PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced third quarter 2006 results.
Third quarter financial highlights include:
- EBITDA (defined below) was US$69.1 million, or an 8.3 percent growth over the same period a year earlier. Net income (loss) for the third quarter was US$(7.4) million.
- Operating income was US$15.9 million and includes the impact of acquisition-related intangible amortization costs of US$38.5 million. Operating income in the same period a year earlier was US$19.3 million and included acquisition-related amortization costs of US$39.2 million.
- Total revenue increased to US$295.5 million, 1.8 percent growth over the same period a year earlier.
- Software revenue increased to US$223.1 million (including license and maintenance revenues), or 1.6 percent growth as compared to the third quarter 2005.
- Revenue amounts are not adjusted for the impact of deferred revenues written off in connection with acquisitions. These write-offs had the effect of reducing third quarter 2006 revenues by US$0.3 million and 2005 revenues by US$2.2 million.
Year-to-date highlights include:
- EBITDA (defined below) was US$186.5 million, or a 25.3 percent growth over the same period a year earlier. Net income (loss) for the first nine months of the year was US$(33.0) million.
- Operating income was US$20.6 million and includes the impact of acquisition-related intangible amortization costs of US$116.8 million. Operating income in the same period a year earlier was US$36.3 million and included acquisition-related amortization costs of US$111.6 million.
- Total revenue increased to US$866.0 million, 4.6 percent growth over the same period a year earlier.
- Software revenue increased to US$649.4 million (including license and maintenance revenues), or 5.7 percent growth as compared to the same period a year earlier.
- Revenue amounts are not adjusted for the impact of deferred revenues written off in connection with acquisitions. These write-offs had the effect of reducing year-to-date 2006 revenues by US$0.7 million and 2005 revenues for the same nine month period by US$10.2 million.
Other financial highlights:
- Net cash from operating activities was US$111.6 million for the first nine months of the year.
- Long term debt as of Sept. 30, 2006, was US$1,155.3 million compared to a balance of US$1,212.0 million as of Dec. 31, 2005. This includes a debt pay-down of US$62.3 million.
“We’ve continued to be successful at working our strategic plan while still focusing on expanding our EBITDA and cash flow, and retooling our sales engine. Our continued product excellence and focus on customer success earned us contracts or additional business in the quarter with such companies as Boeing, DaimlerChrysler, Unilever, Visteon, Bosch Siemens, Northrop Grumman Ship Systems, Bayer Healthcare and the Jet Propulsion Lab,” said Tony Affuso, chairman, CEO and president of UGS. “These contracts reflect the confidence we are receiving across the board from the market, as highlighted most notably by our ranking in the leaders quadrant of the new Gartner Magic Quadrant.
“As always, we continue to focus on customer success, and as a result our retention rate is higher than ever and our maintenance revenue continues to grow solidly.”
Business Highlights
- UGS signed a new reseller agreement with Microsoft that extends the strategic alliance the two companies announced earlier this year. Under the new agreement, UGS becomes the first PLM company authorized to sell SQL Server 2005, Microsoft’s flagship database software, directly to companies looking for a comprehensive PLM solution fully supported on the Microsoft® platform.
- PRTM, internationally recognized as the leading management consulting firm to technology-driven companies, joined the UGS Partner Program as a UGS Consulting and Systems Integration Alliance Partner.
- In the mid-market and channel space, UGS recorded a 35 percent increase in its indirect channel license revenue year-over-year and met its year-end channel capacity goal to increase the channel by 50 percent.
- Ford Motor Company expanded its global deployment of Teamcenter to include Tecnomatix as the global manufacturing data management and manufacturing process planning system to support process driven product design. This solution will enable the reduction of overall vehicle development cycle time by promoting concurrent engineering and globally distributing relevant data.
- An example of UGS’ success in I-deas to NX migration was captured in a third quarter win with Larsen & Toubro Limited, India’s largest technology-driven engineering and construction company. Through the migration, Larsen & Toubro consolidated multiple CAD systems and expanded into PLM.
- Wanfeng Auto Holding Group, a leader in China’s auto industry and the largest aluminum alloy wheel producer in Asia, selected UGS’ Teamcenter® Express software for its first collaborative product data management (cPDM) system.
The company expects to realize revenue from the contracts highlighted above over multiple quarters.
UGS will host its third quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, Nov. 13, 2006. Presentation slides will be posted on www.ugs.com at 8:30 a.m. Central time. See below for webcast/teleconference access information.
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About UGS
UGS is a leading global provider of product lifecycle management (PLM) software and services with nearly 4 million licensed seats and 46,000 customers worldwide. Headquartered in Plano, Texas, UGS’ vision is to enable a world where organizations and their partners collaborate through global innovation networks to deliver world-class products and services while leveraging UGS’ open enterprise solutions, fulfilling the mission of enabling them to transform their process of innovation.
