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Aggressive Investment in New Products and New Markets During First Six Months of 1999

Graphisoft Maintains Strong Profitability with Continued Growth in Traditional Markets

Download the
1999 Second Quarter results
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Budapest - August 12, 1999

Graphisoft® (Frankfurt Neuer Markt: GPH), developer of the award-winning integrated architectural CAD program ARCHICAD®, today announced revenues for the three months and six months ended June 30, 1999, of 5,937 and 11,696 thousand EUROs (TEUR) respectively, representing a 10.9% and 13.6% increase over the same periods last year.

During the first six months of 1999, Graphisoft laid the groundwork to ensure continuing double-digit growth and profitability by initiating ambitious R&D investments in new products and new markets.

"1999 marks the beginning of a new phase in the history of Graphisoft and our strategy for the next decade was established in the first two quarters," said Graphisoft President and CEO Gábor Bojár. "We are exploiting the potential of the information technology (IT) revolution within the building industry by developing a new product line that integrates pre-manufacturing technologies with the building design (building CAD/CAM); internet-based marketing and e-commerce with the building design; and building management with the design."

Revenues from the new product line are expected to accelerate growth from year 2000 and beyond. Management estimates that the new product line revenue will account for 10-15% and 20-25% of total revenues in year 2000 and 2001 respectively. In a five-year perspective, these new revenue sources may exceed the traditional ARCHICAD revenues, while ARCHICAD sales are also expected to improve due to the synergic effect of the new product line.

Graphisoft can afford to invest heavily in R&D, thanks to its consistently strong revenues, which carried over into the first half 1999. ARCHICAD sales in Europe increased considerably over the same period of 1998, particularly in France (50.6%), Austria (44.2%), Germany (29.4%) and Switzerland (26.8%). North America achieved a 30.5% revenue growth on a comparative basis, representing a continuing momentum in the most competitive marketplace. The impressive turnaround in the Asia/Pacific region continued in the second quarter of 1999, resulting in a significant revenue growth of 22.6%.

Within the total revenue growth, several key sales should be highlighted as important milestones in Graphisoft's strategy to extend its traditional core market of small- and medium-sized practices to include large architectural and construction firms. These firms include AV Jennings, Australia's leading residential homebuilder; Kirksey and Partners Architects, one of the most successful architecture and interior architecture firms in the southern United States; and China Space Civil and Building Engineering Design Research Institute (CSCBI), an affiliate of China Aerospace Corporation (CASC).

While the economic crisis in Latin America slowed down revenue in the Rest of the World, Graphisoft implemented the necessary measures to secure long-term growth in these regions. The company confirmed its commitment to a strong global presence and to supporting its loyal user base by announcing two new Graphisoft subsidiaries, in São Paulo, Brazil; and Santiago, Chile.

As a sign of Graphisoft's increased global profile and awareness, The Wall Street Journal named Bojár as its Leading Central European Executive in 1998. Bojár also had the honor of speaking to an audience of over 1000 professionals at the Industry Leaders Keynote panel of A/E/C Systems '99 in Los Angeles, as well as deliver a keynote address in Beijing at the 20th World Congress of the International Union of Architects (UIA).

Graphisoft's core product, ARCHICAD, also received international attention when it was voted "Best Architectural CAD" at the Designers 3D CAD Shootout 1999 competition, in addition to winning a total of nine gold medals. Students of more than 500 universities, colleges and other institutions of higher education around the world recognize ARCHICAD's winning edge. Among the universities that began introducing ARCHICAD into their curriculum in 1999 are Yale University, Tokyo's famous Waseda University, Tsinghua University - the most prestigious university in China - and seven leading architectural universities and schools in Belgium.

The investment in new subsidiaries played a part in the rise in operating expenses in the first six months of 1999, but the majority of the new investments and the corresponding expense increase were allocated to R&D, where a new division was founded and 13 new software engineers were hired. A 26.1% growth in general and administration expenses is attributable to the continuing expenses of being publicly listed, amortization expenses of Graphisoft's new headquarters facilities, and legal costs. The unexpected decline of net income is mostly attributable to the weakness of the EURO that caused the Company to realize exchange rate loss in the three months ended June 1999.

The operating income and net income were 18.7% and 20.6%, respectively, of revenues in the first six months of 1999, representing high profitability in industry comparison. Present profit rate is in line with long-term targets and Graphisoft's aggressive investment strategy in new projects is expected to bring new revenues in year 2000 and beyond.

"New products and technologies to be launched by Graphisoft are expected not just to open brand new market opportunities, but more importantly to build new value for the Virtual Buildingä, thus further increasing the market for ARCHICAD, the primary "authoring tool" of Virtual Buildings," explained Bojár. "And while investing in a completely new product line, we continue to improve ARCHICAD in order to maintain and further increase its technological advantage in the architectural design market."

The condensed financial data are as follows:

3 month ended June 1999

6 months ended June 1999

Percentage to Revenue

3 months

6 months

Revenues

5,937

11,696

n.a.

n.a.

Operating Income

916

2,187

15%

19%

EBITDA

1,211

2,758

20%

24%

Net Income

701

2,414

12%

21%

Net Income per share

0.07

0.22

n.a.

n.a.

All amounts are in thousand EUROs, except Net Income per share, which is in EURO.

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 offices in Budapest, Munich, San Francisco, Tokyo, Hong Kong, London, Madrid and São Paulo. Graphisoft's flagship product, ARCHICAD, is used by more than 65,000 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.

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.