oct. 30 /PRNewswire-FirstCall/ --
ILOG(R) (Nasdaq: ILOG; Euronext: ILO, ISIN: FR0004042364) today
announced results for the first quarter of fiscal 2009, ended
September 30, 2008. IFRS revenues for the quarter were euros 34.3
million compared with euros 29.6 million for the first quarter last
year. IFRS diluted earnings per share were euros 0.19 for the
quarter compared to a diluted loss per share of euros 0.09 in last
year's first quarter. "While battling an unfavorable dollar-euro
exchange rate and a challenging IT spending climate, we were able
to deliver 16% revenue growth and saw strong demand across all our
product lines," said ILOG Chairman and CEO, Pierre Haren. "We
benefited from a strong sales pipe going into the quarter for all
of our products and a very favorable response from customers and
prospects to our proposed acquisition by IBM. We also gained from a
high renewal rate from both end-users and Independent Software
Vendors (ISV) customers." Revenue Trends Geographically, the U.S.
led ILOG's revenue growth in the fiscal first quarter, growing 26%,
driven by strong demand for the company's optimization and business
rule management system (BRMS) products, as well as many contract
renewals across product lines. Europe also grew well at 6%. From a
product standpoint, license and maintenance revenues for
optimization tools and engines grew 46% highlighted by several
significant wins with ISV customers, such as Oracle and Manhattan
Associates, along with a large deal with a leading U.S. financial
firm for a strategic investment portfolio planning application.
Solid royalty revenues also contributed to the increase. BRMS grew
27% (license and maintenance) due to an important activity with
leading banks and insurers, including a major deal with a leading
European financial services group for customer relationship
management. Insurance deals figured prominently in the first
quarter, with new business from Travelers and the branch of one of
the largest health benefits companies in the U.S. Other significant
business in the banking sector included a major Swiss investment
bank for several projects and a leading U.S. bank, which expanded
the use of ILOG JRules for its mortgage lending operations.
Visualization license and maintenance revenues grew 13%.
Significant deal activity included a renewal with a leading telecom
equipment company, which uses ILOG visualization technology for
network management. ISV renewal and new business also helped boost
visualization revenues. ILOG's supply chain applications business
grew 116% year over year driven by large deals with a leading
international oil company and the world's sixth- largest food
company which expanded its use of ILOG LogicTools Inventory Analyst
to set safety stock targets in its SAP SCM system. Similarly, in
another large deal, Miller Coors expanded its use of ILOG LogicNet
Plus XE along with ILOG services for the redesign of their supply
chain for both due diligence and post acquisition work, as well as
for ongoing use for network planning. 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 approximately 850 people worldwide. For more
information, please visit http://www.ilog.com/. Forward-looking
Information 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 U.S.
Private Securities Litigation Reform Act of 1995, specifically
Section 27A of the U.S. Securities Act of 1933, as amended, and
Section 21E of the U.S. Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts,
including, among others, statements regarding the successful
completion of the IBM tender offer and the impact on the Company's
business, 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, those
discussed in the sections entitled "Item 3. Key Information -- Risk
Factors," "Item 4. Information on the Company" and "Item 5.
Operating and Financial Review and Prospects" of ILOG's most recent
Annual Report on Form 20-F filed with the Securities and Exchange
Commission including risks relating to IBM public tender offers;
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 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 bylaws 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 views
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
the other documents we file or submit from time to time with the
SEC, including reports on Form 6-K submitted by us. The
circulation, publication or distribution of this press release is
subject to legal or regulatory restrictions in certain countries.
This press release is not addressed, either directly or indirectly,
to persons who are subject to such restrictions. This press release
does not constitute an offer to purchase securities. The offers are
comprised of a French Offer and a U.S. Offer. The French Offer will
be made to holders of shares and warrants in France. The U.S. Offer
will be made to U.S. holders (within the meaning of Rule 14d-1(d)
under the United States Securities Exchange Act of 1934, as
amended) of shares and warrants as well as to all holders of ADSs
wherever located. You will need to determine which of the offer you
are eligible to participate in. The terms and conditions of the
U.S. Offer are set forth in the U.S. Offer to Purchase dated
October 14, 2008, and the related documentation, as amended, that
International Business Machines Corporation ("IBM") and its
subsidiary, CITLOI S.A.S. ("CITLOI"), filed with the U.S.
