PeopleSoft Announces Strong Fourth Quarter Results

PeopleSoft Announces Strong Fourth Quarter Results

Q4 License Revenue $143 Million, EPS at 18 Cents

Auckland, January 23, 2003 – PeopleSoft, Inc. (Nasdaq: PSFT) today announced its fourth quarter and full year 2002 results. For the quarter ended December 31, 2002, the Company reported Q4 licence revenues of $143 million, exceeding the Company’s guidance of $125-$135 million. Fourth quarter total revenues were $512 million. PeopleSoft also reported Q4 EPS of $0.18, above the Company’s guidance of $0.14-$0.15. Fourth quarter operating income was $78 million, a 25 percent increase over the prior quarter. As a percentage of revenue, fourth quarter operating margins increased to 15.3 percent, up from 13.3 percent in Q3.

For the year ended December 31, 2002, the Company reported licence revenues of $530 million and total revenue of $1.9 billion. On a recurring basis, 2002 operating income was a record $263 million and as a percentage of revenue, increased to 13.5 percent. For the full year of 2002, net income from recurring operations increased to a record $192 million. In 2002, EPS from recurring operations was $0.60, the highest in the Company’s history and an increase from $0.59 in the prior year. 2002 net income including non-recurring items was $183 million and EPS was $0.57.

The Company’s cash and investment balances at December 31, 2002 increased to $1.9 billion, an increase of $166 million over the prior quarter and $256 million over the prior year. Cash flow from operations was $389 million for the year. Days sales outstanding (DSO) at December 31, 2002 was 63 days.

Management Commentary
“PeopleSoft delivered strong results in a difficult year,” said President and CEO Craig Conway. “Clearly setting us apart from our competitors, PeopleSoft posted record operating income, record net income and record EPS. The Company also gained market share across all product lines and expanded its technology leadership by delivering more than 35 new products.

“Looking ahead to 2003, PeopleSoft is extremely well positioned to succeed in any economic climate,” said Conway. “Our superior internet architecture, broad range of applications, global strength and financial stability are compelling advantages,” Conway concluded.

Customer Wins
Leading organisations around the world continue to choose PeopleSoft applications to move their business processes on line and operate in real time.

PeopleSoft won significant deals against its competitors in the fourth quarter. Organisations that purchased PeopleSoft enterprise applications include: ABN AMRO, Agilent Technologies, Air New Zealand, Albertson’s, cablecom GmbH, Citigroup, DaimlerChrysler AG, Queensland Department of Employment & Training, Development Bank of Singapore, Electronic Data Services, Fireman’s Fund Insurance, J.C. Penney, Kaiser Permanente, IBM de Mexico, Marquette University, Nextel Operations, PepsiCo, Peugeot Citroen Automobiles, Scottish Water, Scottish & Newcastle Retail Limited, Thai Farmers Bank Public Company Limited, United Parcel Service, United States Navy, Verizon Wireless, and Waste Management.

Net Income Including Non-Recurring Items
There were no significant non-recurring items in the fourth quarter of 2002 or 2001 and per share results including non-recurring items were equivalent to the per share results from recurring operations in both periods.

The full year 2002 results include non-recurring acquisition-related charges of $11.5 million ($10.4 million after-tax) for purchased in-process research and development and a favourable adjustment of $1.2 million ($0.7 million after tax) related to existing restructuring reserves. Including these non-recurring items, 2002 operating income was $253 million, and net income was $183 million or $0.57 per share.

The full year 2001 results include two non-recurring items, a favourable adjustment to existing acquisition reserves of $4.9 million ($4.9 million after-tax) and acquisition related charges for purchased in-process research and development of $4.9 million ($3.1 million after-tax). Including these non-recurring items, net income for 2001 was $191.6 million or $0.59 per share, equal to the per share results from recurring operations.

About PeopleSoft
PeopleSoft (Nasdaq: PSFT) is the world’s leading provider of application software for the real-time enterprise. PeopleSoft pure internet software enables organisations to reduce costs and increase productivity by directly connecting customers, suppliers, partners and employees to business processes on-line, in real time. PeopleSoft’s integrated, best-in-class applications include Customer Relationship Management, Supply Chain Management, Human Capital Management, Financial Management and Application Integration. Today more than 5,000 organisations in 140 countries run on PeopleSoft software. For more information, visit us at www.peoplesoft.com.

