Pitney Bowes Group 1 Software

Press Release

Date:
Monday, May 12, 2003
Contact:
Mark Funston
Phone:
(301) 731-2300
Email:
mark_funston@g1.com

Group 1 Software Reports Fourth Quarter and Fiscal Year Results

Fiscal Year Revenue Increases 17% and Net Income Up 98% Over Prior Year; Fourth Quarter Revenue up 21%; 71 % Increase in Net Income

Lanham, MD — Group 1 Software (Nasdaq: GSOF) today reported results for its fourth fiscal quarter and fiscal year ended March 31, 2003. The Company reported record fourth quarter revenue of $29.2 million, up 21% vs. the prior year's fourth quarter. Net income available to common stockholders increased 72% to $3.5 million, up from $2.0 million for the prior year's fourth quarter. Fully diluted earnings per share for the quarter increased to $0.22 per share from $0.14 per share the prior year.

For the entire 2003 fiscal year, the Company reported record revenue of $104.3 million, a 17% increase from $89.4 million the prior year. Net income available to common stockholders was $8.7 million, an increase of 99% from $4.4 million reported for the prior year. Fully diluted earnings per share were $0.59 as compared with $0.32 in the prior year, an 84% increase. All earnings per share data have been adjusted for the two-for-one split in the Company's common stock for shareholders of record as of November 15, 2002.

Total revenue for the quarter from Enterprise Solutions software and services was $19.8 million, a 19% increase over the prior year's fourth quarter. Total revenue from DOC1 Customer Communications Management software and services was $9.4 million, a 26% increase over the prior year's fourth quarter.

Fourth quarter license fee revenue for the Company increased 53% to $14.7 million vs. the prior year. License fees in the Enterprise Solutions division were up 46% to $10.3 million. License fees in the DOC1 division increased 70% to $4.4 million.

Group 1's cash position grew even stronger in the quarter. Cash and short-term investments totaled $64.2 million at March 31, 2003 compared with $55.3 million at December 31, 2002 and $47.6 million at March 31, 2002.

“We are obviously pleased with the very strong results we saw for the quarter and full year in both of our operating segments, especially in light of the depressed IT spending environment,” said Group 1's CEO, Bob Bowen. “Our traditional and new products all contributed to our growth both in the fourth quarter and over the full year.”

“We've entered the new fiscal year having announced our intent to acquire the key assets of Sagent Technology, Inc.,” continued Bowen. “We are very enthusiastic about this acquisition, as it will enable us to provide an even more comprehensive array of data quality and data enrichment technologies to the marketplace, and, as well, add the ability to integrate enterprise information from multiple databases. The transaction will also bring us a number of highly talented people, increase our customer base substantially, and expand our global distribution channels.”

At a recent meeting, Group 1's Board of Directors approved the acquisition. Closing is subject to approval by Sagent's shareholders.

“Excluding the potential impact of the pending Sagent acquisition, our guidance for the fiscal year ending March 31, 2004 remains unchanged,” said Group 1's CFO, Mark Funston. “The Company projects revenue growth in the range of 10% to 12% over fiscal 2003 and net earnings growth in the range of 24% to 28%. Additionally, we project that the Sagent acquisition will contribute approximately $30 million in revenue the first year and will be accretive within twelve months following the completion of the transaction.”

The Company will hold a conference call at 8:30 AM EST today to discuss these results. Interested parties are invited to listen to the call, which will be broadcast via the Internet at www.g1.com or by dialing 800-374-0565.

Group 1 Software (Nasdaq: GSOF) is a leading provider of software solutions for data quality, marketing automation, customer communications management and direct marketing applications. Group 1's software systems and services enable over 2,000 customers worldwide to market smarter by helping them find, reach and keep customers. Founded in 1982 and headquartered in Lanham, Maryland, Group 1's solutions are utilized by leaders in the financial services, banking, retail, telecommunications, utilities, e-commerce, and insurance industries. The company's customer base includes such recognized names as Charles Schwab, Entergy, GEICO, L.L. Bean, Wal-Mart and Wells Fargo. For more information about Group 1, visit the company's Web site at http://www.g1.com.

