Moldflow Reports Third Fiscal Quarter 2003 Results

WAYLAND, Mass.--(BUSINESS WIRE)--April 24, 2003--Moldflow Corporation (NASDAQ: MFLO) today announced the results for its third fiscal quarter ended March 29, 2003 which were above the expectations previously set out by management. Third quarter revenues of $9.5 million increased 6% sequentially from the prior quarter and were unchanged from the corresponding quarter of fiscal 2002. Revenues of $26.7 million for the first nine months of fiscal 2003 were unchanged from the same period of fiscal 2002.

For the third fiscal quarter of 2003, Moldflow reported a net loss, as measured under generally accepted accounting principles ("GAAP"), of $584,000, or $0.06 per share, compared to net income of $502,000, or $0.05 per diluted share, during the same quarter of fiscal 2002. Reported net loss, as measured under GAAP, for the first nine months of fiscal 2003 was $368,000, or $0.04 per share, compared to net income of $1.6 million, or $0.16 per diluted share, in the same period of fiscal 2002.

Pro forma net income for the third quarter was $99,000, or $0.01 per diluted share, compared to pro forma net income of $612,000, or $0.06 per diluted share, in the same quarter of the prior year. Pro forma net income in both quarterly periods excludes non-cash amortization expense related to acquired intangible assets, and in fiscal 2003 excludes charges related to the acquisition of Controle de Processus International s.a.r.l. ("CPI") in January 2003. Pro forma net income for the first nine months of fiscal 2003 was $633,000, or $0.06 per diluted share, compared to $1.2 million, or $0.12 per diluted share, in the same period of fiscal 2002. Pro forma net income in both nine-month periods excludes non-cash amortization expense related to acquired intangible assets. Additionally, in fiscal 2003 pro forma net income excludes the acquisition related charges noted above, and in fiscal 2002 excludes gains recognized on the sale of certain investments and long-term assets. Please refer to the Unaudited Consolidated Statement of Operations attached to this press release for a complete reconciliation of the pro forma amounts to the corresponding results as measured under GAAP.

Roland Thomas, Moldflow's president and CEO said, "During the third quarter, we again exceeded our revenue expectations while solidifying our market position with significant new product developments in both our Design Optimization and Manufacturing Solutions product families." He noted, "This quarter's solid performance demonstrates Moldflow's staying power in a year that has presented a challenging business environment for most companies."

Thomas added, "The positive trends that we noted over the September and December quarters, including improved closure rates on new orders and the return to growth of our core Design Optimization products, continued again in this quarter and reflect improving conditions in some of our end-use markets. More specifically, our results in Japan, a major plastic part and mold design market, were particularly notable in the third quarter as many current customers upgraded their existing investments in the Moldflow Plastics Advisers(R) ("MPA(R)") products to more in-depth suites of Moldflow Plastics Insight(R) ("MPI(R)"). This is notable given the continued widespread economic issues in that region."

He continued, "As Moldflow celebrates its 25th anniversary this year, we believe we are better positioned than ever to serve the plastics market. We recently announced the MPI 4.1 and Moldflow Manufacturing Solutions(TM) ("MMS(TM)") 1.0 products, that will enable companies to quickly reduce costs, improve their profitability and stay ahead of their competition. MMS 1.0, which represents the integration of a series of applications powered by Moldflow Plastics Xpert(R) ("MPX(R)") and Moldflow Shotscope(R) technology, delivers a product suite designed to improve manufacturing efficiency and productivity along with the benefit of increased modularity and ease of implementation. With the acquisition of CPI this quarter, we have extended even further the breadth of capabilities we can deliver to our customers to help them optimize their manufacturing operations on the shop floor. As more and more companies seek to implement lean manufacturing techniques and drive toward lights-out production on a global scale, our solutions provide a unique path to achievement of their objectives."