Note: UGS,Femap, NX, Solid Edge, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are trademarks or registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. Microsoft is a trademark or registered mark of Microsoft Corporation or its subsidiaries in the United States and in other countries. All other trademarks, registered trademarks or service marks belong to their respective holders.
The statements in this news release that are not historical statements, including statements regarding our business, results of operations expected financial performance, expected cost savings related to acquisitions, and other statements identified by forward looking terms such as "may," "will," "expect," "plan," "anticipate" or "project," are forward-looking statements. These statements are subject to numerous risks and uncertainties which could cause actual results to differ materially from such statements, including, among others, risks relating to developments in the PLM industry, loss or downsizing of customers, competition, failure to innovate, substantial, prolonged economic downturns, financial distress in the automotive industry, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property, loss of key employees and complexity of income tax assessments. UGS has included a discussion of these and other pertinent risk factors in its quarterly report on Form 10-Q for the period ended June 30, 2006 filed with the SEC. UGS 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 Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
Three months |
|
ended |
|
September 30, 2006 |
September 30, 2005 |
Revenue: |
|
|
License |
$ 85,527 |
$ 89,842 |
Maintenance |
137,542 |
129,706 |
Services and other |
72,476 |
70,701 |
Total revenue |
295,545 |
290,249 |
Cost of revenue: |
|
|
License |
4,114 |
4,761 |
Maintenance |
15,810 |
14,459 |
Services and other |
57,195 |
58,451 |
Amortization of capitalized software and acquired intangible assets |
39,097 |
32,059 |
Total cost of revenue |
116,216 |
109,730 |
Gross profit |
179,329 |
180,519 |
Operating expenses: |
|
|
Selling, general and administrative |
112,027 |
107,803 |
Research and development |
43,416 |
44,350 |
Amortization of other intangible assets |
7,991 |
9,018 |
Total operating expenses |
163,434 |
161,171 |
Operating income |
15,895 |
19,348 |
Interest expense and amortization of deferred financing fees |
(27,576) |
(25,197) |
Other income (expense), net |
1,087 |
(919) |
Loss before income taxes |
(10,594) |
(6,768) |
Benefit for income taxes |
(3,161) |
(2,002) |
Net loss |
$ (7,433) |
$ (4,766) |
|
|
|
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
Nine months |
|
ended |
|
September 30, 2006 |
September 30, 2005 |
Revenue: |
|
|
License |
$ 251,054 |
$ 244,738 |
Maintenance |
398,373 |
369,614 |
Services and other |
216,571 |
213,472 |
Total revenue |
865,998 |
827,824 |
Cost of revenue: |
|
|
License |
10,213 |
15,161 |
Maintenance |
46,610 |
42,317 |
Services and other |
170,210 |
181,148 |
Amortization of capitalized software and acquired intangible assets |
113,856 |
89,283 |
Total cost of revenue |
340,889 |
327,909 |
Gross profit |
525,109 |
499,915 |
Operating expenses: |
|
|
Selling, general and administrative |
337,688 |
313,382 |
Research and development |
142,029 |
118,990 |
In-process research and development |
— |
4,100 |
Restructuring |
(535) |
1,774 |
Amortization of other intangible assets |
25,357 |
25,327 |
Total operating expenses |
504,539 |
463,573 |
Operating income |
20,570 |
36,342 |
Interest expense and amortization of deferred financing fees |
(80,543) |
(71,576) |
Other income (expense), net |
11,024 |
(14,326) |
Loss before income taxes |
(48,949) |
(49,560) |
Benefit for income taxes |
(15,943) |
(14,601) |
Net loss |
$ (33,006) |
$ (34,959) |
|
|
|
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|
|
|
September 30, 2006 |
December 31, 2005 |
Assets: |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 59,257 |
$ 61,532 |
Accounts receivable, net |
241,352 |
251,763 |
Prepaids and other |
35,629 |
22,389 |
Deferred income taxes |
16,663 |
26,471 |
Total current assets |
352,901 |
362,155 |
|
|
|
Property and equipment, net |
30,633 |
36,645 |
Goodwill |
1,423,338 |
1,393,472 |
Capitalized and acquired software, net |
417,031 |
464,994 |
Customer accounts, net |
183,607 |
203,064 |
Other intangible assets, net |
119,093 |
135,265 |
Other assets |
35,380 |
39,623 |
Total assets |
$ 2,561,983 |
$ 2,635,218 |
|
|
|
Liabilities and Stockholder’s Equity: |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
$ 171,605 |
$ 159,976 |
Deferred revenue |
152,301 |
133,027 |
Income taxes payable |
7,844 |
11,895 |
