Cognos Q2 earnings rise, currency impacts guidance
Published:28-September-2007
By BR staff writer
Canadian business intelligence software maker Cognos reported a 12% rise in second-quarter profits and announced plans to buyback $200m of its shares. But the strength of the Canadian dollar is expected to take its toll on profits next quarter.
The Ottawa-based company said it earned $26.5m, (or 31 cents EPS) in its most recently closed quarter, up from $23.8m a year ago.
Revenue for the quarter rose 10% to $254.4m. License revenue was also up 12% at $87m, with Cognos notching up 9 deals over $1m.
Cognos also said it will buy back up to $200m in stock (around 6 million shares) by October 2008. The buy back amount represents 7% of the company's public float of 82.8 million shares as of September 25.
CEO Rob Ashe pointed to "solid growth" across the company's core Cognos 8 BI and performance management product lines and said the company continues to ramp up its sales force, adding over 65 new sales staff over the past 15 months.
He also continues to see strength in both the financial services and state and federal government sectors, pointing out that second half of Cognos' fiscal year was "seasonally strong."
While Cognos' European and US businesses performed well in the quarter, Asia lagged behind. Ashe said that while emerging markets like India, Korea and China showed strength, markets like Japan and Australia were soft.
Earlier this month Cognos acquired rival BI firm Applix for $339m. That deal is expected to close in fourth quarter.
"Response from customers and the market to this announcement has been extremely positive," Ashe said.
Cognos' third-quarter guidance however disappointed slightly due to the impact of a strong Canadian dollar on profitability. Ashe expects earnings per share in the third-quarter to be significantly hit from a strong Canadian dollar that has gained 17% this year to reach parity with its US equivalent
Revenue for the third-quarter is expected in the range of $270m and $285m. GAAP diluted earnings are pegged between 36 and 44 cents.
For fiscal 2008 Cognos guided on revenue in the range of $1.07bn and $1.1bn, with GAAP earnings of $1.66 to $1.76.
Ashe said that a third of Cognos' costs are reported as Canadian dollars, but just 5% of revenue. But he did say that the higher costs related to the Canadian dollar were in part offset by the strengthening of the Euro against the dollar, which he said boosted revenue.
The top end of Cognos' adjusted earnings forecast range met, but did not surpass analyst expectations.
That pushed Cognos' shares down in electronic after-hours trading yesterday. The stock was quoted on Nasdaq at $41.30, down 2.7% from its regular-session close of $42.45.
