SPSS Reports 2008 Second Quarter, First Half Results

SPSS Inc. (Nasdaq: SPSS), a global provider of Predictive Analytics software and solutions, today announced results for the quarter and six months ended June 30, 2008.

The Company reported second quarter revenues of $75.7 million, an increase of 10 percent from $68.9 million in the second quarter of 2007. Net income was $7.8 million, up 9 percent from $7.2 million in the second quarter last year, with diluted earnings per share (EPS) of $0.41, a 14 percent increase from $0.36 in the 2007 second quarter. License revenues were $34.8 million, up 8 percent from $32.4 million in the same quarter last year. Operating income was $10.9 million, or 14 percent of revenues, compared to $10.2 million, or 15 percent of revenues, in the 2007 second quarter. Charges for share-based compensation were $0.08 per share in the second quarter of both 2008 and 2007. Approximately 60 percent of total revenues in the 2008 second quarter came from outside the United States. Excluding the effects of currency exchange rates, total revenues were up 3 percent over the 2007 second quarter.

“While facing a challenging global economic environment, we continued to realize both top- and bottom-line growth,” said Jack Noonan, SPSS chairman, president and CEO. “The breadth of our product offerings, the range of transaction pricing, our diverse customer base and geographic markets contributed to an ability to sustain our financial performance in a weaker economy.”

Noonan continued, “License growth was strongest in the United States, up 9 percent, and in the United Kingdom, up 28 percent, net of currency. These increases occurred most notably with our data mining and data capture technologies. Growth in services revenues was also solid, reflecting a steadily increasing number of consulting and training engagements.”

Revenues for the six months ended June 30, 2008, totaled $153.9 million, an increase of 11 percent from $139.1 million for the same period in 2007. Net income was $17.7 million, up 15 percent from $15.3 million in the first six months of 2007, with EPS of $0.92, a 23 percent increase from $0.75 in the 2007 six-month period. License revenues were $73.2 million, up 9 percent from $67.3 million in the same period last year. Operating income was $24.8 million, or 16 percent of revenues, from $22.3 million, or 16 percent of revenues, in the 2007 six-month period. Charges for share-based compensation were $0.14 per share in the first six month periods of both 2008 and 2007. The effective income tax rate in the 2008 six-month period was 36 percent, compared to 37 percent in the same period last year.

At June 30, 2008, cash and cash equivalents totaled $306.0 million. The Company generated $14.6 million in cash from operations in the 2008 second quarter, up from $13.4 million in the same quarter last year. Cash provided by operating activities in the first six months of 2008 was $28.8 million after the payment of $7.4 million of a year-end 2007 accrued payable related to the Company’s share repurchase program, compared to $34.7 million for the same period in 2007.

Outlook and Guidance

“While underperformance in Northern Europe and Asia, combined with higher investments in marketing, affected our profitability in the quarter, the operating margin for the six-month period remained unchanged from a year ago at 16 percent,” said Raymond Panza, SPSS executive vice president and CFO. “Although we expect to realize the benefits from our investments in marketing, we are focused on managing expenses for the remainder of the year.”

Panza added, “In the 2008 third quarter, we expect revenues of between $74.0 million and $78.0 million, with EPS in the range of $0.42 to $0.48. For the 2008 full year, we reiterate our revenue guidance of between $310.0 million and $320.0 million and EPS in the range of $1.90 to $2.00. EPS guidance for the third quarter and 2008 full year assumes charges for share-based compensation of $0.06 and $0.26, respectively, and an effective income tax rate of 36 percent.”

Conference Call – 4 p.m. CT/5 p.m. ET

The Company will host a conference call at 4 p.m. CT/5 p.m. ET on July 29, 2008, to discuss its financial results. The live call will be broadcast online at www.spss.com/invest. Those interested in participating in the live call should call 866-356-4123 in the United States or 617-597-5393 internationally. The live call pass-code is 94910927. A replay will be available via phone for one week after the call. To access it, participants in the United States should call 888-286-8010 or 617-801-6888 internationally using access code 21486508. An archived version of the call will also be made available online at www.spss.com/invest approximately two hours after the live call.

About SPSS Inc.

SPSS Inc. (Nasdaq: SPSS) is a leading global provider of Predictive Analytics software and solutions. The Company’s Predictive Analytics technology improves business processes by giving organizations forward visibility for decisions made every day. By incorporating Predictive Analytics into their daily operations, organizations become Predictive Enterprises — able to direct and automate decisions to meet business goals and achieve a measurable competitive advantage. More than 250,000 public sector, academic and commercial customers rely on SPSS technology to help increase revenue, reduce costs and detect and prevent fraud. Founded in 1968, SPSS is headquartered in Chicago, Illinois. For more information, please visit www.spss.com.

Safe Harbor Statement

In addition to historical information, this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions or future strategies that are signified by the words “expects,”“anticipates,” “intends,”“believes,” “estimates” or similar language. All forward-looking statements included in this document are based on information available to the Company on the date hereof. The Company cautions investors that its business and financial performance and the matters described in these forward-looking statements are subject to substantial risks and uncertainties. Because of these risks and uncertainties, some of which may not be currently ascertainable and many of which are beyond the Company’s control, actual results could differ materially from those expressed in or implied by the forward-looking statements. The potential risks and uncertainties that could cause results to differ materially include, but are not limited to: the Company’s ability to predict revenue, the Company’s ability to respond to rapid technological changes, a potential loss of relationships with third parties from whom the Company licenses certain software, fluctuations in currency exchange rates, the impact of new accounting pronouncements, increased competition and risks associated with product performance and market acceptance of new products. A detailed discussion of other risk factors that affect the Company’s business is contained in the Company’s Annual Reports on Form 10-K, particularly under the heading “Risk Factors.” The Company does not intend to update these forward-looking statements to reflect actual future events.

NOTE - Share-Based Compensation

On January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), Share-Based Payment ("SFAS No. 123(R)" or the "Statement") using the modified prospective method. SFAS No. 123(R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. Prior to the adoption of SFAS No. 123(R), the Company followed the intrinsic value method in accordance with APB No. 25 to account for its employee stock options and share-based awards issued before 2006. The Company has provided the effects of share-based compensation to show the effects of share-based compensation and the related effects on operating income and diluted net income per common share.