Total current liabilities |
331,750 |
304,898 |
|
|
|
Other long-term liabilities |
61,035 |
48,511 |
Deferred income taxes |
100,472 |
147,440 |
Long-term debt |
1,155,296 |
1,212,046 |
|
|
|
Stockholder’s equity |
|
|
Common stock, $ .01 par value, 3,000 shares authorized; 100 issued and outstanding at September 30, 2006 and December 31, 2005 |
— |
— |
Additional paid-in capital |
1,014,823 |
1,005,991 |
Retained deficit |
(96,208) |
(63,202) |
Accumulated other comprehensive loss, net of tax |
(5,185) |
(20,466) |
Total stockholder’s equity |
913,430 |
922,323 |
Total liabilities and stockholder’s equity |
$ 2,561,983 |
$ 2,635,218 |
|
|
|
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Nine months |
|
ended |
|
September 30, 2006 |
September 30, 2005 |
Cash flows from operating activities |
|
|
Net loss |
$ (33,006) |
$ (34,959) |
Adjustments to reconcile net loss to net cash |
|
|
provided by operating activities: |
|
|
Benefit for deferred income taxes |
(21,241) |
(40,246) |
Depreciation and amortization |
154,886 |
126,792 |
Amortization of deferred financing fees |
4,148 |
4,231 |
In-process research and development |
— |
4,100 |
Stock-based compensation |
438 |
467 |
Unrealized (gain) loss on revaluation of foreign denominated assets and liabilities |
(24,062) |
22,782 |
Unrealized loss (gain) on foreign currency revaluation of derivative instruments |
7,680 |
(17,044) |
Other |
3,205 |
2,920 |
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
Accounts receivable |
19,285 |
10,128 |
Prepaids and other |
(12,325) |
3,674 |
Accounts payable and accrued liabilities |
8,450 |
990 |
Deferred revenue |
11,799 |
32,375 |
Income taxes payable |
(10,936) |
2,676 |
Other long-term liabilities |
3,295 |
(425) |
Total adjustments |
144,622 |
153,420 |
Net cash provided by operating activities |
111,616 |
118,461 |
|
|
|
Cash flows from investing activities |
|
|
Acquisitions, net of cash acquired |
— |
(218,437) |
Acquired software |
(4,000) |
— |
Cash received from prior parent for acquisition related tax matters |
— |
11,354 |
Payments for purchases of property and equipment |
(7,589) |
(8,542) |
Capitalized software costs |
(51,755) |
(56,889) |
Proceeds from sale of marketable securities |
— |
23,194 |
Other |
(1,100) |
(842) |
Net cash used in investing activities |
(64,444) |
(250,162) |
|
|
|
Cash flows from financing activities |
|
|
Proceeds from revolver credit line |
121,800 |
118,551 |
Payments on revolver credit line |
(121,800) |
(124,551) |
Proceeds from notes payable |
6,850 |
10,297 |
Payments on notes payable |
(345) |
(2,773) |
Proceeds from bank notes and bonds |
— |
225,271 |
Payments on bank notes and bonds |
(62,300) |
(74,597) |
Capital contributed by parent (stock options exercised) |
639 |
508 |
Capital contributed by parent (compensatory payment) |
3,819 |
— |
Net cash (used in) provided by financing activities |
(51,337) |
152,706 |
Effect of exchange rates on cash and cash equivalents |
1,890 |
(3,152) |
Net (decrease) increase in cash and cash equivalents |
(2,275) |
17,853 |
Cash and cash equivalents at beginning of period |
61,532 |
58,400 |
Cash and cash equivalents at end of period |
$ 59,257 |
$ 76,253 |
EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. EBITDA is not a recognized term under generally accepted accounting principles, or GAAP. EBITDA does not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, EBITDA is not intended to be a measure of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures (including capitalized software expense), tax payments and debt service requirements. We consider EBITDA to be a key indicator of our ability to pay our debt. We have included information concerning EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business. EBITDA as presented herein are not necessarily comparable to similarly titled measures. The following is a reconciliation of EBITDA to net loss, the GAAP measure we believe to be most directly comparable to EBITDA (in thousands).
|
|
|
Three months ended |
|
September 30, |
|
September 30, |
|
2006 |
|
2005 |
Reconciliation of net loss to EBITDA: |
|
|
Net loss |
$ (7,433) |
|
$ (4,766) |
Interest expense |
27,576 |
|
25,197 |
Benefit for income taxes |
(3,161) |
|
(2,002) |
Depreciation and amortization |
52,160 |
|
45,389 |
EBITDA |
$ 69,142 |
|
$ 63,818 |
|
|
|
|
|
|
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2006 |
|
2005 |
Reconciliation of net loss to EBITDA: |
|
|
Net loss |
$ (33,006) |
|
$ (34,959) |
Interest expense |
80,543 |
|
71,576 |
Benefit for income taxes |
(15,943) |
|
(14,601) |
Depreciation and amortization |
154,886 |
|
126,792 |
EBITDA |
$ 186,480 |
|
$ 148,808 |
|
|
|
|