Insightful Announces Operating Results for First Quarter 2007

Reports 12% Revenue Growth over First Quarter 2006

SEATTLE - May 4, 2007 -

Insightful Corporation (NASDAQ: IFUL), a leading provider of predictive analytics and reporting solutions, today announced its operating results for the first quarter ended March 31, 2007.

Insightful reported total revenues of $6.2 million in the first quarter of 2007, an increase of 12% over revenues of $5.5 million in the first quarter of 2006. Total revenues associated with the company’s core data analysis product line increased by 16% in the first quarter of 2007 compared to the first quarter of 2006. Revenues associated with the company’s text analysis product, InFact, decreased from $0.4 million in the first quarter of 2006 to $0.2 million in the first quarter of 2007. For the first quarter of 2007, Insightful reported a net loss of $1.1 million, or $0.09 per share. Net loss for the first quarter of 2006 was $43,000, or break-even per share.

Non-GAAP operating results, which exclude stock-based compensation expense and amortization of intangible assets, was a loss of $0.8 million, or $0.06 per share, for the first quarter of 2007, compared to non-GAAP earnings of $0.3 million, or $0.02 per share, for the first quarter of 2006. As described in the section below entitled “Use of Non-GAAP Financial Measures,” non-GAAP earnings or loss differs from net income or loss reported under accounting principles generally accepted in the United States (GAAP) due to the exclusion of stock-based compensation expense and the amortization of intangible assets. The reconciliation of Insightful’s GAAP net loss to its non-GAAP operating results for the quarters ended March 31, 2007 and 2006 are set forth at the end of this release.

“The first quarter marked our second consecutive quarter of double digit year-over-year revenue growth,” said Jeff Coombs, president and CEO of Insightful Corporation. “More importantly, we made significant progress in building our vertical solutions organization and enhancing our platform development team. While the increased investments contributed to a loss in the first quarter, they are aimed at creating a product and solutions portfolio that will enable us to accelerate our growth. Our product investment strategy is focused on delivering an increasingly enterprise-scalable predictive analytic platform, and to that end we plan to make our S-PLUS® 8.0 Enterprise Developer product generally available later this quarter. In addition, we plan to deliver a series of high-value solutions targeted at the life science and financial services industries starting later this year.”

Quarterly Highlights

* Software license revenues were $2.0 million in the first quarter of 2007, as compared to $2.4 million in the first quarter of 2006. License revenues from the company’s data analysis product line declined from $2.1 million to $1.9 million. License revenues from the company’s InFact product declined from $0.3 million to $0.1 million. Maintenance revenues were $2.0 million in the first quarter of 2007, as compared to $1.8 million in the first quarter of 2006.
* Professional services and other revenues were $2.1 million in the first quarter of 2007, as compared to $1.3 million in the first quarter of 2006.
* Funded research, which is an offset to research and development expense in the company’s income statement, was $0.5 million in the first quarter of 2007, as compared to $0.6 million in the first quarter of 2006.
* Domestic revenues were $3.1 million in the first quarter of 2007, as compared to $3.4 million in the first quarter of 2006. International revenues were $3.1 million in the first quarter of 2007, as compared to $2.2 million in the first quarter of 2006.
* The company merged its data analysis and text analysis business segments. The S-PLUS predictive analytic product line and the InFact text analytic product will be sold by a single, worldwide enterprise sales force. The company’s current product development and marketing focus is on its data analysis product line.
* The company accelerated its investment in solutions focused on the financial services and life sciences vertical markets, and on enhancing its core S-PLUS predictive analytic platform. As a result, net research and development expenses increased 38% to $1.5 million in the first quarter of 2007, from $1.1 million in the first quarter of 2006, and increased as a percentage of revenues from 20% to 24%. .

Guidance

For the second quarter of 2007, Insightful expects revenues to increase over the second quarter of 2006. The company expects costs in the second quarter of 2007 to be higher than in the first quarter of 2007 as it continues to set the foundation for future growth by investing in sales, marketing and development of its product lines. Because of these investments, management believes the company will incur both a GAAP and a non-GAAP loss in the second quarter of 2007.

Use of Non-GAAP Financial Measures

The non-GAAP financial measure of earnings or loss included in this press release is different from the GAAP measure of net income or loss, as this non-GAAP measure excludes certain expenses otherwise included in the computation of net income or loss. Insightful believes this non-GAAP measure is useful to enhance an overall understanding of its past financial performance and also its prospects for the future. These adjustments to the company’s GAAP results are presented with the intent of providing both management and investors a more complete understanding of Insightful’s underlying operating results and trends. This non-GAAP measure is among the primary indicators management uses as a basis for planning and forecasting of future periods.

The expenses excluded from Insightful’s GAAP results include stock-based compensation expense and amortization of intangible assets arising from the 2004 acquisition from Lucent Technologies, Inc. of the title to the software code underlying the “S” programming language. Stock-based compensation expense and amortization of intangible assets have no current effect on cash or the future uses of cash. Insightful’s stock-based compensation expense fluctuates with changes in the company’s stock price and interest rates. For this reason, changes in stock prices and interest rates could mask variation and trends in Insightful’s GAAP operating results that may otherwise be important to an understanding of the company’s results. The acquisition of intangible assets was an event outside of the course of Insightful’s normal business operations. For these reasons, management believes that exclusion of stock-based compensation expense and amortization of intangible assets may be important to an understanding of Insightful’s ongoing operating performance.

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