MSC.Software Reports Financial Results for Q1 2007

SANTA ANA, Calif., May 9 /PRNewswire-FirstCall/ -- MSC.Software Corporation (NASDAQ: MSCS), a leading global provider of enterprise simulation solutions including simulation software and services, today announced financial results for the first quarter ended March 31, 2007.


Total revenue for the first quarter ended March 31, 2007 was $57.6 million compared to $67.4 million for the first quarter last year. Software revenue for the first quarter totaled $23.0 million compared to $29.3 million for the first quarter last year. The 2006 first quarter included $1.3 million of non-recurring PLM software revenue. The PLM business was sold in March 2006. For the first quarter ended March 31, 2007, maintenance revenue totaled $28.7 million and services revenue totaled $5.9 million, compared to $27.6 million of maintenance revenue and $10.5 million of services revenue for the first quarter last year. The 2006 quarter included $1.1 million of PLM services revenue.

"Our transition to enterprise sales has presented some execution challenges to MSC as we move our key customers from purchasing engineering tools to implementing enterprise-wide simulation platforms," said Bill Weyand, CEO and Chairman of MSC.Software. "And these challenges continued to impact our financial performance in the first quarter as this transition is taking longer than expected. We are disappointed with the timing of large transactions and our ability to close and complete these larger deals. Although we are not satisfied with these results, we did see certain positive signs in our business in the first quarter."

"The number of transactions greater than $100,000 increased both quarter over quarter and sequentially, and the average amount of such transactions increased as well," continued Mr. Weyand. "We are seeing positive signs with our new Enterprise Simulation products and did have a number of key wins in the quarter with customers including Kimberly Clark and GE, in the US, Nissan and Honda in Asia Pacific, and Airbus, Alenia, and VW in Europe."

"MSC is beginning to get traction on evolving our customers from simulation tools to multi-discipline solutions as evidenced by Honda adopting MD Solutions for product development," continued Mr. Weyand. "In addition, winning IBM's Beacon Award for Global Solutions - Best Industry Solution further validates that our SimManager Enterprise product offering represents tremendous value to the customer with the potential for delivering up to a 75% engineering productivity gain."

"We believe our simulation technology is best-in-class, our vertical end-markets are strong, and customer response to our enterprise simulation strategy is positive. We are now focusing on execution in order to improve our financial performance," added Mr. Weyand.


Total revenue in the Americas for the first quarter ended March 31, 2007 was $18.4 million, compared to $22.6 million the first quarter last year. The 2006 first quarter included non-recurring software and services revenue totaling $2.4 million for the PLM business. Total revenue in EMEA for the first quarter was $19.7 million, compared to $23.7 million the first quarter last year. Excluding the effects of changes in the EURO during the 2007 quarter, total revenue in EMEA was $18.0 million. In the Asia Pacific region, revenue totaled $19.6 million, compared to $21.5 million for the first quarter last year. Excluding the effects of changes in the YEN during the 2007 quarter, total revenue in Asia Pacific was $20.0 million.


Total operating expenses for the first quarter ended March 31, 2007 were $59.4 million, compared to $43.2 million for the first quarter last year. Included in the 2007 first quarter was a $7.1 million restructuring charge. Included in the 2006 first quarter were $3.8 million of audit and non-recurring professional service fees incurred in connection with the accounting restatement, and $0.6 million of consulting fees related to the implementation of worldwide financial systems offset by a $4.4 million gain on sale of certain assets of our PLM business.

The first quarter 2007 had an operating loss of ($13.4) million, compared to operating income of $5.6 million in the first quarter last year. For the 2007 first quarter, the loss from continuing operations totaled ($6.4) million or $(0.15) per diluted share, compared to income from continuing operations of $3.1 million or $0.08 per diluted share in the first quarter last year.


At this time the Company will not affirm or issue guidance. The Company will evaluate its decision to provide guidance in the future, as it continues to move through this transition period.


The Company will host a conference call to discuss the first quarter financial results today at 1:30 pm pacific (4:30 pm eastern). The call will be web cast and can be accessed at the following URL:, or by dialing in to (800) 374-0151. The international dial-in number to access the live call is (706) 634-4981. To participate in the live conference call, use the following conference ID code: 7122772. The conference call slide presentation will be available along with the audio web cast and at the Company's website at

An archived version of the audio conference call will be available until May 11, 2007 and can be accessed at: (800) 642-1687 using the conference ID code: 7122772. An archive of the conference call and slide presentation will also be available at .

About MSC.Software Corporation

MSC.Software Corporation (NASDAQ: MSCS) is a leading global provider of enterprise simulation solutions including simulation software and services that help companies make money, save time and reduce costs associated with designing and testing manufactured products. MSC.Software works with thousands of companies in hundreds of industries to develop better products faster by utilizing information technology, software and services. MSC.Software employs more than 1100 people in 23 countries. For additional information about MSC.Software's products and services, please visit

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties. The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this press release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," "guidance" or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those discussed in "Risk Factors" on our 2006 Form 10-K filed with the Securities and Exchange Commission. We undertake no obligation to revise or update publicly any forward-looking statements for any reason or at any time.

