INDUSTRY

Cognos Incorporated, the world leader in business intelligence (BI) and corporate performance management (CPM) solutions, today announced record results for its second quarter of fiscal year 2005, ended August 31, 2004. Revenue for the quarter was $185.2 million, an increase of 17 percent from the second quarter of last fiscal year, when revenue was $158.2 million. Net income for the quarter was $27.6 million, resulting in diluted earnings per share of $0.30. This is an increase of 52 percent compared with net income of $18.2 million and diluted earnings per share of $0.20 in the second quarter of last fiscal year. License revenue achieved strong growth in the quarter, reaching $75.4 million. This was an increase of 21 percent compared with license revenue of $62.2 million in the second quarter of last fiscal year. Revenue for the first six months of fiscal year 2005, ended August 31, 2004, was $358.8 million, an increase of 16 percent compared with revenue of $308.7 million for the first six months of last fiscal year. Net income for the first six months of this fiscal year was $47.7 million or $0.51 per share. This compares to net income of $30.5 million or $0.33 per share in the first six months of last fiscal year. Highlights of the Quarter * Outstanding customer response to Cognos ReportNet(TM) driving continued strong momentum - more than $100 million in ReportNet license revenue in its first four quarters of general availability * 109 contracts greater than $200,000 and 655 contracts greater than $50,000, an increase of 22 percent in each case, from the second quarter of last fiscal year * Double-digit percentage revenue growth in all three major geographies - the Americas, Europe, and Asia-Pacific * Major customer wins at Alinta, Deutsche Post World Net, Georgia Department of Education, Georgia Pacific, Hertz, Johnson & Johnson, JPMorgan Chase & Co., Kaiser Permanente, Purdue University, Shiseido, and the U.S. Air Force * Three percentage point gain in operating margin to 17.9 percent, from 14.8 percent in the second quarter of last fiscal year * Offer to acquire Frango; Frango's leading consolidation and reporting products combined with the Cognos business intelligence, planning, and scorecarding solutions, will deliver the broadest and deepest corporate performance management solution in the industry. "The Cognos team delivered another superb quarter, with record revenue and profitability, excellent operating margin performance, and BI market-leading license revenue growth," said Cognos President and CEO Rob Ashe. "We extended our leadership in the enterprise BI and CPM market. "Execution was strong on all fronts, as we continue to drive operational effectiveness. Our product portfolio - powered by ReportNet - is delivering unparalleled value and performance to our customers and driving major enterprise standardization wins. The outlook for Cognos is excellent - company fundamentals and our competitive position are the strongest ever." Cognos further strengthened its balance sheet in the quarter. The Company increased cash, cash equivalents, and short-term investments by $24.0 million to exit the quarter with $440.4 million. This included operating cash flow of $29.4 million. Business Outlook Management offers the following outlook, excluding the impact of the pending acquisition of Frango. For the third quarter of fiscal 2005, ending November 30, 2004: * Revenue is expected to be in the range of $196 million to $198 million; * Diluted earnings per share are expected to be in the range of $0.32 to $0.34. For the full fiscal year 2005, ending February 28, 2005: * Revenue is expected to be about $780 million * Diluted earnings per share are expected to be about $1.28. Cognos will host a Webcast and conference call to present results for its second quarter of fiscal year 2005 at 5:15 p.m. Eastern Time, today, September 22, 2004. The Webcast may be accessed at http://www.cognos.com/company/investor/events/fy05q2/index.html. The conference call may be accessed at 416-640-1907. A replay of the Webcast will also be available from the Company's Web site, or, until October 6, 2004, by telephone at 416-640-1917, pass code 21092797#. Cognos, the world leader in business intelligence and corporate performance management, delivers software that helps companies drive, monitor and understand corporate performance. Cognos delivers the next level of competitive advantage - Corporate Performance Management - achieved through the strategic application of business intelligence on an enterprise scale. Our integrated CPM solution helps customers drive performance through planning; monitor performance through scorecarding; and understand performance through business intelligence. Cognos serves more than 22,000 customers in over 135 countries. Cognos enterprise business intelligence solutions and services are also available from more than 3,000 worldwide partners and resellers. For more information, visit the Cognos Web site at http://www.cognos.com/. SUPPLEMENTARY INFORMATION (unaudited): FY 2004 FY 2005 Q2 Q3 Q4 Q1 Q2 Revenue Statistics ($000s) Total License 62,234 72,551 93,542 66,070 75,362 Year-Over-Year Revenue Growth Statistics Total License 13% 17% 18% 14% 21% Geographic Distribution Total Revenue ($000s) Americas 96,168 96,079 114,564 104,831 110,240 Europe 47,459 58,838 74,701 54,989 57,952 Asia/Pacific 14,554 17,310 12,881 13,799 17,028 % of Total Americas 61% 56% 57% 60% 60% Europe 30% 34% 37% 32% 31% Asia/Pacific 9% 10% 6% 8% 9% Year-Over-Year Revenue Growth - Total Americas 19% 14% 20% 16% 15% Europe 21% 34% 