"We are continuing to benefit from service-oriented architectures (SOA) as a driver of IT spending for our business rule management system (BRMS) offering, especially in Europe," said ILOG Chairman and CEO, Pierre Haren. "We had good growth across all of our geographic regions this quarter and a strong overall product license growth of 24%. Our professional services also grew an impressive 49%, which is particularly gratifying for us as successful consulting engagements frequently lead to additional license sales from our installed base."
Professional services growth was a major highlight, particularly in the U.S., as businesses increasingly engaged ILOG expertise to speed the deployment and lower the risk of their BRMS and planning and scheduling projects. Maintenance revenue growth of 15% was in line with the company's expectations.
BRMS product growth of 39%, including license and maintenance revenues, in the second quarter was led by the banking sector, particularly in Europe, and capped off a strong 2006 calendar year for that product line. The quarter's largest deals included more business from the Santander Group's IT division, which added ILOG Rules for .NETÂ® to its SOA strategy, and a deal with a leading global financial firm where ILOG JRulesÂ® will be used for account management and financial reporting applications in the U.S. and in the UK. A large Australian banking group will use ILOG JRules, in conjunction with FileNet'sÂ® P8 Business Process Management Suite, to service residential mortgages in Australia.
Optimization product revenues grew 4%, including license and maintenance fees. The optimization highlights of the quarter included successful deployment of a second Fab PowerOpsTM (FPO) module, the Company's semiconductor production scheduling product, at IBM'sÂ® Fishkill semiconductor fab facility. Another highlight included the successful deployment of ILOG Plant PowerOpsÂ® by a leading international food and beverage company, resulting in added services revenue for the quarter.
"We're investing to extend our optimization product line and have restructured our sales organization to better leverage higher-value segments of the manufacturing and supply chain markets. This quarter, some of our high-profile customers have endorsed this strategy through product and services purchases. In addition, the Company's success with FPO at IBM has led to a joint marketing deal where IBM will market FPO as part of the IBM ViewTM suite of manufacturing execution systems. We are optimistic as we enter the New Year that these investments and the joint marketing agreement with IBM will pay dividends," added Haren.
Our visualization product line experienced better results than in the previous quarters with a year over year growth of 9%, including both license and maintenance revenues, as a result of some mid-sized deals from leading telecom, defense and transportation companies in Europe and Asia.
On a calendar year basis, 2006 shows a sharp improvement over 2005, with US GAAP revenue growth of 17%, from $126 million in calendar year 2005 to $147 million in calendar year 2006, and net income improving 46%, from $4.6 million in calendar year 2005 to $6.7 million in calendar year 2006.
Due to positive market trends that will likely continue to favor the Company's current offerings, ILOG's management increases its revenue growth target for fiscal year 2007 from 10% to more than 17% compared to FY06, while maintaining its goal of improved US GAAP profit year over year.