    (in thousands, except per share value amounts)

                                                   December 31,    March 31,
                                                                                                         2006                      2007
        Current  Assets:
        Cash  and  Cash  Equivalents                                              $111,878              $100,597
        Investments                                                                              14,123                  12,000
        Trade  Accounts  Receivable,  less  Allowance
          for  Doubtful  Accounts  of
          $1,555  and  $2,365,  respectively                                    70,432                  74,472
        Income  Tax  Receivable                                                                  --                    4,919
        Deferred  Taxes                                                                        15,727                  15,707
        Other  Current  Assets                                                              7,440                    7,694
        Total  Current  Assets                                                          219,600                215,389

        Property  and  Equipment,  Net                                              19,055                  20,849
        Goodwill  and  Indefinite  Lived  Intangibles                178,457                178,457
        Other  Intangible  Assets,  Net                                            25,912                  24,447
        Deferred  Tax  Assets                                                                4,789                  11,798
        Other  Assets                                                                            11,025                  11,357
        Total  Assets                                                                        $458,838              $462,297

        Current  Liabilities:
        Accounts  Payable                                                                    10,666                    8,066
        Compensation  and  Related  Costs                                        18,949                  16,585
        Current  Portion  of  Long-Term  Debt                                        800                        800
        Restructuring  Reserve                                                                  --                    2,015
        Income  Taxes  Payable                                                              2,903                          --
        Deferred  Revenue                                                                    71,694                  72,376
        Other  Current  Liabilities                                                  14,366                  13,084
        Current  Liabilities  of  Discontinued  Operations          1,862                    1,569
        Total  Current  Liabilities                                                121,240                114,496

        Unrecognized  Tax  Benefits                                                          --                    7,160
        Long-Term  Deferred  Revenue                                                  6,495                  13,925
        Long-Term  Debt                                                                          6,756                    6,801
        Other  Long  Term  Liabilities                                              13,439                  15,663
        Total  Liabilities                                                                147,930                158,045

        Shareholders'  Equity:
        Preferred  Stock,  $0.01  Par  Value,
          10,000,000  Shares  Authorized;  No  Shares
          Issued  and  Outstanding                                                              --                          --
        Common  Stock,  $0.01  Par  Value,
          100,000,000  Shares  Authorized;  43,960,000
          and  44,271,000  Issued  and  43,738,000
          and  43,910,000  Outstanding,  respectively                        440                        443
        Additional  Paid-in  Capital                                              415,860                419,289
        Accumulated  Other  Comprehensive
          Income  (Loss):
            Currency  Translation  Adjustment,
              net  of  Tax                                                                        (13,363)              (13,397)
            Unrealized  Investment  Gain,
              net  of  Tax                                                                            8,868                    7,548
            SFAS  No.  158  Pension  Liability,
              net  of  Tax                                                                          (1,070)                (1,054)
        Total  Accumulated  Other  Comprehensive  Loss                (5,565)                (6,903)
        Accumulated  Deficit                                                            (96,953)            (103,739)
        Treasury  Shares,  At  Cost  (222,000  and
          361,000  Shares,  respectively)                                        (2,874)                (4,838)
        Net  Shareholders'  Equity                                                  310,908                304,252
        Total  Liabilities  and  Shareholders'  Equity            $458,838              $462,297

        (in  thousands,  except  per  share  data)
                                                                                                              Three  Months  Ended
                                                                                                                        March  31,
                                                                                                              2006                      2007
        Software                                                                                  $29,279                $23,003
        Maintenance  and  Services                                                    38,099                  34,646
        Total  Revenue                                                                          67,378                  57,649
        Cost  of  Revenue:
        COR  Software                                                                              3,994                    3,092
        COR  Maintenance  and  Services                                            14,605                    8,555
        Total  Cost  of  Revenue                                                          18,599                  11,647

        Gross  Profit                                                                            48,779                  46,002
        Operating  Expense:
        Research  and  Development                                                    10,953                  13,205
        Selling,  General  and  Administrative                              32,029                  38,910
        Amortization  of  Intangibles                                                    187                        175
        Restructuring  Charge                                                                    --                    7,097
        Impairment  Charges                                                                        --                          --
        Total  Operating  Expense                                                      43,169                  59,387

        Operating  Income  (Loss)                                                        5,610                (13,385)
        Other  (Income)  Expense:
        Interest  Expense                                                                      1,091                        281
        Other  Income,  net                                                                  (1,315)                (1,074)
        Total  Other  (Income),  net                                                      (224)                    (793)

        Income  (Loss)  From  Continuing
        Operations  Before  Provision
          (Benefit)  For  Income  Taxes                                                5,834                (12,592)
        Provision  (Benefit)  For  Income  Taxes                              2,742                  (6,167)
        Income  (Loss)  From  Continuing  Operations                      3,092                  (6,425)
        Discontinued  Operations:
        Total  Income  From  Discontinued
          Operations,  net  of  Income  Taxes                                          436                        175
        Net  Income  (Loss)                                                                  $3,528                $(6,250)
        Basic  Earnings  (Loss)  Per  Share
          From  Continuing  Operations                                                $0.10                  $(0.15)
        Diluted  Earnings  (Loss)  Per  Share
          From  Continuing  Operations                                                $0.08                  $(0.15)
        Basic  Earnings  Per  Share  From
          Discontinued  Operations                                                      $0.01                        $--
        Diluted  Earnings  Per  Share  From
          Discontinued  Operations                                                      $0.01                        $--
        Basic  Earnings  (Loss)  Per  Share                                        $0.11                  $(0.14)
        Diluted  Earnings  (Loss)  Per  Share                                    $0.09                  $(0.14)
        Basic  Weighted-Average  Shares
          Outstanding                                                                            31,000                  43,533
        Diluted  Weighted-Average  Shares
          Outstanding                                                                            45,040                  43,533


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