MCAD Industry View – An August 2006 Update

North American revenue was $66 million, accounting for 42% of total revenue; European revenue was $72 million, accounting for 33% of total revenue; and Asia Pacific revenue was $54 million, accounting for 25% of total revenue. NA revenue was up 37% year-over-year, European revenue 8.4% year-over-year, and AP revenue 13% year-over-year. On a sequential basis, North America was up 16%, Europe up 8%, and AP down almost 3%.

Net income for the quarter was $16.9 million, down 37% from the $26.7 million in the same quarter a year ago but up 57% from the $10.8 million in the just prior quarter. PTC adopted SFAS 123R in the fourth quarter of fiscal year 2005 and, therefore, the GAAP results from the year-ago period do not include the cost of stock-based compensation. In the quarter, PTC recorded stock-based compensation expense of $10.1 million, amortization of acquisition-related intangible assets of $2.8 million, a net restructuring charge of $5.9 million related to a previously announced cost-reduction program, a $2.1 million write-off of in-process research and development associated with the acquisition of Mathsoft, and a one-time tax benefit of $6.1 million due to the favorable resolution of IRS tax audits in the United States. PTC recorded an unrelated tax benefit of $4.4 million in the third quarter of 2005 due to the favorable resolution of a foreign jurisdiction tax audit.

C. Richard Harrison, president and chief executive officer of PTC, said, “By almost every measure, our third quarter results were outstanding. We executed well across product lines, major geographies, and in both large accounts and our reseller channel. Additionally, our recent acquisitions are becoming important to our customers. We are clearly seeing positive results from our strategic efforts."

On August 14, 2006 UGS Corporation reported its financial results for the second quarter of 2006, the period ended June 30, 2006. Total revenue for the quarter was $296 million, an increase of just over 4% from the $285 million in the second quarter of 2005, and just over 2% increase from the $290 million in the prior quarter. Software license revenue was $86 million, accounting for 29% of total revenue. This was a 5.2% increase year-over-year and a 4.3% decline sequentially. Maintenance revenue was $135 million, accounting for 46% of total revenue. This was a 5.3% increase year-over-year and a 4.2% increase sequentially. Service revenue was $75 million, accounting for 25% of total revenue. This was a just under 1% increase year-over-year and a nearly a 7% increase sequentially.

Software revenue from the CAX segment was $140 million, up 3% year-over-year but a 1% decline sequentially. Software revenue from cPDm was $63 million, up nearly 19% year-over-year and essentially flat sequentially.

North American revenue accounted for 43% of total revenue, European revenue was 38% and Asia Pacific 19%. This was pretty much same percentage breakdown in the prior and year ago quarter. In absolute terms, AP was the major year-over-year gainer at +10%, with NA a +1.7% and Europe a +4.1%. On a sequential basis, all geographic regions increased 2.2%.

For the quarter, the net loss was $6.4 million, compared to a net loss of $22 million in the second quarter of 2005 and a net loss of $4.8 million in the prior quarter. EBITDA for the quarter was $69 million, an 80% increase over the $38 million a year earlier and an 8.5% increase over the $63.8 million in the prior quarter.

Tony Affuso, chairman, CEO and president of UGS, said, “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. 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.”

MCAD Vendor Stock Performances

In Q2 2006, the combined stock prices of the MCAD vendors rose 11% in absolute dollars and 7.7% in average price over the second quarter of 2005. This compares to an average decline of 3.8% for the major stock indexes over the same period. ANSYS and MSC Software had over a 30% increase in stock price year-over-year. PTC declined by 20% and Moldflow by nearly 10%.

On a sequential basis, the combined stock prices rose over 17% in absolute dollars and nearly 16% in terms of average price. This compares to an average increase of nearly 7.4% in the major stock indexes. MSC Software and ANSYS were again the growth leaders with 61% and 40%, respectively. MSC Software has finally become current in terms of SEC reporting and expects to be reinstatement on the NASDAQ soon. ANSYS has completed its acquisition of Fluent during the quarter. Moldflow was the largest decliner at 27%. PTC dropped 9%.

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