Thomas concluded, "In the first week of April, I had the opportunity to meet with a large number of Moldflow customers who attended our annual international user conference in Pittsburgh. It was clear to me that these users of Moldflow products recognize the competitive edge that our products provide to their companies. We highly value our position as the market leader in software solutions for the plastics market and we remain committed to delivering the best-in-class solutions to help our customers solve the very real problems they face in their businesses today."

Third Quarter Highlights

Revenues from Design Optimization products accounted for 86% of total product revenues, up from 84% in the same quarter a year ago, while revenues from Manufacturing Solutions products during the third quarter represented 14%. Total product revenues for the third quarter of fiscal 2003 of $4.6 million increased sequentially by 9% over the prior quarter and were down 8% from the same quarter of fiscal 2002. Service revenues, primarily comprised of revenues from maintenance and support contracts, were $4.9 million for the third quarter of fiscal 2003, up 4% from the prior quarter and 10% from the same quarter in fiscal 2002. On a regional basis, revenues in Asia Pacific represented 40% of Moldflow's total revenues for the third quarter of fiscal 2003, while revenues in the Europe and Americas regions represented 35% and 25% of total revenue, respectively.

As of March 29, 2003, the Company had $50.3 million in cash and marketable securities and no long-term debt. Free cash flow generated during the third quarter was $1.0 million while cash flow provided by operating activities was $1.4 million. Please refer to the Unaudited Condensed Consolidated Statement of Cash Flows attached to this press release for a complete reconciliation of free cash flow to cash flow provided by operating activities as measured under GAAP.

The Company had a total of 246 employees at March 29, 2003, of which 34 were sales representatives, 74 were in research and development, with the remainder employed in sales management, marketing, customer support, and general and administrative functions.

Customer Wins

Moldflow's financial results included sales to companies across diverse industries and geographies, including customers in the automotive, medical, electronics, consumer goods, material supply and molding industries. During the quarter, Moldflow received a number of notable new customer orders including a significant design optimization order from Rotoplas, a custom molder of plastic components for various industries. In total, 77 new customers were added during the quarter.

In addition to new customers, a number of long time customers made significant new investments to extend the use of Moldflow products to additional users and plants, or to include complementary products in established design and manufacturing processes, for example:

-- Companies in the personal care consumer goods industry, including Phillips Oral Healthcare, Gillette, Diam and Estee Lauder, each made investments in Moldflow Design Optimization Solutions products;
-- Tyco Electronics expanded its Moldflow shop floor product installation to include seats of Moldflow Shotscope and MPX for implementation in its North American facilities; and
-- Intralox, a North American manufacturer of modular plastic conveyor belting, added seats of Moldflow Manufacturing Solutions products to its existing shop floor implementation for use its North American molding operations.

Other notable orders were received during the quarter from customers such as Alcon Laboratories, Canon Inc., FCI, Hewlett Packard, Matsushita Electric, Nikon, Seiko Epson, Sanyo and Toshiba.

Business Outlook

The current business outlook is based on information as of April 24, 2003 and is current as of today only. Moldflow expects revenues for the fourth fiscal quarter of 2003 to be between $9.1 million and $9.6 million. On a pro forma basis, Moldflow expects fourth fiscal quarter 2003 net income (loss) to be between ($0.02) and $0.01 per share. Expected fourth quarter pro forma net earnings per share excludes charges for amortization of acquired intangible assets of approximately $112,000, and assumes an income tax provision of $225,000. Giving effect to these assumptions, fourth fiscal quarter GAAP net income (loss) is expected to be between ($0.03) and breakeven per share.

Moldflow expects free cash flow for the fourth fiscal quarter of 2003 to be between $500,000 and $800,000. Free cash flow in our outlook is based upon our projection of cash flow from operations of $1.0 million to $1.2 million reduced by capital expenditures, including capitalized software development costs, of $400,000 to $500,000.

Financial Results

The unaudited condensed consolidated financial statements and supplemental information for the third fiscal quarter of the year ended June 30, 2003 follow.

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