Green Hills Software Achieves 43% Revenue Growth in Third Quarter; Net Income Grows 104%.

SANTA BARBARA, Calif. -- Green Hills Software, Inc., the market leader in embedded software development tools and royalty-free real-time operating systems (RTOS), today announced results for its third quarter ended September 30, 2004.

Revenue in the third quarter of 2004 was $18.4 million, an increase of 43% over the third quarter of 2003. Net income was $4.7 million, an increase of 104% over the prior year. Earnings were $0.13 per share, fully diluted, an increase of 96% over the same period of 2003.

For the nine months ended September 30, 2004, revenue increased 45% to $52.8 million, net income grew 90% to $13.3 million and earnings per share grew 84% to $0.38.

"We are extremely pleased with our third quarter results," commented Dan O'Dowd, founder and chief executive officer of Green Hills Software. "We continue to gain significant market share. We are growing twice as fast as our largest competitor, Wind River Systems, and we are also growing twice as fast as the entire embedded Linux market. Our extraordinary growth rate can be credited to our clear technology leadership -- we offer the industry's highest performance, most reliable and most secure solutions. And, like embedded Linux, Green Hills Software has always championed the royalty-free licensing model that customers prefer. In contrast, a majority of Wind River's growth is from royalties, which now contribute one-third of its revenue."

"Our growing market share is a testament to the strength of our products and sales execution," said David Chandler, Green Hills Software's vice president of sales. "Our competitive win rates are at record levels, and we are getting invited to a growing number of opportunities as our critical mass and awareness grow."

Q3 and YTD Highlights

Highlights of Green Hills Software's third quarter and year-to-date include:

--Year-to-date revenue from sales to automotive electronics manufacturers has more then doubled over the first three quarters of 2003. This success spans the full spectrum of automotive applications: developers of powertrain and chassis control applications are adopting the SuperTrace probe and TimeMachine debugger while the INTEGRITY operating system is increasingly being incorporated into infotainment and telematics systems.

--During the third quarter, Green Hills Software added sales personnel across all key regions: North America, Europe and Asia/Pacific. "Green Hills Software is able to recruit industry veterans across the world based on our growing market presence, and international expansion is a key component of our growth strategy," noted Chandler. "We are continuing to aggressively recruit on a worldwide basis."

--In August, Green Hills Software began shipping version 5.0 of its velOSity microkernel and INTEGRITY operating system, with enhancements for automotive, resource-constrained and multiprocessing applications and support for easier porting from legacy kernels. INTEGRITY 5.0 is the first operating system certified under the "POSIX(R): Certified by IEEE and The Open Group" program to the 1003.1(TM)-2003 System Interfaces Product Standard and is listed on the certification register at http://get.posixcertified.ieee.org/register.html.

--In September, Green Hills Software announced that Avadis "Avie" Tevanian, Jr., Ph.D., senior vice president and chief software technology officer for Apple Computer, was elected to its Board of Directors.

Looking Forward

"Green Hills Software has had consistent growth greater than 40% through 2004," noted Chandler. "We are continuing to extend our technology leadership, as demonstrated by our POSIX certification and the velOSity and INTEGRITY 5.0 release. We are having great success in fast growing markets such as automotive, safety-critical, and security-critical systems. And we are growing our sales force to meet the expanding demand for our products. Consequently, I expect that our growth rate will continue to significantly outpace the industry and that our market share will continue to increase."

About Green Hills Software

Founded in 1982, Green Hills Software, Inc. is the technology leader for real-time operating systems and software development tools for 32- and 64-bit embedded systems. The royalty-free velOSity microkernel, INTEGRITY RTOS, compilers, MULTI and AdaMULTI Integrated Development Environments and TimeMachine 4-D debugger offer a complete development solution that addresses embedded systems from the lowest cost consumer products to the most safety-critical aircraft flight systems. Green Hills is headquartered in Santa Barbara, CA., with European headquarters in the United Kingdom. Visit Green Hills Software on the web at www.ghs.com.

Green Hills Software, the Green Hills logo, MULTI, velOSity, INTEGRITY, AdaMULTI, and TimeMachine are trademarks or registered trademarks of Green Hills Software, Inc. in the U.S. and/or internationally. All other trademarks and products are the property of their respective owners.

North American Sales Contact: Green Hills Software, Inc., 30 West Sola
 Street, Santa Barbara, CA 93101, Tel: [phone], Fax: 805-965-
 6343, Website: www.ghs.com, Email: [e-mail].

International Sales Contact: Green Hills Software Ltd., Dolphin House,
 St. Peter Street, Winchester Hampshire SO23 8BW, United Kingdom, Tel:
 [phone], Fax: [phone], Email: mktg-
 [e-mail].
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