Total revenue for the third quarter ended September 30, 2007 was $57.2 million compared to $58.4 million for the third quarter last year. Software revenue for the third quarter totaled $19.9 million compared to $22.7 million for the third quarter last year. For the third quarter ended September 30, 2007, maintenance revenue totaled $31.6 million and services revenue totaled $5.7 million, compared to $28.9 million of maintenance revenue and $6.8 million of services revenue for the third quarter last year.
Total revenue for the nine months ended September 30, 2007 was $175.6 million compared to $193.7 million for the nine month period last year. Software revenue for the nine months totaled $65.9 million compared to $83.3 million for the nine month period last year. For the nine months ended September 30, 2007 maintenance revenue totaled $92.3 million and services revenue totaled $17.4 million, compared to $85.7 million of maintenance revenue and $24.7 million of services revenue for the nine month period last year. The 2006 nine month period included $2.4 million of non-recurring PLM revenue.
"The strategic product transition to simulation enterprise solutions is a journey for both MSC.Software and our customers," said Bill Weyand, CEO and Chairman of MSC.Software. "Recent successful enterprise transactions with industry leaders including Airbus and Audi indicate that we are making progress with this product transition."
"During the month of October, we held our Virtual Product Development Conferences throughout all world regions, where we saw a record number of registrations and attendance was notably higher than last year. We believe this is an indication that our customers continue to see great value in all of our simulation product solutions," continued Mr. Weyand.
"We believe we are seeing certain positive signs in our business activities, both with our new enterprise solutions and our software tools, and had a number of key wins in both categories in the third quarter with customers including Spirit Aerospace, Northrop Grumman and Bombardier in the Americas, Honda R&D and Mahindra Engineering in Asia Pacific, and Airbus, Audi and Eurocopter in Europe."
REVENUE BY GEOGRAPHY
Total revenue in the Americas for the three and nine months ended September 30, 2007 was $17.6 million and $53.3 million respectively, compared to $17.1 million and $58.0 million for the same periods last year. Total revenue in EMEA for the three and nine months ended September 30, 2007 was $21.5 million and $65.9 million, respectively, compared to $23.1 million and $74.4 million for the same periods last year. Changes in the Euro dollar increased EMEA revenue during the three and nine months of 2007 by $1.5 million and $4.9 million, respectively. In the Asia Pacific region, revenue for the three and nine months of 2007 totaled $18.1 million and $56.4 million respectively, compared to $18.2 million and $61.3 million for the same periods in 2006. Changes in the Japanese Yen decreased Asia Pacific revenue during the three and nine months of 2007 by $0.3 million and $1.7 million, respectively. The decreases in total revenue in all world geographies generally reflect decreases in software revenue from the impacts of the transition from selling engineering tools to selling enterprise solutions to our major customers in certain key industries including automotive, aerospace and manufacturing industries, decreases in services revenue due to a de-emphasis on certain low value consulting engagements, partially offset by growth in maintenance revenue.
RESULTS OF OPERATIONS AND EPS
Total operating expenses for the three and nine months ended September 30, 2007 were $46.6 million and $151.9 million, respectively, compared to $48.9 million and $142.5 million for the same periods last year. Operating income for the three months ended September 30, 2007 was $87 thousand and for the nine month period was a loss of ($9.5) million, compared to an operating loss of ($2.3) million and operating income of $5.6 million for the same periods in 2006. The operating loss for the nine months ended September 30, 2007 included restructuring and impairment charges totaling $8.9 million.
For the three months ended September 30, 2007, loss from continuing operations totaled $122 thousand compared to loss from continuing operations of ($1.8) million or ($0.04) per diluted share for the third quarter last year. For the nine months ended September 30, 2007, loss from continuing operations totaled ($5.1) million or ($0.12) per diluted share, compared to income from continuing operations of $2.1 million or $0.06 per diluted share for the nine month period last year.
At this time the Company will not issue guidance. The Company will evaluate its decision to provide guidance in the future, as it continues to move through this transition period and visibility improves.
