ArcSys reports record revenue, income and earnings; 245% increase in revenue.

SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 12, 1995--ArcSys Inc. (NASDAQ:ARCS) today reported record levels of revenue, operating income, net income and earnings per share for the third quarter of fiscal 1995, ended September 30, 1995.

Revenue was $4,807,000; operating income was $1,162,000; and net income was $1,574,000 (15 cents per share).

Compared to the third quarter of 1994, revenue increased 245%, up from $1,394,000, and operating income was up from a loss of $421,000. Net income was up from a loss of $427,000 (loss of 13 cents per share) for the same quarter last year.

For the nine months ended September 30, 1995, ArcSys' revenue increased 254% to $12,087,000, compared with $3,414,000 for the same period in 1994; and operating income increased to $2,634,000, up from a loss of $1,547,000. Net income increased to $3,073,000 (34 cents per share) compared with a loss of $1,528,000 (loss of 48 cents per share) for the same period last year.

"Our growth this quarter, particularly in volume deals with major accounts, is an indication of the market's acceptance of our technology and products, and is a strong endorsement of our continued success," said Gerald C. Hsu, president and CEO of ArcSys.

"In August, ArcSys announced their intention to merge with Integrated Silicon Systems. We believe our strong Q3 performance shows the strategic importance of this merger to our customers. They have recognized the benefits of the merger, and have adopted our physical design technology for their next-generation deep submicron IC designs.

ArcSys, Inc. develops, markets, and supports integrated circuit design automation (ICDA) software for deep submicron ICs, microprocessors, microcontrollers, application- specific standard products (ASSPs), and complex application-specific integrated circuits (ASICs). ArcSys' products help lower IC development costs by reducing die size; reduce time to market by shortening the physical design cycle; and provide more competitive, higher-performance ICs through timing-driven layout.

The company has announced its intention to merge with Integrated Silicon Systems of Research Triangle Park, North Carolina, subject to regulatory and shareholder approval. ArcSys headquarters are located at 1208 East Arques Avenue, Sunnyvale, CA 94086. Telephone [phone], Fax [phone]. -0-

                              ArcSys Inc.
                 Consolidated Statements of Operations
                      (In thousands, unaudited)

                              Three months ended  Nine months ended
                              9/30/95  9/30/94    9/30/95  9/30/94
                              -------  -------    -------  -------
Revenue:
 License                      $ 4,192  $ 1,235    $10,775  $ 3,132
 Service and other                615      159      1,312      282
    Total revenue               4,807    1,394     12,087    3,414

Cost of revenue:
 License                           31        8         68       12
 Service and other                548      140      1,222      397
    Total cost of revenue         579      148      1,290      409
 Gross profit                   4,228    1,246     10,797    3,005

Operating expenses:
 Research and development         957      559      2,456    1,535
 Sales and marketing            1,698      964      4,777    2,470
 General and administrative       411      144        930      547
    Total operating expenses    3,066    1,667      8,163    4,552
     Operating income (loss)    1,162     (421)     2,634   (1,547)
 Interest income                  441       28        614       86
 Interest and other expenses       27       34         54       67
 Income (loss) before provision
  for income taxes              1,576     (427)     3,194   (1,528)
 Provision for income taxes         2       --        121      --
 Net income (loss)            $ 1,574  $  (427)   $ 3,073  $(1,528)
 Net income (loss) per share  15 cents (13 cents) 34 cents (48 cents)
Number of shares used in per
 share calculation             10,548    3,180      9,114    3,180

    The accompanying notes are an integral part of these
consolidated financial statements.

                             ArcSys Inc.
               Condensed Consolidated Balance Sheets
                           (In thousands)

                                      Sept. 30    Dec. 31
                                        1995        1994
                                    (Unaudited)
ASSETS
Current assets:
 Cash and cash equivalents             $ 8,656    $ 4,205
 Short term investments                 27,087        293
 Accounts receivable                     1,119      1,147
 Prepaids and other current
  assets                                   384        205
   Total current assets                 37,246      5,850
Property and equipment                   1,407        600
 Total assets                          $38,653    $ 6,450

LIABILITIES
Current liabilities:
 Current portion of capital
  lease obligations                    $   161    $   273
 Accounts payable                          338        210
 Accrued payroll                         1,189        849
 Other accrued expenses                    498        302
 Deferred revenue                        1,823      1,175
  Total current liabilities              4,009      2,809
Capital lease obligations,
 less current portion                       69        147
  Total liabilities                      4,078      2,956

MANDATORILY REDEEMABLE
 CONVERTIBLE PREFERRED STOCK
Mandatorily redeemable
 convertible preferred stock,
 and convertible preferred
 stock with put option                     --       8,312

STOCKHOLDERS' EQUITY (DEFICIT)
Stockholders' equity (deficit)          34,575     (4,818)
 Total liabilities, mandatorily
  redeemable preferred stock and
  stockholders' equity (deficit)       $38,653    $ 6,450-0-

CONTACT: ArcSys Inc.

Lois DuBois, 408/523-8857