Securities and Exchange Commission (the "Commission") on Schedule
TO and the solicitation/recommendation statement on Schedule 14D-9,
as amended, that ILOG filed with the Commission. The terms and
conditions of the French Offer are set forth in the Note
d'Information, as amended, that IBM and CITLOI filed with the
French stock market authority, the Autorite des Marches Financiers
(the "AMF"), and the Note en Reponse, as amended, that ILOG filed
with the AMF. The AMF granted its visa on the Note d'Information
and the Note en Reponse on September 12, 2008. CITLOI and ILOG have
also made publicly available documents supplementing the Note
d'Information and the Note en Reponse, respectively, which provide
additional legal, financial and accounting information on these
entities. ILOG security holders and other investors can obtain
copies of these tender offer materials and any other documents
filed with the Commission from the Commission's website
(http://www.sec.gov/) and with the AMF from the AMF's website
(http://www.amf-france.org/), in both cases without charge. Such
materials filed by IBM and CITLOI, and ILOG will also be available
for free on IBM's website (http://www.ibm.com/), and on ILOG's
website (http://www.ilog.com/), respectively. Holders of ILOG
securities, stock options and free shares should consult their own
tax advisors as to the particular tax consequences to them of
exercising their stock options, selling their shares, participating
in the Offers, and any payments in respect of their stock options
of free shares, including the application of French, United States
federal, local and other tax laws and possible changes in tax laws.
ILOG S.A. Consolidated Income Statements (unaudited) In IFRS in
thousands of euros and thousands of shares, except per share data
Three Months Ended September 30 September 30 2008 2007 (in euros)
(in euros) Revenues: License fees 17,863 11,063 Maintenance 9,445
9,389 Professional services 6,998 9,187 Total revenues 34,306
29,639 Cost of revenues: License fees 265 247 Maintenance 951 871
Professional services 5,533 7,653 Total cost of revenues 6,749
8,771 Gross profit 27,557 20,868 Operating expenses: Marketing and
selling 12,686 11,875 Research and development 6,125 7,018 General
and administrative 5,578 4,028 Total operating expenses 24,389
22,921 Income (loss) from operations 3,168 (2,053) Net interest
income and other 725 423 Income (loss) before taxation 3,893
(1,630) Income taxes expense 184 108 Net income of fully
consolidated subsidiaries 3,709 (1,738) Equity (loss) in earnings
of affiliates (73) 31 Net income 3,636 (1,707) Earnings per share -
Basic 0.19 (0.09) - Diluted 0.19 (0.09) Share and share equivalents
used in per share calculations - Basic 18,846 18,539 - Diluted
18,728 18,447 Operational expenses 31,138 31,692 Professional
services margin 21% 17% Gross margin 80% 70% ILOG S.A. Condensed
Consolidated Balance Sheets (unaudited) In IFRS in thousands of
euros September 30 June 30 2008 2008 (in euros) (in euros) Assets
Current assets: Cash and cash equivalents 59,114 47,113 Short-term
investments - - Accounts receivable 27,368 24,706 Other receivables
and prepaid expenses 11,439 8,721 Total current assets 97,921
80,540 Long-term assets: Tangible and intangible assets - net
10,117 10,189 Other long-term assets 18,555 16,820 Total long-term
assets 28,672 27,009 Total assets 126,593 107,549 Liabilities and
Shareholders' Equity Current liabilities: Accounts payable and
other current liabilities 24,332 20,509 Current portion of capital
lease obligations (2) 12 Deferred revenue 24,353 23,729 Total
