Annual Report 2006

ANNUAL REPORT 2006 POWERING MARKETING SUCCESSTM TO THE SHAREHOLDERS OF UNICA CORPORATION For Unica, fiscal year 2006 will be remembered as a year of exciting growth and effective execution. We continued our successful track record, attaining the highest annual revenue in company history of $82.4 million and delivering strong 30 percent year-over-year revenue growth. We generated over $7 million in operating cash flow. Furthermore, even after completing two acquisitions, we ended the year with a healthy balance sheet having $40 million in cash and equivalents. Market demand continues to confirm that Chief Marketing Officers (CMOs) and other marketing executives want and need a comprehensive solution to effectively manage what has become a very complex process. They want to turn large amounts of raw market and While marketing is subject to constant change, customer data into actionable insight. Because it can also be paradoxically slow to change. marketers must deal with an ever-changing The internet has been a viable marketing environment of new media and channels, channel for at least ten years; yet, marketers evolving customer requirements, and shifting are still in the early stages of seriously internal IT infrastructures, CMOs require tech- integrating the internet with the rest of their nology solutions that not only adapt to change marketing efforts. Consumers are ahead of but let them capitalize on it. Most importantly, marketers. They regularly use multiple channels CMOs do not want to use different, multiple to gather information and execute their buying applications to do their jobs – they are seeking processes, and marketers must catch up. vendors that can provide them an integrated suite of capabilities to be used on demand, Internet marketing is relatively undeveloped installed on premise, or used in some when compared both to its potential and combination form. more established marketing vehicles such as direct mail, email, or service center marketing. Because of these industry trends, we believe Many organizations’ web marketing initiatives Unica has a strong competitive advantage. are just a minor slice of the aggregated Over the years we have developed a broad trillion-dollar annual investment in marketing. and comprehensive set of capabilities that Even with its fast growth, internet marketing specifically address the marketing function’s accounts today for less than one percent of needs. We have designed and integrated these all marketing investment! capabilities into a software suite that encapsu- lates and automates the essential processes of Unica believes the internet will continue to marketing, regardless of industry. It allows change and challenge marketing. With the marketers to easily adapt our solution to their acquisition we made in web analytics (Sane organizations. Implementing our software Solutions) in fiscal year 2006, we believe we are is done without requiring hard-coded well positioned for this important trend. customization, making it easy for marketers Internet channels will become increasingly to continually refine the solution for their important over time, but they cannot remain in changing needs. As we reflect on the state silos. Customers use integrated buying of marketing in 2006, it is clear why marketing processes, and marketers must respond in kind. is the last function of an enterprise to be Thus, a complete marketing solution offers far automated: it is difficult, constantly changing, more than just web analytics or even search and increasingly complex! engine marketing. It encompasses deep analytics, collaborative tools to facilitate the work and interaction of numerous individuals, Annual Revenue (in millions) vendors and partners in the marketing ecosystem, and manages and measures campaigns that span channels and time. The solution must provide a holistic “system of record” for the entire marketing organization – and we believe Unica is uniquely positioned to deliver this solution today. For fiscal year 2007, our plan is to leverage both our market and technology leadership in enterprise marketing management (EMM) to capture additional market share. Our plan leverages Unica’s talented team of product development and services professionals led by Vice President of Engineering John Hogan, and Vice hard-working team, we successfully met of consistency. Since margin expansion is President of Consulting Dick Hale. These these challenges. In 2007, we plan to realize inherent in our business model, we believe teams will help us support our growing improved operating margins as the successful top-line growth and proper customer base across a broad set of percentage increase in our general and investment during these formative years of capabilities and geographies, and bring administrative spending is expected to be the EMM market will result in meaningful to market the next wave of EMM product lower than the percentage increase in margin expansion in the future. Thus, we and services aimed at growth beyond 2007. revenue. are not optimizing for short-term margin We are entering the year with a robust expansion or revenue growth. Rather, our Underlying our fiscal year 2007 operating suite of products for our customers. strategy is to correctly balance short-term plan is a strategy that establishes the rela- We plan to capitalize on this advantage margin and revenue growth in order to tionship between revenue growth, through increased investment in sales achieve our long-term vision of winning investment, and operating margin. For the and marketing, exploiting growth potential the EMM market. We believe this will past three years, our revenue has grown at in internet marketing, marketing resource offer the best return to our investors over a compounded annual rate of over 30 management, and international markets. the long term. percent but, due to investment in R&D and Under the leadership of Senior Vice scaling our infrastructure, our operating We continue to believe Unica can be a President of Worldwide Sales Eric Schnadig, margin has been relatively unchanged. billion-dollar EMM software company and Senior Vice President and Chief if we maintain our focus on EMM and Marketing Officer Carol Meyers, we have Although Ralph and I have shared our execute in synch with the expansion of assembled a team of talented professionals strategy and approach in various forums, it the market. I do not expect the road to with a demonstrated record of achieve- is worth repeating to ensure that investors always be smooth, but I strongly believe ment who can deliver on these investment are aligned with our worldview on this key our current leadership position and our opportunities. issue. In essence, the Unica business model long-term perspective puts Unica in the is a margin-expanding business. Margin To support sales and marketing investment best position to capture the EMM market expansion comes from economies of scale and our growing revenue and operations, potential. Most importantly, I believe our of operating expenses and increasing high- we increased our investment in, and the team of intelligent, talented, and dedicated margin recurring revenue streams, which effectiveness of, our general and adminis- Unicans provides us our best competitive include annual maintenance on perpetual trative infrastructure during 2006. Our first advantage and is ready and able to execute licenses and subscription fees relating to year as a public company was a challenging our vision. I want to thank all Unica term licenses. one for the administrative team. It included employees for their dedicated and out- supporting 30 percent revenue growth, The level of investment we make is standing efforts in 2006. I look forward to adding 100 new employees (increasing the primarily determined by the size and the opportunity to report to you next year total to nearly 400 Unicans), completing growth of short- to medium-term market on a successful 2007. two acquisitions, and complying with opportunities. At Unica, our fundamental Yuchun Lee SEC reporting and other regulatory strategy is to invest for sustained revenue Chairman and Chief Executive Officer requirements. Thanks to the leadership of growth, growing in synch with the Unica Corporation our Senior Vice President and Chief expansion of the EMM market and with Financial Officer Ralph Goldwasser, and his the objective of delivering a high level UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2006 or n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-51461 Unica Corporation (Exact name of registrant as specified in its charter) Delaware 04-3174345 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 170 Tracer Lane Waltham, Massachusetts 02451-1379 (Address of principal executive offices) (781) 839-8000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value per share Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasonal issuer, as defined in Rule 405 of the Securities Act. Yes n No ¥ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No ¥ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥ No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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