Interim report January 1 – September 30, 2010

​Strong krona and low market activity impact results
– Largest deal of the quarter was a combined Orc/Neonet solution

During the quarter, a weaker dollar in particular gave rise to negative exchange rate differences in the income statement and reduced ACV (Annualized Contract Value).

License sales remained on a good level in spite of changes to financial market regulations and low trading volumes on exchanges. However, transaction revenue decreased as a result of the lower stock market turnover.

Churn for the quarter (downsizing and cancellations) was higher than the average for 2009. A substantial part of the increase was due to cancellations initiated by Orc for solutions that are not part of the company’s strategy.

The largest deals in Q3 involved a combined Orc/Neonet solution and the installation of Orc’s new managed service offering, Orc Hosted. 

The annualized contract value (ACV) at the end of Q3 2010 was SEK 692.1m (628.0), an increase of SEK 64.1m, or 10%, compared to Q3 2009. On the merger date, ACV in Neonet amounted to SEK 52.1m.

The transaction net was SEK 23.4m (-) and the transaction margin was 36% (-) for Q3 2010.

July - September 2010

• Operating revenue of SEK 255.6m (180.7)
• Revenue growth of 41%
• Operating income of SEK 17.4m (54.6)
• Operating margin of 7% (30)
• Income after tax of SEK 0.6m (36.4)
• Basic earnings per share of SEK 0.03 (2.40)

January - September 2010

• Operating revenue of SEK 708.6m (524.5)
• Revenue growth of 35%
• Operating income of SEK 54.7m (146.6)
• Operating margin of 8% (28)
• Income after tax of 25.5m (103.7)
• Basic earnings per share of SEK 1.24 (6.82)

The Neonet Group has been consolidated as of April 1, 2010. The actual transaction date was April 7.

CEO Thomas Bill comments:
Due to the general market situation, which is characterized by low volumes on the world’s stock exchanges and uncertainty about the outcome of the ongoing process to regulate financial markets, a number of our present and potential customers are experiencing profitability problems and postponing technology investments until the future. These circumstances impacted our sales of licenses during the quarter, although they were still on a good level. Total churn were also affected by the general market situation and rose to a higher level, compared to earlier during the year. On the whole, these developments reduced our ACV. 

It is pleasing to note that the largest business deal of the quarter was a combined Orc/Neonet solution. Several other cross-sales were also made, indicating that we are on the right track with the solutions we can offer in the new Group. 

Several positive signals could be perceived during the quarter; for example, demand for trading solutions with ETFs (exchange traded funds) and structured products in Europe, deals in the energy product trading market in the U.S., and the sale of licenses to a local Japanese bank. 

Transaction Services were also affected by the low volumes of trading. As a consequence, revenue decreased, compared to the preceding quarter, but with an unchanged transaction margin. However, we could see that revenues and margins were developing favorably toward the end of the quarter. 

Low volumes and uncertainty about regulations will probably also affect business in the last quarter. However, we are convinced that a number of activities will have positive effects, such as the launch of our new combined offerings, the development of our hosted solutions and new products, and our continuing work to improve the profitability of our Transaction Services. 

We are confident about achieving our synergy effects of SEK 130m during 2012 and reaching our goals for an anticipated operating margin of approximately 20% at the lowest in a weak market and an operating margin of 35% or higher in good times.  

About Orc Software
Orc is a leading provider of technology and services for the global financial industry. Orc delivers trading and market access solutions used by proprietary trading and market making firms, investment banks, hedge funds and brokerage houses worldwide. 

Available as deployed software or as managed services, Orc develops and provides the tools needed for running profitable trading or brokerage businesses in today’s competitive and ever-changing markets. 

Built on Orc’s in-depth of knowledge of the trading world, Orc Trading and Orc Brokerage solutions offer strong analytics, unmatched market access, high-frequency trading capabilities, automated trading strategies and execution, ultra-low latency and effective risk management. 

Complementing the Orc Group’s trading technology solutions, our Neonet business unit offers low-latency brokerage services to professional market participants, with clients in over 20 countries globally. CameronTec, an Orc company, is the market leader in FIX infrastructure and connectivity solutions. 

With market presence in all major global financial centers, Orc provides sales and support services from its offices across EMEA, the Americas and the Asia-Pacific regions. 

Orc Software is publicly traded on NASDAQ OMX Stockholm (SSE: ORC). 

For additional information visit www.orcsoftware.com.

Contact Information
CEO Thomas Bill, phone: +46 8 506 477 35
CFO Anders Berg, phone: +46 8 506 477 24

N.B. The English text is a translation of the Swedish text. In case of discrepancy between the Swedish and the English text the Swedish version shall prevail.

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