Lawson Software Reports Q3 FY05 Results; Company Achieves High End of

    Business Editors

    ST. PAUL, Minn.--(BUSINESS WIRE)--March 18, 2005--Lawson Software, Inc. (Nasdaq:LWSN), today reported revenues of $82.7 million for its fiscal 2005 third quarter ended Feb. 28, 2005, compared with revenues of $91.6 million in its fiscal 2004 third quarter. License fee revenues were $13.9 million in the third quarter, compared with $25.2 million in the fiscal 2004 third quarter. Services revenues were $68.8 million in the quarter, compared with $66.4 million in the fiscal 2004 third quarter, due to maintenance fees from support contracts purchased in April 2004.
    Net income was $2.8 million, or $0.03 per diluted share, compared with $2.6 million, or $0.02 per diluted share in the fiscal 2004 third quarter. Fiscal 2005 third quarter benefited from a reduction in accounts receivable reserves due to significant collections and recoveries which resulted in a $0.6 million favorable bad debt expense reduction and a $0.7 million favorable adjustment to revenue to reduce the product warranty provision. While operating income in the fiscal 2005 third quarter was $2.5 million compared with $3.4 million in the fiscal 2004 third quarter, net income benefited from a reduced provision for income taxes and increased interest income.
    Fiscal 2005 third quarter operating results include $4.2 million in pre-tax items consisting of $2.1 million in SEC legal investigation costs, $1.0 million in amortization of acquired maintenance contracts reflected in cost of services, $0.8 million in software amortization reflected in cost of license fees, $0.4 million in intangible amortization related to acquisitions, $0.1 million in non-cash stock-based compensation, and ($0.2) million in restructuring adjustments. There was also a ($0.4) million tax-related adjustment.
    For the nine months ended Feb. 28, 2005, the company posted a net loss of $677,000, or a loss of $0.01 per share, on total revenues of $248.4 million, compared with net income of $4.5 million, or $0.04 per diluted share, on total revenues of $263.9 million in the comparable fiscal 2004 period.
    Fiscal 2005 nine-month operating results include $14.6 million in pre-tax items consisting of $5.2 million in restructuring charges, $3.0 million in amortization of acquired maintenance contracts reflected in cost of services, $2.6 million in SEC legal investigation costs, $2.4 million in software amortization reflected in cost of license fees, $1.2 million in intangible amortization related to acquisitions, and $0.2 million in non-cash stock-based compensation. There was also a ($0.6) million tax-related adjustment.
    The company's cash, cash equivalents and marketable securities increased to $221.9 million at Feb. 28, 2005, from $208.9 million at Nov. 30, 2004. Days sales outstanding (DSO) were reduced to 46 during the third quarter, compared with 52 in the fiscal 2005 second quarter.

    Third Quarter Performance

    "We are clearly seeing the benefit from our corporate restructuring and strong cost and expense management," said Jay Coughlan, Lawson president and chief executive officer. "Although our business with current clients remains healthy, our software licensing activity with new clients was affected by ongoing questions about the direction of the software industry, which resulted in extended sales cycles and some delayed purchasing decisions. We are continuing to work on gaining prospects' confidence in selecting Lawson by focusing on our key strengths: we are financially healthy, our solutions are some of the best in the industry, we present strong value in the form of low total cost of ownership, and we value every client who joins the Lawson community."
    The company signed 100 deals in the quarter, compared with 124 in the second quarter. Of total contracting activity in the fiscal 2005 third quarter, approximately 64 percent came from existing clients and approximately 36 percent from new clients.
    During the quarter, the company signed 10 new clients at an average selling price of $478,000, compared with 15 new clients at an average selling price of $383,000 in the second quarter of fiscal 2005. The company signed four software licensing agreements valued at more than $1 million: Safeway in the Retail market; Chicago Housing Authority in the Government and Education market; and Mayo Clinic and JPS Health Network in the Healthcare market.

    Conference Call and Webcast

    The company will host a conference call to discuss its third quarter results and future outlook at 8:15 a.m. Eastern Time (7:15 a.m. Central Time), Friday, March 18, 2005.
    Interested parties may listen to the call by dialing 888-391-3141 (passcode Lawson 318) and international callers 1-517-308-9004. A live webcast will also be available on www.lawson.com. Interested parties should dial into the conference call or access the webcast approximately 10-15 minutes before the scheduled start time. A replay will be available approximately one hour after the conference call concludes and will remain available through Friday, March 25. The replay number is 866-383-3161 and international 1-203-369-0384. The webcast will remain on www.lawson.com for approximately two weeks.