current liabilities 48,683 44,250 Long-term liabilities: Long-term
portion of capital lease obligations - - Other long-term
liabilities 2,227 2,137 Total long-term liabilities 2,227 2,137
Total liabilities 50,910 46,387 Shareholders' equity: Paid-in
capital 61,788 53,244 Treasury stock (7,624) (8,414) Retained
earnings and other 21,519 16,332 Total Shareholders' equity 75,683
61,162 Total liabilities and shareholders' equity 126,593 107,549
ILOG S.A. Condensed Consolidated Statements of Cash Flow
(unaudited) In IFRS in thousands of euros September 30 June 30 2008
2008 (in euros) (in euros) Cash flows from operating activities:
Net Income 3,636 128 Depreciation/amortization & sales of fixed
assets 823 2,804 Share-based compensation 405 1,775 Deferred income
taxes - (37) Unrealized (gain) loss on derivative instruments (15)
44 (Gain) loss of equity in affiliates 73 36 Change in working
capital (288) 7,132 Net cash provided (used) by operating
activities 4,635 11,882 Cash flows from investing activities:
Acquisition of fixed assets and business (273) (2,848) Loans to
related parties (400) (700) Sale (Purchase) of short term
investments, net - - Net cash (used in) provided by investing
activities (673) (3,548) Cash flows from financing activities:
Repayment of capital lease obligations (15) (153) Cash proceeds
from issuance of shares 5,710 835 Sale (Purchase) of treasury stock
790 (1,502) Net cash provided by financing activities 6,485 (820)
Impact of exchange rate changes on cash and cash equivalents 1,554
(1,182) Net increase (decrease) in cash, cash equivalents 12,001
6,332 Cash and cash equivalents, beginning of period 47,113 40,781
Cash and cash equivalents, end of period 59,114 47,113 Discussion
of Income Statement for the Quarter Ended September 30, 2008 (In
IFRS and in euros) Revenues and Gross Margin Revenues in the
quarter increased to euros 34.3 million from euros 29.6 million, or
by 16%, compared to the same quarter in the previous year. Because
of a stronger euro, at an average exchange rate of euros 1 = $1.50
compared to euros 1 = $1.37 in the same quarter last year, revenues
expressed at prior period constant currency rates increased by a
higher percentage of 22%. Revenues by region were as follows (in
thousands): Three Months Ended Change September 30 September 30 As
2008 2007 Reported Constant (in euros) (in euros) (in euros) North
America 18,285 14,469 26% 36% Europe 13,349 12,539 6% 9% Asia
Pacific 2,672 2,630 2% 2% Total revenues 4,306 29,638 16% 22% The
revenue growth was mainly driven by the U.S. with significant
increase of license revenues. Activity in Europe and Asia was also
good and mainly driven by license revenues. The 61% increase in
license revenues over the same quarter from last year was primarily
attributable to high demand for ILOG products, good renewal rates
of agreements with customers and the positive impact of the IBM
announcement, related to the contemplated acquisition of ILOG.
Maintenance revenues grew 1% in the quarter compared to the same
quarter last year. This stability is attributable to exchange rate
fluctuations and the stronger euro in particular. ILOG still
experiences a growth of its installed base, and a very good rate of
customer contract renewal. Professional services revenues decreased
by 24% compared to the same quarter last year and further
decreased, compared to previous quarters, in order to take into
account the lower demand for ILOG services. This decrease is mainly
the result of the continuing impact of the crisis in the banking
sector impacting the use of our consultants for BRMS
implementations and continued support for existing ILOG customers.
