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12 November 2004

UGS Reports 3rd Quarter Revenue of US$253.8 Million or 18 Percent Growth

FOR RELEASE Friday, November 12, 2004

PLANO, Texas– UGS, a leading global provider of product lifecycle management (PLM) software and services, today announced financial results for the third quarter ended September 30, 2004.

Pro forma financial highlights from the third quarter include:

  • Revenue of US$253.8 million, or 18 percent growth over the same period a year earlier.
  • Overall software revenue growth of 16 percent over the same period a year earlier.
  • Collaborative Product Development Management (cPDm) revenue growth of 32 percent, including cPDm software revenue growth of 37 percent, over the same period a year earlier.
  • EBITDA of US$67.0 million, or a 44 percent increase over the same period a year earlier.
  • Operating income of US$57.5 million, or a 129 percent increase over the same period a year earlier.
  • All of the above figures exclude certain GAAP purchase accounting adjustments relating to the UGS acquisition.  These include amortization and depreciation expenses of US$32.6 million and the reduction to revenues of US$16.5 million as a result of writing off deferred revenue.

“UGS’ relentless focus on client value continues to fuel our ability to exceed market growth rates in the exciting PLM market.  We continue to grow not only in our core traditional markets, but in newer vertical segments as well, such as consumer packaged goods and retail and apparel,” said Tony Affuso, chairman, CEO and president of UGS.  “We are also seeing growth in all regions around the world, particularly in Europe.  The emerging status of PLM as a transformational enterprise strategy is taking hold on a global basis, and UGS is leading the way.”  

cPDm Strength Key to Year-to-Date Performance
UGS’ reported year-to-date revenues through the third quarter total US$724.7 million, or 15 percent growth as compared to the same period a year earlier.  In addition, the company has reported year-to-date EBITDA of US$174.9 million, or 26 percent growth as compared to the same period a year earlier. 

All of the above figures exclude certain GAAP purchase accounting adjustments relating to the UGS acquisition.  These include amortization and depreciation expenses of US$45.3 million and the reduction to revenues of US$26.9 million as a result of writing off deferred revenue.

UGS also reported year-to-date overall software revenue growth of 15 percent. A key driver of UGS’ year-to-date software growth is the company’s continuing strong leadership in the cPDm segment of the PLM market – the market’s highest-growth space.  UGS’ Teamcenter® portfolio, the company’s cPDm solution, is the world’s most widely used PLM solution and serves as the enterprise collaboration backbone for companies seeking a comprehensive integrated digital lifecycle environment.

Among companies with more than 1,000 PDM seats, 85 percent are using Teamcenter®.  Eight of the top 10 aerospace contractors have standardized on Teamcenter® as have 9 out of the top 10 automotive OEMs that have selected a PDM partner.  There are nearly 2 million seats of Teamcenter® in operation around the world – more than all of UGS’ competitors combined. 

Exceeding future growth projections by Daratech, year-to-date, UGS has reported cPDm total revenue growth of 19 percent, with cPDm software revenue growth of 21 percent.  Through 2008, Daratech expects the cPDm segment of the PLM market to grow 12 percent, compounded annually.

“UGS is the undisputed market leader for cPDm and this is how leadership in the PLM market will be defined moving forward.  Our company has developed the most comprehensive suite of PLM offerings with an emphasis on the collaboration and product data management side of the market, and that strategy continues to bear fruit with the ongoing success of our flagship Teamcenter portfolio,” Affuso said.  “Teamcenter ultimately helps companies transform the process of PLM by powering innovation with knowledge.  That’s a compelling value proposition that’s unique to UGS, and that our clients increasingly are turning to us for.”

Third Quarter Highlights

Business Highlights

  • Announced the largest-ever Nordic contract with Saab AB in which UGS will serve as the company’snew technology partner for PLM.  
  • Announced that Rolls-Royce, following a competitive evaluation process, selected and entered into a framework agreement with UGS for the supply of PLM-related products and services. 
  • Announced the third Hyundai Heavy Industries (HHI) division contract this year which included the Construction and Equipment Division’s selection of UGS’ NX and Teamcenter® software and services as the standard for global product development throughout the division and its entire supply chain. 
  • Announced that the engineering company group of FERBER, Fereng, adopted Teamcenter® and NX products as its corporate standard for PLM and product development. 
  • Announced that UGS received leading marks for its innovative open technology and business model from industry analyst firm Collaborative Product Development Associates, LLC in which the company earned leading marks in all four of the study’s major categories with top honors awards in two of the four. 

Product Highlights

  • cPDm – UGS announced the release of its product lifecycle sourcing solution within Teamcenter® that includes a web-based RFx and survey capability, and a sourcing community capability.  Also announced was the formalization of its joint development and joint marketing agreement for Teamcenter Sourcing with A.T. Kearney.  In addition to UGS’ sales of Teamcenter Sourcing through its direct channel, UGS has a relationship with A.T. Kearney Procurement Solutions to deliver the sourcing technology through A.T. Kearney.
  • Digital Product Development – UGS announced the release of NXTM3, its digital product development solution that transforms the entire product development process.  Along with a new look and feel with a streamlined user interface, NX 3 also features new capabilities and enhancements across the board.  For the first time, all participants in the development process can use a single digital model – from planning through engineering into manufacture – synchronized within a single NX Managed Development Environment.   

Corporate Highlights

  • Jim Milton joined UGS as executive vice president, Global Sales Operations.  In this newly-created position, Milton is responsible for UGS’ sales and alliance efforts on a global basis, working in partnership with the company’s zone and automotive sales leaders to aggressively target geographic, industry and strategic corporate opportunities. 
  • UGS completed the move to its new corporate headquarters building in Plano, Texas, where an estimated 80 of its approximately 5,000 global employees work.  

About UGS
UGS is a leading global provider of product lifecycle management (PLM) software and services with more than 3.3 million licensed seats and 42,000 clients worldwide.   Headquartered in Plano, Texas, the company promotes openness and standardization and works collaboratively with its clients in creating enterprise solutions enabling them to transform their process of innovation and thus begin to capture the value of PLM. 

 

The statements in this news release that are not historical statements are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond UGS’ control, which could cause actual results to differ materially from such statements. The company has included a discussion of pertinent risk factors in the final offering memorandum relating to our 10% Senior Subordinated Notes, a copy of which discussion of risk factors is available from the company. The company disclaims any intention or obligation to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise.

 

UGS will broadcast a conference call on its third quarter 2004 earnings with securities analysts live on the Internet at 10:30 a.m. Central time, Friday, Nov. 12, 2004.  See below for access information.  Participation will be listen-only mode at:https://www.mymeetings.com; conference number: 8903800; pass code: UGS