Applix reports 60% increase in quarterly license revenue; total revenue rises 55%

Company re-affirms outlook for 2007

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Applix, Inc. (NasdaqGS: APLX), a leading business analytics software solutions provider, today reported that revenue for the quarter ended March 31, 2007 was $13.90 million, a 55 percent increase over revenue of $8.99 million in the first quarter of 2006. License revenue for the first quarter of 2007 was $7.11 million, a 60 percent increase compared to $4.43 million for the same period in 2006.

Net income for the first quarter of 2007, as reported in accordance with U.S. generally accepted accounting principles (GAAP), was $759,000, or $0.04 per diluted share, compared to net income of $97,000, or $0.01 per diluted share, for the year ago period.

First quarter 2007 non-GAAP net income was $1.42 million, or $0.08 per diluted share, after excluding $738,000 of stock-based compensation charges, $255,000 of amortization charges primarily associated with the Company’s acquisition of Temtec International B.V. in June 2006, $112,000 of legal expenses related to the Securities and Exchange Commission (SEC) investigation and the related income tax benefit of $442,000 on these non-GAAP adjustments. In the first quarter of 2006, non-GAAP net income was $833,000, or $0.05 per diluted share, reflecting the exclusion of stock-based compensation, amortization charges and SEC investigation-related legal and consulting expenses of $495,000, $63,000 and $197,000, respectively, and the related income tax benefit of $19,000 on these non-GAAP adjustments. The SEC investigation was settled with respect to Applix in January 2006, with no monetary penalty assessed.

David C. Mahoney, President and Chief Executive Officer of Applix, said, “These results demonstrate that our market position continues to strengthen and that we are executing well on an aggressive growth strategy as a leader in the converging BI and BPM markets, which we call Business Analytics. Our global presence enabled us to drive new business opportunities and expansions in our installed base in all geographies, as we added more channel partnerships in newer markets. Our investments in sales and marketing programs and R&D in 2006 have already produced results: during the first quarter this year, our sales pipelines steadily increased while we closed 33% more six figure deals than we did a year ago. In addition, the latest version of our flagship product has been very well received by existing customers, new prospects and industry analysts. Applix TM1 V9.1 extends our lead in performance and scalability as well as in critical areas such as ease of use and return on investment. We believe we are off to another great year and we look forward to continuing to build on this momentum.”

First Quarter Business Highlights

- Applix ranked at the highest levels in customer satisfaction and speed of implementation in the annual OLAP Survey 6, based upon customer surveys, and had the highest customer satisfaction ratings among BPM core vendors in the BPM Partners’ Pulse Survey. ..
- Applix announced the release of Applix TM1 V9.1, providing enhanced operational visibility and management agility across the enterprise. ..
- Applix expanded its presence in Asia Pacific, through offices in Hong Kong and Japan, and a new partnership with UFIDA, China’s largest software company.

First Quarter Financial Highlights

- Cash and short-term investments grew to $33.11 million at 3/31/07, up from $27.21 million at 12/31/06. ..
- Gross margin for the first quarter of 2007 was 87.7%, compared to 88.2% in the first quarter of 2006. ..
- Days sales outstanding was 62 days at 3/31/07, compared to 75 days at 12/31/06 and 59 days at 3/31/06. ..
- Twelve customers purchased more than $100,000 in software licenses in the first quarter of 2007, up from nine in the first quarter of 2006. ..
- Average license deal size for transactions over $20,000 was between $60,000 - $65,000 in the first quarter of 2007, up from between $55,000 - $60,000 in the first quarter of 2006.

Milt Alpern, Senior Vice President and CFO of Applix, commented, “We posted solid first quarter results while continuing our investments in sales and marketing to drive topline growth and gain market share. We are also seeing the beginning of operating margin expansion as we had anticipated, based upon attaining greater operating leverage with those investments. These results provide us with a strong confidence level on which to reaffirm our outlook for 2007 at industry-leading revenue growth levels.”

Financial Outlook for 2007

Applix is today re-affirming the financial outlook for the Company for 2007 it first provided on February 8, 2007. The Company continues to target total revenue of $67 - $70 million and license revenue of $38.5 - $40.5 million. Applix is targeting diluted earnings per share for 2007 on a GAAP basis between $0.31 - $0.38, based upon an assumed weighted average number of diluted shares of 18,000,000 and an estimated effective tax rate of 40%. The increase in the effective tax rate to 40% is primarily due to the reversal of the valuation allowance on domestic net operating losses. On a non GAAP basis, excluding the expected annual impact of stock-based compensation charges of $3.0 million, or $0.17 per diluted share, amortization costs of $863,000, or $0.05 per diluted share, SEC investigation-related expenses of $400,000, or $0.02 per diluted share, and the related income tax benefit of $1.7 million, or $0.09 per diluted share, on these non-GAAP adjustments, the company’s forecast for annual earnings is between $0.46 - $0.53 per diluted share. Neither forecast reflects the impact of foreign exchange, which cannot be predicted.

Investor Conference Call and Webcast

The senior management of Applix will host a conference call and Webcast to discuss the first quarter results tomorrow morning, Friday, April 27, 2007 at 8:30 am ET. To access the call, please dial 1-800-299-8538, using the confirmation code 40722823. Internationally, the call may be accessed by dialing 1-617-786-2902, using the same confirmation code. To listen via live audio Webcast, please visit the Company’s website, at least ten minutes prior to the start of the call. The Webcast will be available as a replay starting one hour after the call is completed at the same location.

Use of Non-GAAP Financial Measures

The non-GAAP financial measures included in this press release are different from those presented under U.S. GAAP as these non-GAAP measures exclude certain non-cash charges, such as amortization of intangible assets and stock-based compensation expense, and other non-recurring items. Applix has provided these measures in addition to U.S. GAAP financial results because management believes that these non-GAAP measures provide a consistent basis for comparisons between quarters and of growth rates yearover- year that are not influenced by certain non-cash charges, impacts of prior period acquisitions or other non-recurring items, and therefore are helpful in understanding the company’s underlying operating results. Reconciliations of U.S. GAAP to non-GAAP results are presented at the end of this press release.
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