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Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation reform Act of 1995. Words like “are enthusiastic”, “announced our intent”, “guidance” and “projects” are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Readers are cautioned not to place undue reliance of these forward-looking statements, which address the conditions as they are found on the date of this press release. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances that arise after the date of this press release or to reflect the occurrence of unanticipated events. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. Group 1 Software and DOC1 are registered trademarks of Group 1 Software, Inc.

Additional Contact InformationMark FunstonCFOGroup 1 Software301.918.0381mark_funston@g1.comDavid PeikinCorporate Communications ManagerGroup 1 Software301.918.0818pr@g1.comCharles MessmanMKR Group626.395.9500cmessman@mkr-group.com GROUP 1 SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Adjusted to reflect the 2 for 1 stock split approved by the Board of Directors on November 5, 2002) (In thousands, except per share data) (Unaudited)

For the Three For the Twelve Month Period Month Period Ended March 31, Ended March 31, 2003 2002 2003 2002 Revenue: Software license and related revenue $14,749 $9,666 $48,480 $32,996 Maintenance and services 14,414 14,448 55,772 56,432 Total revenue 29,163 24,114 104,252 89,428

Cost of revenue: Software license expense 4,080 3,747 15,293 12,051 Maintenance and service expense 4,413 4,516 17,094 20,802 Total cost of revenue 8,493 8,263 32,387 32,853

Gross profit 20,670 15,851 71,865 56,575

Operating expenses: Research and development 3,214 2,537 11,800 10,345 Sales and marketing 9,235 6,912 32,947 28,845 General and administrative 3,758 3,107 14,626 11,255 Total operating expenses 16,207 12,556 59,373 50,445

Income from operations 4,463 3,295 12,492 6,130

Non-operating income Interest income 278 289 1,157 1,589 Interest expense (12) (118) (301) (372) Other non-operating income (expense) 236 --- 14 (69) Total non-operating income 502 171 870 1,148 Income before provision for income taxes 4,965 3,466 13,362 7,278

Provision for income taxes 1,490 1,433 4,602 2,852

Net income 3,475 2,033 8,760 4,426

Preferred stock dividend requirements (2) (14) (44) (56)

Net income available to common stockholders $3,473 $2,019 $8,716 $4,370

Basic earnings per share $0.26 $0.16 $0.67 $0.35

Diluted earnings per share $0.22 $0.14 $0.59 $0.32

Basic weighted average shares outstanding 13,543 12,552 13,029 12,474

Diluted weighted average shares outstanding 15,586 14,028 14,734 13,798

GROUP 1 SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS (In thousands, except par value)

March 31, March 31, 2003 2002

ASSETS Current assets: Cash and cash equivalents $56,475 $22,936 Short-term investments, available-for-sale 7,712 24,669 Trade and installment accounts receivable, less allowance of $1,755 and $2,058 18,834 17,551 Deferred income taxes 2,130 1,718 Prepaid expenses and other current assets 4,067 3,219

Total current assets 89,218 70,093

Installment accounts receivable, long-term 39 263 Property and equipment, net 4,707 5,797 Computer software, net 23,490 22,873 Goodwill 12,716 12,686 Other assets 206 167 Total assets $130,376 $111,879

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,358 $1,198 Current portion of note payable and capital lease obligation 371 3,496 Accrued expenses 7,033 5,857 Accrued compensation 9,454 3,732 Current deferred revenues 31,241 28,833

Total current liabilities 49,457 43,116 Notes payable, net of current portion 350 3,630 Deferred revenues, long-term 315 197 Deferred income taxes 4,694 4,534

Total liabilities 54,816 51,477

Commitments and contingencies --- ---

Stockholders' equity: 6% cumulative convertible preferred stock $0.25 par value; 1,200 shares authorized; 0 and 48 shares issued (aggregate involuntary liquidation preference $950) --- 916 Common stock $0.50 par value; 50,000 shares authorized; 14,902 and 13,836 shares issued 7,451 6,918 Additional paid in capital 34,951 29,620 Retained earnings 37,619 28,903 Accumulated other comprehensive income (loss) 184 (1,368) Less treasury stock, 1,246 and 1,240 shares, at cost (4,645) (4,587)

Total stockholders' equity 75,560 60,402

Total liabilities and stockholders' equity $130,376 $111,879