According to a Gartner report published in November 2002, Global 1000 enterprises spend nearly $1 trillion annually on marketing. Despite the significant amounts spent on media advertising, promotions, direct marketing activities, Internet advertising and other marketing services, most businesses have not automated their marketing functions. Other business functions, such as sales, manufacturing, logistics and finance, have implemented comprehensive enterprise software applications to automate workflow, business processes and information management. Marketing organizations, however, typically continue to rely on manual processes, internally developed software programs, and desktop office productivity software such as graphics packages, word processing and spreadsheets to conduct marketing activities.

Enterprise marketing management, or EMM, software can help a business manage the complexities and processes of marketing and facilitate the operation of a customer-centric business, all while driving revenue growth and cost efficiencies. One way in which EMM software can help a business achieve these benefits is by providing a marketing organization with the means to develop a better understanding of existing and prospective customers. EMM software also can help a marketing organization deliver more personal and compelling marketing throughout the customer lifecycle. In addition, a marketing organization can employ EMM software to allocate marketing resources and to measure and analyze the results of its marketing efforts. Moreover, due to the large size of the marketing budgets of many businesses, a modest improvement in the efficiency of a marketing organization through a more robust, comprehensive software solution can create significant savings.

Based on these potential benefits, including the substantial, measurable return on investment offered by EMM software, a sizable market opportunity has developed for providers that can offer a comprehensive EMM solution. According to a report published by International Data Corporation in March 2004, worldwide license and maintenance revenue from packaged marketing automation software is forecasted to increase from $1.4 billion in 2003 to $2.1 billion in 2008.

Affinium Campaign allows marketing organizations to easily create, test and execute customer interaction strategies across outbound and inbound touch points using a common graphical user interface. Marketers can quickly create powerful marketing campaign logic using graphical flowcharts. Reusable campaign templates can be adapted to deliver personalized acquisition, retention, cross-selling and other treatment strategies through outbound channels such as direct mail, email, telemarketing and the web.

Affinium Model enables marketing organizations to automate the creation of accurate predictive models to determine customer response propensities, recognize customers at risk of attrition, identify significant customer behaviors, analyze customer attributes and preferences, discover cross-selling opportunities, and forecast customer value. Accurate models can be developed and deployed quickly to target likely responders to a particular marketing offer.

Affinium Plan provides marketing operations and resource management capabilities that help marketers define, coordinate, monitor and measure marketing program activities. Affinium Plan provides visibility into all marketing initiatives, thereby enabling businesses to improve their decision-making, management and overall productivity for those initiatives.

Affinium Leads enables marketers to better manage the qualification, enrichment, distribution and maturation of leads from the sales and marketing organizations, resulting in increased closure rates and revenue. Affinium Leads helps automate the analysis, prioritization and distribution of leads based on easily defined business rules that can incorporate sophisticated analytics, regional overlays, product group hierarchies and channel partners.

The Company provides a full range of services to its customers through three principal services groups. The Company’s professional services group provides implementation, training and consulting services to its customers, MSPs and systems integrators. The Company provides maintenance on a centralized basis from its headquarters in Waltham, Massachusetts. The Company’s dedicated customer success group focuses on maintaining and expanding customer relationships around the world.

Cost of revenues was $5.4 million for the six months ended March 31, 2005, an increase of $1.4 million or 35% compared to cost of revenues of $4.0 million for the six months ended March 31, 2004.

Gross profit was $24.5 million for the six months ended March 31, 2005, an increase of $7.1 million or 41% compared to gross profit of $17.4 million for the six months ended March 31, 2004.

Operating expenses were $22.2 million for the six months ended March 31, 2005, an increase of $6.5 million or 42% compared to operating expenses of $15.7 million for the six months ended March 31, 2004.

Income from operations was $2.4 million for the six-month period ended March 31, 2005, an increase of $583 thousand or 32% compared to $1.8 million for the six-month period ended March 31, 2004.