Green Hills Software Announces Record Results in 2004; Revenue Up 40%; Net Income Surges 66%.

SANTA BARBARA, Calif. -- Green Hills Software, Inc., the technology leader in embedded software development tools and real-time operating systems (RTOS), reported today its financial results for the fiscal year ended December 31, 2004. The Company's 2004 record annual revenue of $71.6 million represented increases of 40% over the year ended December 31, 2003 and a 76% increase over 2002. Green Hills Software's expanded global revenue base accompanied by a controlled cost structure fueled a record $17.2 million in reported net income for the year and resulted in growth of 66% over 2003 and 248% over 2002. Green Hills Software's earnings per share also increased 58% over 2003 and 227% over 2002 to a record $0.49 in 2004 on a fully diluted basis. Annual results are reported in accordance with U.S. GAAP and have been audited by Ernst & Young LLP.

"Green Hills Software's 2004 financial results mark another phenomenal year of success," said Dan O'Dowd, Green Hills Software's founder and chief executive officer. "We are the fastest growing and most profitable RTOS supplier. For four straight years, we have led the industry in growth and for six straight years we have been the most profitable RTOS company. In 2004, Green Hills Software grew more than twice as fast and earned more than twice as much as our largest competitor. Our increased market share is the result of our heralded innovations and proven leadership in delivering the best solutions to meet the requirements of next-generation electronic product developers."

Annual Highlights

Major product and technology achievements in 2004 included:

--INTEGRITY PC was introduced, enabling Linux and legacy applications to run safely in security- and reliability-critical systems. With INTEGRITY PC, users of enterprise operating systems can take advantage of the absolute security offered by the INTEGRITY operating system without having to re-implement existing applications. This makes it economically feasible to upgrade the security of critical systems that are already deployed or under development.

--The velOSity microkernel, the foundation of the INTEGRITY RTOS, was released as a separate product--enabling the rapid development of high-performance software for cost-sensitive devices. Together, the velOSity microkernel and INTEGRITY RTOS provide seamless scalability from the smallest, high-volume, resource-constrained consumer applications through the largest, most mission-critical avionics, defense, medical and telecommunications systems.

--The INTEGRITY RTOS was the first operating system to be certified to the latest edition of the POSIX standard and was the first operating system certified under the new "POSIX(R): Certified by IEEE and The Open Group" program.

--In an overwhelming endorsement of the Green Hills compilers' industry-leading performance, in 2004 microprocessor vendors selected Green Hills compilers more than three times as often as all other compilers combined for benchmarks that were certified and published by the Embedded Microprocessor Benchmark Consortium (EEMBC).

--The Company's revolutionary TimeMachine Debugger continued to build upon its tremendous acclaim in the market. Acknowledgements included awards for "2003 Product of the Year" by Electronic Products Magazine, "EDN 2003 Software Innovation of the Year" by EDN Magazine, and the "Software Design Award" by the Electronic Industry Design Awards.

Among notable and announced customer wins in 2004 are:

--Aerospace and defense:

--Eurofighter GmbH selected Green Hills Software's INTEGRITY RTOS and AdaMULTI integrated development environment (IDE) for the development and implementation of several mission-critical systems deployed in the latest Eurofighter Typhoon aircraft.

--The Boeing Company selected the INTEGRITY RTOS and MULTI IDE for development and deployment of the X-45C Joint Unmanned Combat Air System (J-UCAS).

--Boeing is also using INTEGRITY PC for the development of military radios.

--Automotive:

--Leading in-vehicle communications supplier PEIKER acustic GmbH & Co. KG selected the INTEGRITY RTOS and MULTI IDE to form the software backbone of the company's future in-car automotive electronics.

--Mobileye N.V., a leading provider of automated driver-assistance technologies, used the MULTI IDE, TimeMachine tools, and Green Hills Software's processor probes to speed the design, implementation and testing of a single-chip vision system that is set to revolutionize the mass implementation of camera-based driver-assistance systems.

--Communications:

--Allied Telesyn selected the INTEGRITY RTOS and MULTI IDE for a highly flexible and resilient gigabit Ethernet switch.

--Nera selected the velOSity microkernel, INTEGRITY RTOS and MULTI IDE to form the basis of the company's next generation microwave radio links.

--Consumer:

--Hewlett-Packard expanded its adoption of Green Hills Software products, including for printers and digital cameras.

Corporate milestones:

--Green Hills Software opened new offices in the U.S., Sweden, Israel, Germany and Australia in response to expanding global customer demand.

--During 2004, the Company's board of directors elected new members, with strong and diversified backgrounds, including Daniel P. Burnham, former Raytheon Company Chairman and CEO, and Avadis "Avie" Tevanian, Jr., Ph.D., Chief Software Technology Officer for Apple Computer.

--Green Hills Software has appointed Jeffrey Hazarian as new chief financial officer, providing the Company with extensive experience in corporate and international accounting and financial and management reporting (see today's related announcement).

--The Company received its second Software Development Times Magazine Award for excellence in the "Embedded & Mobile" category as part of the "SD Times 100."

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 product line 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.

Green Hills Software, the Green Hills logo, MULTI, INTEGRITY, velOSity, AdaMULTI and TimeMachine are trademarks or registered trademarks of Green Hills Software, Inc. in the U.S. and/or internationally. All other trademarks 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: [phone], 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: [e-mail].