Related gross margin for the quarter was 21% in line with the
previous quarter and better than the average of 16% observed in
fiscal year 2008. The number of consultants and third-party
sub-contractors has decreased between the same quarter of last year
and the first quarter of the current fiscal year, to adapt to the
current activity and, as a consequence, the utilization rate of
ILOG resources was improved. Operating Expenses The 6% increase in
operating expenses over the same quarter last year is primarily due
to exceptional costs relating to the IBM tender offer and in
particular legal fees in the amount of euros 1.9 million recorded
as general and administrative expenses. The reduction of our
headcount and the quarterly accrual of the research tax credit
helped offset the impact of salary increases that were applied in
the second quarter of last year. On September 30, 2008, the Company
had 835 employees, compared to 864 a year earlier. This decrease
occurred in the last fiscal year with 847 people at the end of June
and is mainly attributable to an effort to reduce headcount and
save costs. The number of consultants was particularly affected by
these decreases and was reduced to 142 from 159 last year. Non
Operating Income Non operating income was particularly strong this
quarter thanks to an increase in the interest rate received on a
record cash level with significant stock option exercises and
foreign exchange gains on hedging activities to protect royalty
flows from a weak U.S. dollar. Income tax expense amounted to euros
0.2 million compared to euros 0.1 million, in the same quarter last
year, as a result of tax liabilities in the quarter in countries
where ILOG doesn't benefit from tax loss carryforwards. Balance
Sheet and Cash Flow Discussion ILOG's cash position totaled euros
59.1 million at September 30, 2008, up from euros 47.1 million at
June 30, 2008. Operating activities generated euros 4.6 million as
a result of the strong profitability in the quarter in spite of a
longer days sales outstanding (DSO) from 72 days at the end of June
2008 to 76 days mainly as a result of slightly longer terms of
payment granted to our customers. Investing activities for the
quarter amounted to euros 0.7 million for IT equipment purchases
and an additional loan advance to Prima Solutions in an amount of
400 thousand of Euros. Cash provided by financing activities netted
euros 6.5 million and is mainly attributable to the proceeds from
the issuance of shares pursuant to the exercise of stock options in
the amount of euros 5.7 million and the sale on the market of the
treasury shares held under the liquidity contract for euros 0.8
million subsequent to its termination on September 5, 2008. An
additional amount of euros 2.4 million was received in October 2008
subsequent to the September close date and was related to the
exercise of stock options in September 2008. On the other hand,
cash was increased by euros 1.6 million corresponding to the impact
of the stronger dollar against the euro at the end of September
2008 compared to June 2008 on our cash balances denominated in U.S.
dollars. As of September 30, 2008, shareholders' equity was euros
75.7 million, an increase of euros 14.5 million from euros 61.2
million at June 30, 2008, mainly as a result of the issuance of 1.1
million shares upon exercise of stock options during the quarter
and the result of the sale of the treasury shares held under the
liquidity contract entered into with Oddo Corporate Finance, and
also as a result of the profit realized in the quarter. On
September 30, 2008, the Company had 20,303,827 shares issued and
outstanding, compared to 19,208,848 as of June 30, 2008, due to the
exercise of 1,094,979 stock options. Internal Control In October
2008, ILOG was advised by Ernst & Young Audit, its independent
accountants that they had identified, while reviewing the first
quarter accounts for the year ended June 30, 2009, a matter
involving internal control over financial reporting and its
operation. ILOG's independent accountants identified this matter
while planning and performing their not-yet-completed audit of the
consolidated financial statements of ILOG and its subsidiaries for
the year ended June 30, 2009 and internal control over financial
reporting as of June 30, 2009 that they consider to be a material
weakness under standards established by the Public Company
Accounting Oversight Board (United States). To improve the
effectiveness of its internal control, ILOG has determined to
increase the level of scrutiny when reviewing certain unusual terms
in customer contracts in light of most recent guidelines issued by
its auditors around revenue recognition accounting literature.
Constant Exchange Rates Non-GAAP Financial Measures In this
earnings release, we disclose selected figures that are non-GAAP
financial measures. Under SEC rules, a non-GAAP financial measure
is a numerical measure of our historical or future financial
performance, financial position or cash flows that excludes
amounts, or is subject to adjustments that have the effect of
excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP
in our consolidated income statement, consolidated balance sheet or
consolidated statement of cash flows; or includes amounts, or is
subject to adjustments that have the effect of including amounts,
that are excluded from the most directly comparable measure so
calculated and presented. In this regard, GAAP refers to IFRS.
Constant Currency Rates Where constant exchange rates are referred
to in the above discussion, current period results for entities
reporting in currencies other than Euros are converted into Euros
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, ILOG JRules, ILOG LogicTools
Inventory Analyst, ILOG LogicNet Plus are registered trademarks of
ILOG. All other trademarks referenced herein are the trademarks or
registered trademarks of their respective owners. DATASOURCE: ILOG
CONTACT: Investors, Kirsten Molyneux of Gavin Anderson &
Company, +44 20 7554 1400 (London), for ILOG; or Jerome Arnaud, +33
(0) 6 07 35 80 87, +1-408-991-7103, , or Media, Susan Peters,
+1-408-991-7109, , both of ILOG Web site: http://www.ilog.com/
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