PeopleSoft and the PeopleSoft logo are registered trademarks and Pure Internet Architecture is a trademark of PeopleSoft, Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2003 PeopleSoft, Inc. All rights reserved.

Statements made in this press release that state the Company or management’s intentions, beliefs, expectations, or predictions for the future are forward-looking statements. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. The specific forward-looking statements relate to such matters as the current and expected technology spending and macro-economic environment, the Company’s competitive position and the market acceptance of existing products and services, as well as those under development. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the Company’s actual results to differ materially from those projected. These risks, assumptions and uncertainties include: economic conditions in the U.S. and abroad; the ability to complete and deliver products and services within currently estimated time frames and budgets; the ability to achieve revenues from products and services that are completed or are currently under development; competitive and pricing pressures; and other risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission. Please refer to the Company’s annual report to shareholders (Form 10-K) and subsequent filings on Form 10-Q for more information on the risk factors that could cause actual results to differ.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)

THREE MONTHS ENDED
DECEMBER 31, TWELVE MONTHS ENDED
DECEMBER 31,

2002 2001 2002 2001
Revenues:
Licence fees $ 143,242 $ 174,075 $ 530,077 $ 645,421
Services 369,014 346,867 1,411,341 1,370,953
Development and other services - 18,714 7,530 102,713
Total revenues 512,256 539,656 1,948,948 2,119,087

Costs and expenses:
Cost of licence fees 12,039 14,800 45,142 61,323
Cost of services 166,025 182,961 661,083 744,163
Cost of development and other services - 16,922 6,755 93,124
Sales and marketing expense 136,427 130,299 514,800 513,928
Product development expense 88,305 75,186 341,187 298,998
General and administrative expense 32,219 39,083 117,070 155,567
Restructuring, acquisition and other charges (1,204) - 10,275 12
Total costs and expenses 433,811 459,251 1,696,312 1,867,115

Operating income 78,445 80,405 252,636 251,972
Other income, net 9,276 7,793 30,600 37,603
Income before provision for income taxes 87,721 88,198 283,236 289,575
Provision for income taxes 30,311 30,428 100,647 98,021
Net income $ 57,410 $ 57,770 $ 182,589 $ 191,554

Basic income per share $ 0.18 $ 0.19 $ 0.59 $ 0.64
Shares used in basic per share computation 313,170 303,739 310,777 297,999

Diluted income per share $ 0.18 $ 0.18 $ 0.57 $ 0.59
Shares used in diluted per share computation 318,256 323,081 320,310 323,625

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except employee count)
(unaudited)

DECEMBER 31,
2002 DECEMBER 31,
2001

Assets:
Current assets:
Cash and cash equivalents $ 319,344 $ 433,700
Short-term investments 1,588,172 1,199,046
Accounts receivable, net 357,353 375,437
Income taxes receivable - 7,288
Deferred tax assets 40,559 58,088
Other current assets 45,448 59,309
Total current assets 2,350,876 2,132,868

Property and equipment, net 222,800 214,162
Investments 21,946 40,587
Deferred tax assets 149,187 136,048
Capitalised software, net 44,101 16,213
Other assets 59,653 49,243
$ 2,848,563 $ 2,589,121

Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable and accrued liabilities $ 132,687 $ 181,761
Accrued compensation and related expenses 172,566 184,237
Income taxes payable 48,095 47,352
Convertible debt - 57,000
Short-term deferred revenues 422,657 409,316
Total current liabilities 776,005 879,666

Long-term deferred revenues 95,460 98,025
Other liabilities 21,486 19,490

Stockholders’ equity:
Common stock 3,150 3,068
Additional paid-in capital 1,382,442 1,226,155
Retained earnings 599,803 417,214
Treasury stock (35,563) (35,414)
Accumulated other comprehensive income (loss) 5,780 (19,083)
1,955,612 1,591,940
$ 2,848,563 $ 2,589,121

Worldwide employee count 8,293 8,436

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