32% 17% 22% Asia/Pacific 60% 67% 10% 3% 17% Pro Forma Year-Over-Year Revenue Growth - In Local Currency Americas 18% 12% 17% 15% 14% Europe 9% 16% 14% 7% 11% Asia/Pacific 46% 42% (8%) (9%) 10% Pro Forma Year-Over-Year Revenue Growth - Due to Foreign Currency Americas 1% 2% 3% 1% 1% Europe 12% 18% 18% 10% 11% Asia/Pacific 14% 25% 18% 12% 7% New vs Existing License Revenue - % of Total New 32% 33% 31% 31% 38% Existing 68% 67% 69% 69% 62% Channel - License Revenue - % of Total Direct 69% 70% 80% 73% 73% Third Party 31% 30% 20% 27% 27% Other Statistics Cash, cash equivalents, and short-term investments ($000s) 284,442 320,895 388,241 416,362 440,410 Days sales outstanding 62 62 68 55 56 Total employees 3,011 3,001 2,966 3,027 3,062 COGNOS INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (US$000s except share amounts, U.S. GAAP) (Unaudited) Three months ended Six months ended August 31, August 31, 2004 2003 2004 2003 Revenue Product license $ 75,362 $ 62,234 $141,432 $120,035 Product support 76,156 66,162 150,943 130,289 Services 33,702 29,785 66,464 58,420 Total revenue 185,220 158,181 358,839 308,744 Cost of revenue Cost of product license 546 1,106 1,167 2,217 Cost of product support 7,074 6,887 14,249 13,742 Cost of services 27,457 21,503 52,932 42,362 Total cost of revenue 35,077 29,496 68,348 58,321 Gross margin 150,143 128,685 290,491 250,423 Operating expenses Selling, general, and administrative 90,230 81,495 180,739 161,733 Research and development 25,382 21,714 49,707 45,008 Amortization of intangible assets 1,369 1,991 2,741 4,096 Total operating expenses 116,981 105,200 233,187 210,837 Operating income 33,162 23,485 57,304 39,586 Interest expense (8) (154) (79) (325) Interest income 1,781 1,543 3,185 2,587 Income before taxes 34,935 24,874 60,410 41,848 Income tax provision 7,336 6,716 12,686 11,299 Net income $ 27,599 $ 18,158 $ 47,724 $ 30,549 Net income per share Basic $0.31 $0.20 $0.53 $0.34 Diluted $0.30 $0.20 $0.51 $0.33 Weighted average number of shares (000s) Basic 90,382 89,181 90,237 88,854 Diluted 92,849 91,806 92,771 91,365 COGNOS INCORPORATED CONSOLIDATED BALANCE SHEETS (US$000s, U.S. GAAP) August 31, February 29, 2004 2004 Assets (Unaudited) Current assets Cash and cash equivalents $364,782 $224,830 Short-term investments 75,628 163,411 Accounts receivable 114,824 152,859 Prepaid expenses and other current assets 16,495 16,668 Deferred tax assets 1,815 2,445 573,544 560,213 Fixed assets 69,048 71,292 Intangible assets 21,431 23,643 Goodwill 172,323 172,323 $836,346 $827,471 Liabilities Current liabilities Accounts payable $23,741 $30,698 Accrued charges 23,349 25,483 Salaries, commissions, and related items 52,231 59,903 Income taxes payable 5,550 5,875 Deferred revenue 155,759 178,752 260,630 300,711 Deferred income taxes 20,176 18,098 280,806 318,809 Stockholders' Equity Capital stock Common shares and additional paid-in capital (August 31, 2004 - 90,417,883; February 29, 2004 - 89,902,895) 224,676 206,499 Treasury shares (August 31, 2004 - 46,375; February 29, 2004 - 43,500) (1,199) (1,065) Deferred stock-based compensation (771) (730) Retained earnings 334,608 305,399 Accumulated other comprehensive loss (1,774) (1,441) 555,540 508,662 $836,346 $827,471 COGNOS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (US$000s, U.S. GAAP) (Unaudited) Three months ended Six months ended August 31, August 31, 2004 2003 2004 2003 Cash flows from operating activities Net income $ 27,599 $ 18,158 $ 47,724 $ 30,549 Non-cash items Depreciation and amortization 6,504 7,318 13,002 14,466 Amortization of deferred stock-based compensation 220 221 405 390 Amortization of other deferred compensation - 62 7 124 Deferred income taxes 1,285 7,007 2,301 4,053 Loss on disposal of fixed assets 123 9 124 463 35,731 32,775 63,563 50,045 Change in non-cash working capital Decrease (increase) in accounts receivable (8,472) (5,109) 36,461 31,897 Decrease (increase) in prepaid expenses and other current assets (699) (772) 171 (3,860) Decrease in accounts payable (18) (2,153) (6,985) (10,778) Increase (decrease) in accrued charges 1,298 (1,263) (1,897) (7,072) Increase (decrease) in salaries, commissions, and related items 8,468 2,005 (7,275) (13,788) Increase (decrease) in income taxes payable 2,048 1,297 (44) 1,159 Decrease in deferred revenue (8,942) (5,069) (21,491) (15,351) Net cash provided by operating activities 29,414 21,711 62,503 32,252 Cash flows from investing activities Maturity of short-term investments 99,081 53,058 244,674 116,810 Purchase of short-term investments (85,566) (88,339) (156,961) (133,039) Additions to fixed assets (4,637) (5,089) (7,710) (11,498) Additions to intangible assets (460) (365) (529) (686) Business acquisition - (122) - (230) Net cash provided by (used in) investing activities 8,418 (40,857) 79,474 (28,643) Cash flows from financing activities Issue of common shares 8,983 5,643 19,272 18,109 Purchase of treasury shares (335) - (335) (564) Repurchase of shares (9,866) - (19,855) - Decrease in long-term debt and long-term liabilities - - - (1,697) Net cash provided by (used in) financing activities (1,218) 5,643 (918) 15,848 Effect of exchange rate changes on cash 727 (985) (1,107) 4,137 Net increase (decrease) in cash and cash equivalents 37,341 (14,488) 139,952 23,594 Cash and cash equivalents, beginning of period 327,441 200,670 224,830 162,588 Cash and cash equivalents, end of period 364,782 186,182 364,782 186,182 Short-term investments, end of period 75,628 98,260 75,628 98,260 Cash, cash equivalents, and short-term investments, end of period $440,410 $284,442 $440,410 $284,442