    About Lawson Software

    Lawson Software provides business application software and services that put time on the side of services organizations in the healthcare, retail, government and education, banking and insurance and other markets. Lawson's software suites include enterprise performance management, distribution, financials, human resources, procurement, retail operations and service process optimization. Headquartered in St. Paul, Minn., Lawson has offices and affiliates serving North and South America, Europe, and Africa. Additional information about Lawson is available at www.lawson.com.

    Forward-Looking Statements

    This press release contains forward-looking statements that contain risks and uncertainties. These forward-looking statements contain statements of intent, belief or current expectations of Lawson Software, Inc., and its management. Such forward-looking statements are not guarantees of future results and involve risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. The company is not obligated to update forward-looking statements based on circumstances or events that occur in the future. Risks and uncertainties that may cause such differences include but are not limited to: uncertainties in the software industry; global military conflicts; terrorist attacks in the United States, and any future events in response to these developments; changes in conditions in the company's targeted service industries; increased competition and other risk factors listed in the company's most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission and as included in other documents the company files from time to time with the Commission.

LAWSON SOFTWARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED (in thousands)

February 28, 2005 May 31, 2004 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $73,128 $72,396 Marketable securities 146,732 128,065 Trade accounts receivable, net 42,299 65,236 Other current assets 39,149 35,761 ------------ ------------ Total current assets 301,308 301,458

Long-term marketable securities 2,006 8,521 Property and equipment, net 14,817 17,235 Goodwill and other intangible assets, net 77,718 83,809 Other assets 12,275 12,575 ------------ ------------ Total assets $408,124 $423,598 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $1,344 $1,652 Accounts payable and other accrued liabilities 43,679 51,375 Deferred revenue and client deposits 74,376 83,095 ------------ ------------ Total current liabilities 119,399 136,122

Long-term debt, less current portion - 990 Other long-term liabilities 3,354 3,600 ------------ ------------ Total liabilities 122,753 140,712 ------------ ------------

Stockholders' equity: Preferred stock - - Common stock 1,122 1,099 Additional paid-in capital 337,250 327,715 Treasury stock, at cost (73,448) (65,555) Deferred stock-based compensation (132) (774) Retained earnings 16,794 17,471 Accumulated other comprehensive income 3,785 2,930 ------------ ------------ Total stockholders' equity 285,371 282,886 ------------ ------------ Total liabilities and stockholders' equity $408,124 $423,598 ============ ============

LAWSON SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (in thousands, except per share data)

Three Months Ended Nine Months Ended ------------------------- ------------------------- February 28, February 29, February 28, February 29, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues: License fees $13,924 $25,195 $40,370 $65,169 Services 68,790 66,411 208,028 198,704 ------------ ------------ ------------ ------------ Total revenues 82,714 91,606 248,398 263,873 Cost of revenues: Cost of license fees 2,232 3,911 7,511 11,990 Cost of services 34,260 34,258 107,764 100,090 ------------ ------------ ------------ ------------ Total cost of revenues 36,492 38,169 115,275 112,080 ------------ ------------ ------------ ------------

Gross profit 46,222 53,437 133,123 151,793

Operating expenses: Research and development 15,527 16,940 46,828 47,132 Sales and marketing 17,681 23,615 58,216 68,111 General and administrative 10,325 9,090 26,486 28,400 Restructuring (153) - 5,237 2,210 Amortization of acquired intangibles 391 346 1,160 912 ------------ ------------ ------------ ------------ Total operating expenses 43,771 49,991 137,927 146,765 ------------ ------------ ------------ ------------ Operating income (loss) 2,451 3,446 (4,804) 5,028 Other income: Interest income 1,281 797 2,845 2,459 Interest expense (11) (18) (39) (56) ------------ ------------ ------------ ------------ Total other income 1,270 779 2,806 2,403

Income (loss) before income taxes 3,721 4,225 (1,998) 7,431 Provision (benefit) for income taxes 961 1,648 (1,321) 2,898 ------------ ------------ ------------ ------------ Net income (loss) $2,760 $2,577 $(677) $4,533 ============ ============ ============ ============

Net income (loss) per share: Basic $0.03 $0.03 $(0.01) $0.05 ============ ============ ============ ============ Diluted $0.03 $0.02 $(0.01) $0.04 ============ ============ ============ ============ Shares used in computing net income (loss) per share: Basic 99,342 98,650 98,651 98,472 ============ ============ ============ ============ Diluted 104,899 107,510 98,651 107,339 ============ ============ ============ ============

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CONTACT: Lawson Software, Inc., St. Paul Media contact: Terry Blake, 651-767-4766 terry.blake@lawson.com or Investors and analysts contact: Barbara Doyle, 651-767-4385 barbara.doyle@lawson.com

KEYWORD: MINNESOTA INDUSTRY KEYWORD: HARDWARE SOFTWARE NETWORKING INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Lawson Software, Inc.

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