The Company will host a conference call to discuss the third quarter financial results today at 7:00 am pacific (10:00 am eastern). The conference call will be web cast and can be accessed at the following URL: http://www.mscsoftware.com/ir/, 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: 22241568. The conference call slide presentation will be available along with the audio web cast and at the Company's website at http://www.mscsoftware.com/ir/.
An archived version of the audio conference call will be available until November 8, 2007 and can be accessed at: (800) 642-1687 using the conference ID code: 22241568. An archive of the conference call and slide presentation will also be available at http://www.mscsoftware.com/ir/.
About MSC.Software Corporation
MSC.Software Corporation (NASDAQ: MSCS) is a leading global provider of enterprise simulation solutions including simulation software and services that helps 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 1200 people in 23 countries. For additional information about MSC.Software's products and services, please visit http://www.mscsoftware.com.
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," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," "preliminary," "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.
PRELIMINARY MSC.SOFTWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2007 2006 2007 Revenue: Software $22,650 $19,874 $83,336 $65,859 Maintenance 28,946 31,632 85,713 92,272 Services 6,778 5,681 24,638 17,443 Total Revenue 58,374 57,187 193,687 175,574 Cost of Revenue: Software 2,632 2,173 9,882 7,692 Maintenance and Services 9,206 8,281 35,753 25,422 Total Cost of Revenue 11,838 10,454 45,635 33,114 Gross Profit 46,536 46,733 148,052 142,460 Operating Expenses: Research and Development 9,883 12,428 31,817 37,530 Selling, General and Administrative 38,810 32,912 110,074 104,956 Amortization of Intangibles 187 177 562 522 Restructuring and Other Charges -- 1,129 -- 8,919 Total Operating Expenses 48,880 46,646 142,453 151,927 Operating Income (Loss) (2,344) 87 5,599 (9,467) Other (Income) Expense : Interest Expense 255 300 3,329 873 Other Income, net (1,346) (1,834) (3,892) (2,464) Total Other Income, net (1,091) (1,534) (563) (1,591) Income (Loss) From Continuing Operations Before Provision (Benefit) For Income Taxes (1,253) 1,621 6,162 (7,876) Provision (Benefit) For Income Taxes 540 1,743 4,025 (2,796) Income (Loss) From Continuing Operations (1,793) (122) 2,137 (5,080) Income From Discontinued Operations, net of Income Taxes -- -- 436 1,046 Net Income (Loss) $(1,793) $(122) $2,573 $(4,034) Basic Earnings (Loss) Per Share From Continuing Operations $(0.04) $-- $0.06 $(0.12) Diluted Earnings (Loss) Per Share From Continuing Operations $(0.04) $-- $0.06 $(0.12) Basic Earnings Per Share From Discontinued Operations $-- $-- $0.01 $0.02 Diluted Earnings Per Share From Discontinued Operations $-- $-- $0.01 $0.02 Basic Earnings (Loss) Per Share $(0.04) $-- $0.07 $(0.09) Diluted Earnings (Loss) Per Share $(0.04) $-- $0.07 $(0.09) Basic Weighted-Average Shares Outstanding 42,872 44,219 36,416 44,026 Diluted Weighted-Average Shares Outstanding 45,420 44,219 45,594 44,026 MSC.SOFTWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except per share value amounts) December 31, September 30, 2006 2007 ASSETS Cash and Investment $126,001 $134,337 Trade Accounts Receivable, less Allowance for Doubtful Accounts of $1,555 and $1,846, respectively 70,432 48,105 Property and Equipment, Net 19,055 19,642 Goodwill, Indefinite Lived & Other Intangibles 204,369 201,101 Other Assets 38,981 55,575 Total Assets $458,838 $458,760 LIABILITIES AND SHAREHOLDERS' EQUITY Deferred Revenue $78,189 $75,240 Long-Term Debt 7,556 6,891 Other Liabilities 62,185 63,011 Total Liabilities 147,930 145,142 Net Shareholders' Equity 310,908 313,618 Total Liabilities and Shareholders' Equity $458,838 $458,760
Web site: http://www.mscsoftware.com/