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Graphisoft Earnings Per Share in First Quarter Above Analyst Expectations

Company Reports Accelerated Revenue Growth; Revenues Up 16,5%, Net Income 29,7% of Revenues, Earnings Per Share Exceeding Expectations at 0,16 Euro; Remarkable Turnaround in Asia-Pacific Region and Lucrative Large Account Sales are Cited

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1999 First Quarter results
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Budapest - May 12, 1999

Graphisoft® (Frankfurt Neuer Markt: GPH), developer of the award-winning integrated architectural CAD program ARCHICAD®, today announced that its net revenues for the three months ended March 31, 1999, exceeded consensus expectations at 5,759 thousand EUROs (TEUR). Operating income and net income were more than 22,1% and 29,7% of revenues respectively.

Sales in the Asia-Pacific region were especially good. Following an extended period of decreasing results, the area was on the rebound in the first quarter of 1999, achieving a growth of nearly 20% compared to the same period in 1998. This helped accelerate the Company's total year-on growth to 16.5% in the quarter, up from 3.8% and 7.5% in the third and fourth quarters of 1998 respectively.

"The impressive turnaround in our Asia-Pacific operations demonstrates the success of Graphisoft's business strategy," commented President and CEO Gábor Bojár. "Our willingness to invest even in hard times and to slightly decrease our exceptionally high operating margin enables us to achieve our long-term objectives."

Sales in Germany, Austria and Switzerland attained a remarkable combined growth rate of 37.9% in the first quarter, compared to the same period of 1998. Sales performance in Europe as a whole grew by 19.6%. North American revenues continued their strong growth with gains of 25.1% on the previous year. These results more than compensated for the decreasing revenues coming from the "Rest of the World," due to the economic difficulties in Latin-America.

The Company continued its progressive expansion into the market of strategic large accounts. Lucrative deals in all segments and regions contributed to revenue gains. AV Jennings, Australia's largest residential builder, decided to base its CAD activity on ARCHICAD. Kirksey And Partners Architects, one of the most successful architecture firms in the southern United States, made ARCHICAD its CAD standard. Tokyo's famous Waseda University announced its decision to introduce ARCHICAD into a wide range of its educational courses later in 1999.

The global reach of ARCHICAD was further expanded to include a 25th language when the localized Estonian version of ARCHICAD hit the market in January. And with its acquisition in January of the Bauplan division of the German AEC company Wiechers & Partner GmbH - including its staff, Bauplan software and its related business activities - Graphisoft expanded its German client base by more than 700 architectural offices. The company plans to integrate Bauplan technology into future versions of ARCHICAD to strengthen its adherence to German CAD standards, broaden its market and extend its market-leading position in Germany.

Operating expenses grew by 25.4% from 2,787 TEUR in the first three months of 1998 to 3,493 TEUR in the same cycle of 1999. While adopting strict cost-controlling measures to maintain its outstanding profitability, Graphisoft continued to invest in R&D and marketing. A 59.9% increase in R&D expenses is due to a 14% staff expansion, and the merging of Bauplan developers into the team in Germany. Sales and marketing expenses grew from 29.7% of revenues to 31.2% of revenues in 1998 and 1999, respectively, partially due to an expanded sales staff and increased marketing costs, especially in Germany, Spain and North America. General and administrative expenses increased slower than revenues, by 7.9%.

Operating margin remained high at 22.1% of revenues; however, the operating income declined from 1,402 TEUR in the first three months of 1998 to 1,271 TEUR in the same period of 1999. The most important factors of the decrease are the write-off of goodwill on the Bauplan acquisition (1,278 TEUR, depreciated through seven years, 46 TEUR cost in this quarter), new facilities in Budapest and an almost 10 percent increase in staff.

Graphisoft maintained its outstanding profitability. Net income achieved 1,713 TEUR in the first quarter of 1999, a 3.6% increase compared to the same cycle in 1998. The company's net margin at 29.7% is exceptionally high in the industry.

The condensed financial data are as follows:

 

3 Months ended March 31, 1999

% to ‘98
same period3)

Revenues¹)

5,759

16.5%

Operating income¹)

1,271

-9.4%

EBITDA¹)

1,547

-0.1%

Net Income¹)

1,713

3.6%

Net Income per share²)

0.16

-5.9%

EBITDA stands for Earnings Before Interest and Taxes, Depreciation Added

1) Figures are in Thousand EUROs.
2) Per share figures are in EUROs.
3) All data previously reported in TDM have been translated to TEUR by using 1.95583 as denominator.

"We intend to implement our strategic goals as well as to maintain our double-digit growth and profitability in 1999 and onwards," said Bojár. "We are working to extend the value and relevance of our Virtual Building concept through development in pre-manufacturing construction technologies, such as log home buildings; integrating building component manufacturers into the design process through our SalesCAD program and partnerships with industry leaders; and extending the use of digital data into the maintenance cycle using our Building Management program."

Graphisoft is a leading provider of computer-aided design (CAD) software solutions for the architectural profession and the building industry. Founded in 1982 in Budapest, Hungary, Graphisoft is ranked today among the largest AEC CAD software developers in the world with offices in Budapest, Munich, San Francisco, Tokyo, Hong Kong, London and Madrid. Graphisoft's flagship product, ARCHICAD, is used by more than 55,000 architects worldwide and distributed in 25 localized language versions and 80 countries. Shares of Graphisoft are traded on the Frankfurt Stock Exchange Neuer Markt under the symbol GPH. More information about Graphisoft is available at www.graphisoft.com.

This press release contains statements that are forward looking. These statements are based on current expectations that are subject to risks and uncertainties. Actual results may vary because of factors such as technological shifts; customer demand; competitive products and pricing; shipping schedules; litigation; and other issues.

Graphisoft and ARCHICAD are registered trademarks of Graphisoft R&D Rt. All other trademarks mentioned are the properties of their respective owners.

Graphisoft is a leading provider of computer-aided design (CAD) software solutions for the architectural profession and the building industry. Founded in 1982, Graphisoft is ranked today among the largest AEC CAD software developers in the world, with 12 offices all over the world in addition to its headquarters. Graphisoft's flagship product, ARCHICAD, is used by more than 75,000 architects worldwide and distributed in 25 languages and 80 countries. Shares of Graphisoft are traded on the Frankfurt Stock Exchange Neuer Markt under the symbol GPH. More information about Graphisoft is available at www.graphisoft.com.