Core Revenue Growth Excluding Acquisitions Was 13% in the Fourth Quarter and 31% for the Fiscal Year
Fourth quarter highlights include: -- Revenues of $101.6 million, an increase of 27% over the fourth quarter last year; -- Net income of $2.3 million or $0.08 per share, slightly above Company guidance for the quarter. Fiscal year 2002 highlights include: -- Revenues of $344.2 million, up 46% over last year; -- Operating income of $6.6 million, excluding restructuring and other impairment charges; -- Key balance sheet items include $35 million in cash and investments, $67 million in deferred revenue and $242 million in shareholders' equity.
MSC Software's conference call to discuss the fourth quarter and year end results will be web cast live today at 8:30 am Pacific (11:30 am Eastern) at the Company's website at http://www.mscsoftware.com/ir . It can also be accessed through the following toll-free dial-in numbers: US - (800) 374-0151 or Intl. - (706) 634-4981, referencing MSC Software. An archived version of the conference call will also be available at the Company's website.
"Our revenue growth in the fourth quarter was supported by the fact that we were able to close many of the transactions that had been pushed from the third quarter," said Frank Perna, Jr., chairman and CEO, MSC.Software Corp. "Even without the impact of the third quarter transactions, our systems business was particularly strong, as we saw expanded penetration into our core software and other manufacturing accounts.
"Virtual Product Development and the increasing use of simulation technologies are helping our customers save time and money with their Product Lifecycle Management implementations. Customers are finding significant value in our integrated software, services and systems approach to product delivery. Significant business wins at BMW and a major first tier automotive supplier in the Americas support this fact," continued Mr. Perna.
"We solidified our position in the Desktop and CAD-embedded markets with a number of key product releases including Generative Nonlinear for CATIA V5, and new releases of MSC.visualNastran 4D and MSC.Dynamic Designer. The 2003 release of MSC.Patran began shipping and features numerous enhancements to interoperability among MSC products.
"Although current economic conditions continue to be challenging, the right sizing moves that were executed in FY 2002 will allow us to grow profitably now, and we are well positioned for accelerated revenue growth and improving margins when the economy recovers," concluded Mr. Perna.
For the fourth quarter ended December 31, 2002, MSC.Software reported revenue of $101.6 million, an increase of 27% over reported revenue of $80.1 million for the fourth quarter last year. The reported net income for the fourth quarter was $2.3 million compared with $6.3 million in the fourth quarter last year. Earnings per diluted share were $0.08 compared with $0.21 per diluted share in the fourth quarter last year.
For the fiscal year ended December 31, 2002, MSC.Software reported revenue of $344.2 million compared to $236.1 million of reported revenue in fiscal 2001, an increase of 46%. The pro forma net loss, excluding restructuring and other non cash impairment charges, write off of acquired R&D and cumulative change in accounting principle, for the fiscal year 2002 was ($1.3) million or ($0.05) per diluted share. The reported net loss, including restructuring and other impairment charges, write-off of acquired R&D and cumulative change in accounting principle, was ($51.3) million or ($1.75) per diluted share in fiscal 2002, compared with net income of $10.3 million or $0.47 per diluted share in fiscal 2001.
In the Americas, revenue increased 18% to $49.8 million in the fourth quarter versus the fourth quarter last year. Revenue increased 55% to $180.5 million for the fiscal year ended December 31, 2002. In the Americas, 75 transactions over $100,000 were signed in the fourth quarter, and the total number of new accounts increased by 240 new names. Key software business completed in the quarter included United Technologies, Delphi, Kodak and Guidant. Key services engagements were completed or are ongoing with customers including Cooper Tire and Ford. Key enterprise systems were delivered to Harley Davidson, Orbitz and Pegasus.
In spite of very tough economic markets in Europe, MSC.Software's European revenue increased by 8% to $23.5 million in the fourth quarter versus the fourth quarter last year, and increased 24% to $78.9 million in fiscal 2002. Total number of new accounts increased by 57 and the number of transactions over $100,000 totaled 14 in the fourth quarter. Key services engagements were ongoing with BMW, Renault Formula 1 and Jaguar. Major software deals were signed with Eurocopter Germany, British Aerospace and MTU AeroEngines. A total solution including software, services and systems was sold to Ernst- Mach-Institute, a subsidiary of Fraunhofer Gesellschaft, which will use the computing environment for research in the field of high-speed dynamics, including stochastic simulation techniques.
The Asia-Pacific region reported significant revenue growth for MSC.Software, with revenue increasing 75% to $28.3 million in the fourth quarter, and increasing 50% to $84.8 million in fiscal 2002. The total number of new customer accounts increased by 52 new account names. In total 32 transactions over $100,000 were signed in the region in the fourth quarter. Key software contracts were signed with Mitsubishi Motor in Japan and Kwanjin in Korea. Service and system engagements moved forward with Samsung Heavy Industries, Japan Automotive Research and James Hardie Research in Australia.
Based on current visibility, the Company expects first quarter revenue and earnings to be within current consensus estimates. In addition the Company is comfortable with the consensus estimates for revenue and earnings for FY 2003.
