Second quarter financial highlights include: - Total revenue increased to US$296.7 million, 4 percent growth over the same period a year earlier. - Software revenue increased to US$221.2 million (including license and maintenance revenues), or 5 percent growth as compared to the second quarter 2005. - Total revenue and software revenue increased in each geographic region compared to the same period in 2005. - cPDM software revenue grew 18 percent over the same period a year earlier. (cPDM represents Teamcenter software revenue and excludes digital manufacturing software revenue.). - EBITDA (defined below) was US$69.3 million, or an 80 percent growth over the same period a year earlier. - Operating income increased to US$10.1 million and includes the impact of acquisition-related intangible amortization costs of US$39.1 million. - These amounts are not adjusted for the impact of deferred revenues written off in connection with acquisitions. These write-offs had the effect of reducing second quarter 2006 revenues by US$0.2 million and 2005 revenues by US$3.4 million.
"We continue our drive to sustain solid growth and improve operating income while we focus on executing our strategic plan to position the company for enhanced growth," said Tony Affuso, chairman, CEO and president of UGS. "As we complete the reorganization of our sales force to focus on verticals and mid-market channels, we are currently adding needed sales capacity. We have seen early progress in our mid-market channel strategy marked by strong double digit software growth in the quarter. During the second quarter we also continued to receive third-party accolades for our software and service through such prestigious designations as being named a Caterpillar Strategic Supplier, the Honda Engineering Supplier of the Year Award, Ford's Q1 Certification, GM's Supplier of the Year Award and Frost & Sullivan's PLM Company of the Year Award."
Business Highlights - UGS mid-market approach continued to gain steam through UGS Velocity Series(TM) portfolio wins as well as increased channel expansion. Second quarter indirect channel revenue increased by 30 percent, and the company signed more than 50 new partners in the first half of the year. (see separate release) - Kaltenbach Maschinenfabrik GmbH & Co. KG, a global supplier of machine tools, has selected Solid Edge(R) 3D CAD software to develop its range of circular and band saw machines as well as sectional steel processing systems. Following evaluation of several competing products, Kaltenbach selected Solid Edge for its flexibility, user-friendly design and support. (see separate release) - Radkersburger Metallwarenfabrik, an Austrian-based die manufacturer, has selected NX CAM Express(R) software for manufacturing its deep drawing dies. (see separate release) - UGS today announced an original equipment manufacturer (OEM) agreement with China's Jilin University (JLU) to integrate one-step formability analysis technology developed by JLU into NX(TM) software, UGS' digital product development solution. The technology, developed by JLU's Institute of Auto-body and Die Engineering (IADE), helps improve design and manufacturing processes and is expected to be available in NX commercially in the third quarter of 2006. (see separate release) The company expects to realize revenue from the contracts highlighted above over multiple quarters.
UGS will host its second quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, August 14, 2006. Presentation slides will be posted on http://www.ugs.com at 8:30 a.m. Central time. See below for webcast/teleconference access information.
AUDIO ACCESS INFORMATION - WEB STREAMING URL: https://e-meetings.mci.com CONFERENCE NUMBER: 9704629 PASSCODE: UGS Note: Pop-up blockers must be disabled. To join: - Go to the URL listed above - Select Join an Event from the Events tab - Enter all requested registration information and follow instructions to proceed AUDIO ACCESS INFORMATION - DIAL-IN NUMBER: +1-517-268-4880 PASSCODE: UGS NET CONFERENCE ACCESS INFORMATION URL: https://e-meetings.mci.com/nc/join/ CONFERENCE NUMBER: PA9704629 PASSCODE: UGS Audience members can join the event directly at: chttps://e-meetings.mci.com/nc/join.php?i=PA9704629&p=UGS&t=r NET REPLAY ACCESS INFORMATION
To access the Net replays of this call, go to: https://e-meetings.mci.com/nc/join.php?i=PA9704629&p=UGS&t=r
The replay will be available for 30 days, ending Sept. 13, 2006.
