Telelogic Reports Profitable Growth for Second Quarter 2004

MALMÖ, Sweden – July 21, 2004 – Telelogic (Stockholm Exchange: TLOG), the leading global provider of solutions for advanced systems and software development, today announced second quarter revenues of US$33.4 million (SEK 251.5 million). This is a 16 percent increase, at constant exchange rates, compared to Q203 when Telelogic revenues were US$28.0 million (SEK 223,5) million). Pre-tax profit for the second quarter increased significantly to US$4.9 million (SEK 36.6 million) compared to US$-2.0 million (SEK -15.9 million) for Q2 2003. Cash flow for the quarter was also positive at US$6.9 million (SEK 51.9 million). Sales of new licenses and maintenance agreements were particularly strong, showing continued growth, totalling US$27.3 million (SEK 205.9 million). This is a 17 percent increase, at constant exchange rates, compared with Q203. Services revenue for the first quarter amounted to US$6.1 million (SEK 45.6 million), a 10 percent increase at constant exchange rates, compared with the same quarter the previous year. “The second quarter was very strong,” said Anders Lidbeck, president and CEO for Telelogic. “Growing revenues coupled with continued firm cost control, resulted in a 16 percent operating margin, taking us one step closer to the long term objective of a operating margin of 20 percent. We continue to build a solid financial platform on top of a strong and a very good market position, for continued earnings improvements in 2004.” Telelogic’s operation in the US realized 24 percent growth compared with the same quarter 2003. And in Asia, Telelogic had a record quarter with 44 percent year-over-year growth, as a result of continued strong license sales. Profitability in both regions continues. In Europe, revenues have increased 5 percent compared with the same period last year, with a 25 percent smaller – yet more nimble and focused – sales organization. Additionally, Telelogic implemented a cost cutting program during the summer of 2003, with a positive effect on profitability. The contribution margin in Europe increased exponentially, from 19 percent for the second quarter 2003 to 36 percent for the first quarter this year. Telelogic's business in the aerospace/defense segment delivered another strong quarter with 37 percent revenue growth, retaining its position as the company's largest vertical market with 36 percent of sales. During the last two years, sales to this sector have increased quarter to quarter. Sales in the telecommunications sector have stabalized, although major growth was achieved in Asia/Pacific. Overall, sales in the telecom segment declined by 1%. In addition, sales in the automotive industries remained strong, especially in Asia/Pacific. Sales of Telelogic’s market-leading requirements management tool, DOORS®, increased 33 percent, while revenues for SYNERGY™ increased by 3 percent, based on growth in the Asia/Pacific which is attributed to a newly realeased Asian version. The TAU® product line sales increased 5 percent. Telelogic’s performance has honored the company with a place on Computer Business Review’s (CBR) top 10 list of the most influential companies in application development for 2004. Last year, Telelogic ranked ninth and this year, Telelogic moved up to seventh among leading industry counterparts such as Microsoft, IBM, and Sun Microsystems. The CBR research report, “Under the Shadow” praises Telelogic as “a strong European contender in a field dominated by U.S. companies.” “This is the second year in a row that Computer Business Review has bestowed top 10 honors on Telelogic for our innovative application development tools,” said Anders Lidbeck, president and CEO of Telelogic. “This recognition reflects Telelogic’s ongoing commitment to providing our customers with best-in-class solutions.” Outlook for 2004 The underlying demand in the marketplace is assessed as good. Telelogic expects that demand will continue to develop favorably now that the investment climate is gradually stabilizing and improving. Telelogic’s forecast is unchanged in comparison with previous interim reports. The Company’s goal during the coming years is to increase sales by at least 10% per year in local currency. During 2004, this goal will only apply to the Company’s operations in the Americas and Asia. Within the framwork of this goal, Telelogic also intends to strongly improve its market position in Asia, and during the next three years, double its operations there. For operations in Europe during 2004, attainment and consolidation of the long-term goals for productivity and profitability are prioritized. When these goals have been achieved, the Company’s growth objectives will also include the European operations. During 2004, the Company will focus on further improving operating income so as to be able to enduringly attain its goal of a 20 percent operating margin, excluding goodwill depreciations, which was set in 1999. The forecast is that this goal will be attained towards the end of 2004. It is the Company’s intention that pre-tax profit and cash flow for 2004 shall improve significantly in comparison to the previous year. Note: The results presented are based on Swedish Accounting Principles. This report has not been subject to special review by Telelogic’s auditors. During the quarter, there has been no modification of the accounting principles. The full report is available for download as pdf-file. Safe Harbor Statement The foregoing, including the discussion regarding the company's future prospects, contains certain forward-looking statements that involve risks and uncertainties, including uncertainties associated with economic conditions in the high-tech industry, particularly in the principal industry sectors served by the company, changes in customer requirements, the ability of the company to assimilate acquired businesses and to achieve the anticipated benefits of such acquisitions, competition and technological change. The company's actual results of operations may differ significantly from those contemplated by such forward-looking statements as a result of these and other factors, including factors set forth in the company's Annual Report.