ILOG® (NASDAQ: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced results for the second quarter of fiscal 2008, ended December 31, 2007, highlighted by 22% revenue growth year-over-year. Revenues for the quarter were $48.0 million compared with $39.4 million for the second quarter last year. U.S. GAAP earnings per share were $0.15 compared with $0.05 last year.
“We had a good quarter in a tough environment with license growth at 23% and significant improvement in our profitability both sequentially and year-over-year,” said ILOG Chairman and CEO, Pierre Haren. “The solid sales pipeline resulted in strong growth in our optimization and supply chain applications. We were able to grow our business rule management system (BRMS) sales thanks to the diversification of our BRMS customer base away from financial institutions, achieving notable wins in other industries including transportation and through applications including commissioning, data cleansing and loyalty programs. We were also pleased to meet our revenue target without large deals this quarter, underscoring demand for our products to address today’s business challenges across industries and geographies.”
Revenue Trends
In addition to 23% license growth, ILOG also achieved worldwide revenue increases of 23% in maintenance and 18% in professional services. Revenue growth across all geographies was evenly distributed: Europe revenues rose 25%, the U.S. grew 20% and Asia grew 19%.
Following the acquisition of LogicTools, ILOG’s supply chain applications business gathered momentum in the U.S., as witnessed by strong license growth for LogicNet Plus XE® supply chain network planning product. New customers included a leading U.S. chemical company and one of the most-recognized supermarket dairy brands. LogicTools products are in a market development phase in Europe following their official launch there early in the second quarter.
Strong royalty revenues for ILOG’s optimization technology and positive momentum of the new release of CPLEX for planning and scheduling applications resulted in 55% year-over-year growth for combined license and maintenance revenues. In addition to revenues from two major Independent Software Vendors and a CPLEX renewal with Areva, the French nuclear energy leader, key optimization deals were signed with a large Spanish water utility and a major German automotive manufacturer.
ILOG’s visualization products had 8% combined license and maintenance revenue growth with several notable deals including Alcatel Lucent in Italy for a telecom network management application. ILOG’s visualization product line benefits from current trends in the industry for Rich Internet Applications (RIA) and interactive visualization to support Web 2.0 and business intelligence (BI) initiatives. Early in the second quarter, the company unveiled ILOG Elixir®, a new graphical data display library built on the Adobe Flex® platform, which further strengthens the product line’s RIA relevance.
The ILOG BRMS product line achieved combined license and maintenance revenue growth of 9% on top of a very strong comparison base in the second quarter of fiscal year 2007, when growth in that business had neared 40%. In the current year’s fiscal quarter, strong demand for BRMS products from a diverse customer base more than offset the dip in the mortgage business in the U.S. Key deals for BRMS in the quarter included repeat business from Greek banking leader Eurobank EFG, which will be further leveraging ILOG JRules for additional applications as the bank expands its business process management (BPM) initiatives. In the U.S., the company also had good diversification across industries outside of financial services for its BRMS products, illustrated by deals with a leading U.S. airline for a loyalty management program and with AT&T. Asia also had strong BRMS demand with a sizeable deal with a large Singapore Ministry and from China Pacific Insurance Co., Ltd.
“We’re seeing growing interest from customers in leveraging our technologies to enhance BI platforms, including BRMS related to operational BI,” added Haren. “We look forward to developing this new business opportunity throughout 2008 as we further diversify our BRMS business to supplement their essential nature for BPM and service-oriented- architecture (SOA) markets.”
Business Outlook
ILOG continues to expect meeting its 20% revenue growth target for fiscal year 2008. However, two factors have had a negative impact on margins: the weaker dollar and the less favorable IT spending environment. Thus ILOG now believes that it is unlikely to overcome in the remaining two quarters of fiscal year 2008 the entire operating profit shortfall from the quarter ended September 30, 2007. Therefore, rather than the $10 million target stated earlier, ILOG now expects to achieve a fiscal year 2008 U.S. GAAP operating profit in excess of $6 million, or 3% of revenues.
“We had a good quarter in a tough environment with license growth at 23% and significant improvement in our profitability both sequentially and year-over-year,” said ILOG Chairman and CEO, Pierre Haren. “The solid sales pipeline resulted in strong growth in our optimization and supply chain applications. We were able to grow our business rule management system (BRMS) sales thanks to the diversification of our BRMS customer base away from financial institutions, achieving notable wins in other industries including transportation and through applications including commissioning, data cleansing and loyalty programs. We were also pleased to meet our revenue target without large deals this quarter, underscoring demand for our products to address today’s business challenges across industries and geographies.”
Revenue Trends
In addition to 23% license growth, ILOG also achieved worldwide revenue increases of 23% in maintenance and 18% in professional services. Revenue growth across all geographies was evenly distributed: Europe revenues rose 25%, the U.S. grew 20% and Asia grew 19%.
Following the acquisition of LogicTools, ILOG’s supply chain applications business gathered momentum in the U.S., as witnessed by strong license growth for LogicNet Plus XE® supply chain network planning product. New customers included a leading U.S. chemical company and one of the most-recognized supermarket dairy brands. LogicTools products are in a market development phase in Europe following their official launch there early in the second quarter.
Strong royalty revenues for ILOG’s optimization technology and positive momentum of the new release of CPLEX for planning and scheduling applications resulted in 55% year-over-year growth for combined license and maintenance revenues. In addition to revenues from two major Independent Software Vendors and a CPLEX renewal with Areva, the French nuclear energy leader, key optimization deals were signed with a large Spanish water utility and a major German automotive manufacturer.
ILOG’s visualization products had 8% combined license and maintenance revenue growth with several notable deals including Alcatel Lucent in Italy for a telecom network management application. ILOG’s visualization product line benefits from current trends in the industry for Rich Internet Applications (RIA) and interactive visualization to support Web 2.0 and business intelligence (BI) initiatives. Early in the second quarter, the company unveiled ILOG Elixir®, a new graphical data display library built on the Adobe Flex® platform, which further strengthens the product line’s RIA relevance.
The ILOG BRMS product line achieved combined license and maintenance revenue growth of 9% on top of a very strong comparison base in the second quarter of fiscal year 2007, when growth in that business had neared 40%. In the current year’s fiscal quarter, strong demand for BRMS products from a diverse customer base more than offset the dip in the mortgage business in the U.S. Key deals for BRMS in the quarter included repeat business from Greek banking leader Eurobank EFG, which will be further leveraging ILOG JRules for additional applications as the bank expands its business process management (BPM) initiatives. In the U.S., the company also had good diversification across industries outside of financial services for its BRMS products, illustrated by deals with a leading U.S. airline for a loyalty management program and with AT&T. Asia also had strong BRMS demand with a sizeable deal with a large Singapore Ministry and from China Pacific Insurance Co., Ltd.
“We’re seeing growing interest from customers in leveraging our technologies to enhance BI platforms, including BRMS related to operational BI,” added Haren. “We look forward to developing this new business opportunity throughout 2008 as we further diversify our BRMS business to supplement their essential nature for BPM and service-oriented- architecture (SOA) markets.”
Business Outlook
ILOG continues to expect meeting its 20% revenue growth target for fiscal year 2008. However, two factors have had a negative impact on margins: the weaker dollar and the less favorable IT spending environment. Thus ILOG now believes that it is unlikely to overcome in the remaining two quarters of fiscal year 2008 the entire operating profit shortfall from the quarter ended September 30, 2007. Therefore, rather than the $10 million target stated earlier, ILOG now expects to achieve a fiscal year 2008 U.S. GAAP operating profit in excess of $6 million, or 3% of revenues.