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. For more information on UGS products and services, visit http://www.ugs.com.
Note: UGS, JT, 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. 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 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, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property and losses of key employees. UGS has included a discussion of these and other pertinent risk factors in its annual report on Form 10-K most recently 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.
CONTACTS: Doug Barnett - Financial Analysts 972-987-3352 Email Contact Mendi Paschal - Media 972-987-3210 Email Contact UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) Three months Three months ended ended June 30, June 30, 2006 2005 Revenue: License $86,017 $81,777 Maintenance 135,142 128,301 Services and other 75,500 74,932 Total revenue 296,659 285,010 Cost of revenue: License 2,175 5,944 Maintenance 15,695 14,495 Services and other 57,167 66,701 Amortization of capitalized software and acquired intangible assets 37,713 31,038 Total cost of revenue 112,750 118,178 Gross profit 183,909 166,832 Operating expenses: Selling, general and administrative 117,850 110,410 Research and development 47,388 38,659 In-process research and development - 4,100 Restructuring - 1,774 Amortization of other intangible assets 8,547 8,739 Total operating expenses 173,785 163,682 Operating income 10,124 3,150 Interest expense and amortization of deferred financing fees (26,520) (25,216) Other income (expense), net 7,703 (8,583) Loss before income taxes (8,693) (30,649) Benefit for income taxes (2,274) (8,625) Net loss $(6,419) $(22,024) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) Six months Six months ended ended June 30, June 30, 2006 2005 Revenue: License $165,527 $154,896 Maintenance 260,831 239,908 Services and other 144,095 142,771 Total revenue 570,453 537,575 Cost of revenue: License 6,099 10,400 Maintenance 30,800 27,858 Services and other 113,105 122,697 Amortization of capitalized software and acquired intangible assets 74,759 57,224 Total cost of revenue 224,673 218,179 Gross profit 345,780 319,396 Operating expenses: Selling, general and administrative 225,661 205,579 Research and development 98,613 74,640 In-process research and development - 4,100 Restructuring (535) 1,774 Amortization of other intangible assets 17,366 16,309 Total operating expenses 341,105 302,402 Operating income 4,675 16,994 Interest expense and amortization of deferred financing fees (52,967) (46,379) Other income (expense), net 9,937 (13,407) Loss before income taxes (38,355) (42,792) Benefit for income taxes (12,782) (12,599) Net loss $(25,573) $(30,193) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) June 30, December 31, Assets: 2006 2005 Current assets Cash and cash equivalents $61,472 $61,532 Accounts receivable, net 258,645 251,763 Prepaids and other 29,206 22,389 Deferred income taxes 17,351 26,471 Total current assets 366,674 362,155 Property and equipment, net 32,031 36,645 Goodwill 1,416,422 1,393,472 Capitalized and acquired software, net 434,919 464,994 Customer accounts, net 190,095 203,064 Other intangible assets, net 124,032 135,265 Other assets 36,910 39,623 Total assets $2,601,083 $2,635,218 Liabilities and Stockholder's Equity: Current liabilities Accounts payable and accrued liabilities $146,489 $159,976 Deferred revenue 173,827 133,027 Income taxes payable 9,245 11,895 Current portion of long-term debt 6,500 - Total current liabilities 336,061 304,898 Other long-term liabilities 63,770 48,511 Deferred income taxes 107,706 147,440 Long-term debt 1,180,970 1,212,046 Stockholder's equity Common stock, $ .01 par value, 3,000 shares authorized; 100 issued and outstanding at June 30, 2006 and December 31, 2005 - - Additional paid-in capital 1,011,626 1,005,991 Retained deficit (88,775) (63,202) Accumulated other comprehensive loss, net of tax (10,275) (20,466) Total stockholder's equity 912,576 922,323 Total liabilities and stockholder's equity $2,601,083 $2,635,218