ILOG Reports Results for the Quarter and Year Ended June 30, 1997

Business Wire, August 4, 1997

PARIS--(BUSINESS WIRE)--August 4, 1997--ILOG S.A. (NASDAQ NMS: ILOGY), a leading provider of advanced software components, today reported revenues of $9.6 million for its fourth quarter ended June 30, 1997, an increase of 15% compared to $8.3 million in the June 1996 quarter. The loss from operations for the June 1997 quarter was $425,000, compared to $593,000 in the June 1996 quarter. Loss per share for the June 1997 quarter was $0.02 on 10.9 million shares, compared to $0.10 on 7.0 million shares in the June 1996 quarter.

The company reported revenues of $33.3 million for the year ended June 30, 1997, an increase of 28% compared to $26.0 million in the prior year. The loss from operations for the year was $3.7 million, compared to $4.7 million in the prior year. Loss per share for the year was $0.31 on 8.4 million shares, compared to $0.73 on 6.9 million shares in the prior year. Both revenues and expenses in the year would have been each approximately $1.2 million higher if the US dollar exchange rates for the year had been the same rates used in the preceding year. Currency fluctuations did not have a material effect on the company's results from operations, net loss or net loss per share.

In a separate release issued today ILOG also announced a proposed acquisition of CPLEX Optimization, Inc. which is part of ILOG's strategic direction in reinforcing its position as the world's leading purveyor of resource optimization software components.

Revenues in the quarter grew by 15% over the same quarter in the previous year and 28% for the year, reflecting higher revenues from services which grew by 58% over the same quarter in the preceding year and 50% for the year. "The growth of our consulting business during the year and the achievement of customer funded research and development in the most recent quarter" said Pierre Haren, ILOG's President and CEO, "is expected to provide an impetus for license revenues in the future and reflects our strategic decision to emphasize the provision of services as a means to accelerate the time to customer satisfaction."

Overall gross margin for the quarter decreased to 78% from 83% for the same period in the preceding year due to the 58% growth in lower-margin services revenues. Marketing and selling expenses for the quarter increased by 10% over the same period in the prior year reflecting continuing investment in sales and marketing personnel, particularly in North America. Research and development expenses, net of government funding, for the quarter decreased by 15% over the same period in the prior year primarily because certain research and development activities were customer funded and are classified as cost of revenues for operating statement reporting purposes. Government funding in the quarter was $167,000 compared to $1,157,000 for the same period in the preceding year as a number of funded projects have been concluded. General and administrative expenses for the quarter increased by 7% over the same period in the prior year. Net interest income (expense) for the quarter increased from $(95,000) to $154,000 over the same period in the prior year reflecting interest earned on the proceeds of the company's February initial public offering.

Overall gross margin for the year was 80% compared to 79% in the prior year. Marketing and selling expenses for the year increased by 25% over the prior year reflecting continuing investment in sales and marketing personnel, particularly in North America. Research and development expenses, net of government funding, for the year increased by 3% over the prior year. Government funding in the year was $415,000 compared to $2,549,000 in the prior year as a number of funded projects were concluded in the year. General and administrative expenses for the year increased by 21% over the prior year, which reflects staffing additions to the company's finance organization and on-going costs associated with being a public company. Net interest income (expense) and other for the year increased from $(259,000) to $1,124,000 over the prior year reflecting a $1,100,000 grant received from an agency of the French government with respect to the company's establishment of subsidiaries outside of France and interest earned on the proceeds of the company's February initial public offering.

At June 30, 1997 shareholders' equity was $27.0 million, compared to $1.2 million at June 30, 1996. Cash at June 30, 1997 totaled $26.0 million compared to $5.0 million at June 30, 1996. At June 30, 1997 the company had 11.0 million shares issued and outstanding compared to 6.9 million at June 30, 1996.

Business Developments in the Quarter

40% of ILOG's revenues in the quarter were derived from telecom customers. In this market segment ILOG libraries are being increasingly selected for large-scale projects, and many customers are starting to reuse in-house components that were built with ILOG libraries. Telecom industry applications include network management, customer care and billing, and network optimization. ILOG's increased focus in the telecom market has been rewarded in the quarter by new business from Hitachi, Kolsch and Altmann, Lucent and Mannesman. Repeat business with Alcatel, ATT, Bellcore, Ciena, DS Telematica, France Telecom, Hewlett-Packard, IBM, NTT, Qualcomm, Telefonica, Telecom Italia, SFR, TTC and US West was also received.