Members of MSC.Software's financial community are invited to attend our Investor and Analyst Day to be held in Santa Ana, CA on Wednesday, March 12th. The day long event will be an opportunity to meet with key members of MSC's management team, see simulation technology in action, and look into the future of Virtual Product Development. Please consult the event website at http://www.mscsoftware.com/ir/events for registration.
MSC.Software (NYSE: MNS) is the leading global provider of simulation software, with related services and systems, 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, services and systems. MSC.Software employs more than 1,500 people in 22 countries. For additional information about MSC.Software's products and services, please visit www.mscsoftware.com .
Except for the historical information contained herein, certain matters discussed in this news release constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Other factors which could cause such results to differ materially from those described in the forward-looking statements include delays in developing, completing, or shipping new or enhanced products, the ability to assimilate acquisitions into MSC's operations, foreign currency translations, and other risks and uncertainties that are detailed in the Company's annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission.
MSC.SOFTWARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2002 2001 2002 2001 (Unaudited) (Unaudited) REVENUE: Software $47,675 $51,436 $160,361 $150,342 Services 24,835 16,353 87,790 59,224 Systems 29,055 12,327 96,000 26,531 Total Revenue 101,565 80,116 344,151 236,097 COST OF REVENUE: Software 5,182 7,880 22,468 26,193 Services 14,992 9,901 54,299 33,292 Systems 26,846 10,755 81,359 22,125 Total Cost of Revenue 47,020 28,536 158,126 81,610 GROSS PROFIT 54,545 51,580 186,025 154,487 OPERATING EXPENSE: Research and Development 8,107 5,729 27,368 22,068 Selling, General and Administrative 36,427 32,655 145,520 99,253 Restructuring and Other Impairment Charges -- -- 13,815 1,894 Write-Off of Acquired In-Process R&D -- -- 2,380 -- Amortization of Goodwill and Other Intangibles 1,918 2,703 6,574 10,878 Total Operating Expense 46,452 41,087 195,657 134,093 OPERATING INCOME (LOSS) 8,093 10,493 (9,632) 20,394 OTHER EXPENSE (INCOME) Interest Expense 3,667 625 8,101 5,239 Other Expense (Income), Net 765 (330) 165 (1,704) Total Other Expense, Net 4,432 295 8,266 3,535 INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE 3,661 10,198 (17,898) 16,859 Provision (Benefit) for Income Taxes 1,384 3,938 (5,869) 6,588 NET INCOME (LOSS) BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE 2,277 6,260 (12,029) 10,271 CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE -- -- (39,300) -- NET INCOME (LOSS) $2,277 $6,260 $(51,329) $10,271 BASIC EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE CHANGE $0.08 $0.22 $(0.41) $0.50 DILUTED EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE CHANGE $0.08 $0.21 $(0.41) $0.47 BASIC EARNINGS (LOSS) PER SHARE $0.08 $0.22 $(1.75) $0.50 DILUTED EARNINGS (LOSS) PER SHARE $0.08 $0.21 $(1.75) $0.47 Basic Weighted-Average Shares Outstanding 29,730 28,569 29,379 20,606 Diluted Weighted-Average Shares Outstanding 30,194 30,322 29,379 21,900 PRO FORMA RESULTS (EXCLUDING RESTRUCTURING AND OTHER IMPAIRMENT CHARGES, WRITE-OFF OF ACQUIRED IN-PROCESS R&D AND CUMULATIVE CHANGE) OPERATING INCOME (LOSS) $8,093 $10,493 $6,563 $22,288 NET INCOME (LOSS) $2,277 $6,260 $(1,341) $11,439 BASIC EARNINGS (LOSS) PER SHARE $0.08 $0.22 $(0.05) $0.56 DILUTED EARNINGS (LOSS) PER SHARE $0.08 $0.21 $(0.05) $0.52 MSC.SOFTWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) December 31, December 31, 2002 2001 (Unaudited) ASSETS Cash and Investments $34,564 $89,540 Trade Accounts Receivable, Net 97,636 82,276 Other Current Assets 37,177 26,184 Total Current Assets 169,377 198,000 Property and Equipment, Net 35,511 31,209 Goodwill and Other Intangible Assets, Net 264,788 173,355 Capitalized Software Costs, Net 25,957 25,952 Other Assets 11,641 5,139 Total Assets $507,274 $433,655 LIABILITIES AND SHAREHOLDERS' EQUITY Borrowings Under Line of Credit $-- $-- Current Portion of Long-Term Debt 13,750 -- Accounts Payable 32,706 22,289 Restructuring Reserve 4,207 1,404 Deferred Revenue 67,327 48,578 Other Current Liabilities 39,008 31,907 Total Current Liabilities 156,998 104,178 Deferred Income Taxes 29,243 14,489 Long-Term Debt, Less Current Portion 40,104 -- Notes Payable to Shareholders, Less Current Portion 24,470 24,178 Subordinated Notes Payable, Less Current Portion 6,817 9,185 Other Long-Term Liabilities 7,162 4,653 Total Liabilities 264,794 156,683 Total Shareholders' Equity 242,480 276,972 Total Liabilities and Shareholders' Equity $507,274 $433,655