Moldflow Reports Fourth Fiscal Quarter 2003 Results; Exceeds Guidance with Quarterly Growth in Revenues and EPS

WAYLAND, Mass.--(BUSINESS WIRE)--Aug. 5, 2003--Moldflow Corporation (NASDAQ: MFLO) today announced the results for its fourth fiscal quarter and year ended June 30, 2003, which were above the expectations previously set out by management. Fourth quarter revenues of $9.9 million increased 20% from the corresponding quarter of fiscal 2002 and increased 5% sequentially from the preceding quarter. Revenues of $36.6 million for the full 2003 fiscal year increased 4% over fiscal 2002.

For the fourth fiscal quarter of 2003, Moldflow reported net income, as measured under generally accepted accounting principles ("GAAP"), of $250,000, or $0.02 per diluted share, compared to a net loss of $849,000, or $0.08 per share, during the same quarter of fiscal 2002. For the full 2003 fiscal year, the Company reported a net loss, as measured under GAAP, of $118,000, or $0.01 per share, compared to net income of $780,000, or $0.08 per diluted share, in fiscal 2002.

Pro forma net income, a non-GAAP financial measure, for the fourth quarter was $340,000, or $0.03 per diluted share, which compared to pro forma net loss of $222,000, or $0.02 per share, in the same quarter of the prior year. Pro forma net income for the full 2003 fiscal year was $973,000, or $0.09 per diluted share, which was unchanged from fiscal 2002. Pro forma net income in all periods excludes non-cash amortization expense related to acquired intangible assets and other restructuring and acquisition related charges, net of related tax effects. Additionally, fiscal 2002 pro forma net income 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 most directly comparable GAAP measures.

Roland Thomas, Moldflow's president and CEO said, "I am pleased to report on a fiscal quarter and full fiscal year of strong financial and operating results. During the past quarter, we continued to execute well amid mixed global market conditions by delivering on our well-established value proposition. We were rewarded with solid growth in both revenues and profits."

He continued, "In the fourth quarter, we saw strong demand for our products, in particular, the Moldflow Manufacturing Solutions, or 'MMS' products. In April, we released MMS 1.0 - the integration of our process and production monitoring and control products into a new, modular user environment - and it was well received by our customers. With the demonstrated rapid payback on investment afforded by the MMS suite, many new customers made initial investments and a notable number of world-class global manufacturing companies expanded pilot implementations into plant-wide deployments. In addition, we built upon the initial successes that we had in France in the third quarter with the production monitoring product acquired in our purchase of CPI in January. This resulted in the highest revenue quarter for the MMS product line in our history. This fiscal year also saw positive signs for our Design Optimization Solutions business, particularly in Japan where we were able to achieve many significant orders from both new and existing customers."

He concluded, "The successes we had in the fourth quarter and the last year are gratifying and make us optimistic about the future and our business strategy. As we look forward to fiscal 2004, we expect to see continued modest growth in total revenues. Further, we remain committed to managing the company for growth with increased profitability and cash flow while continuing to make investments in research and development to maintain our market leadership and in the distribution channels needed to reach our global customer base. Given that there is still a degree of uncertainty in the world economy and our end-user markets in particular, we will continue to monitor the economic conditions and adjust our business model when appropriate to meet these objectives."

Fourth Quarter Highlights

Fourth quarter 2003 revenues totaled $9.9 million and represented an increase of 20% over the same period in the prior year. Excluding the impact of movements in foreign currency exchange rates, revenues increased 9% over the corresponding period of the prior year. On a sequential basis, total revenues in the fourth fiscal quarter increased 5%, while growth in revenues on a constant currency basis was 2%.

Total product revenues for the fourth quarter of fiscal 2003 of $4.8 million increased by 21% over the same quarter of fiscal 2002 and increased sequentially by 4% over the preceding quarter. Revenues from Manufacturing Solutions products during the fourth quarter represented 32% of total product revenues, up from 18% in the prior year, while Design Optimization products accounted for 68% of total product revenues. Service revenues, primarily comprised of revenues from maintenance and support contracts, were $5.2 million for the fourth quarter of fiscal 2003, up 18% from the same quarter in fiscal 2002 and 5% from the preceding quarter. On a regional basis, revenues in Europe represented 44% of Moldflow's total revenues for the fourth quarter of fiscal 2003, while revenues in the Americas and Asia Pacific regions represented 24% and 32% of total revenue, respectively. In total, 92 new customers were added during the quarter.

As of June 30, 2003, the Company had $52.1 million in cash and marketable securities and no long-term debt. Free cash flow generated during the fourth quarter was $327,000 while cash flow provided by operating activities was $914,000. 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 June 30, 2003, of which 33 were sales representatives, 75 were in research and development, with the remainder employed in sales management, marketing, customer support, and general and administrative functions.

Business Outlook

The current business outlook is based on information as of August 5, 2003 and is current as of that day only. Moldflow expects revenues for the first fiscal quarter of 2004 to be between $9.4 million and $9.9 million and net income per diluted share, measured under GAAP, to be between $0.01 and $0.03 per share, assuming an effective income tax rate of 35%.

Moldflow expects negative free cash flow for the first fiscal quarter of 2004 to be between $400,000 and $600,000 consistent with historical seasonal trends. Free cash flow in Moldflow's outlook is based upon a projection of cash flow used in operations of between $100,000 and $200,000 reduced by capital expenditures, including capitalized software development costs, projected to be between $300,000 and $400,000.

Financial Results

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

Use of Non-GAAP Financial Information

To supplement our unaudited consolidated financial statements presented on a GAAP basis, we use non-GAAP, or "pro forma," additional measures of net income (loss), net income (loss) per share and cash flow that we believe are appropriate to enhance an overall understanding of our historical financial performance and future prospects. The non-GAAP results, which are adjusted to exclude certain costs, expenses, gains and losses from the comparable GAAP measures, are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. These non-GAAP results are among the primary indicators management uses as a basis for evaluating our financial performance as well as for forecasting of future periods. For these reasons, and because the non-GAAP additional measures present additional information that is not readily ascertainable from the GAAP presentation, management believes these non-GAAP measures can be useful to investors, potential investors and others. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), income (loss) per share or cash flow from operations prepared in accordance with GAAP.

Information Dissemination

Moldflow will host a conference call to discuss the fourth quarter and full fiscal year 2003 results and future outlook at 11:30 a.m. US Eastern time today. A live Webcast of the conference call, together with this press release and supplemental financial information, can be accessed through the Company's Website at in the Investor Information section. In addition, the call, press release and supplemental information will be archived and can be accessed through the same link.

About Moldflow Corporation

Moldflow (NASDAQ: MFLO) is the world's leading provider of software products and services that increase the speed, efficiency, quality and drive down the cost of the design and manufacture of injection molded plastic products. Companies use Moldflow's complete suite of products to address plastic part design issues at the earliest possible stage as well as to maximize productivity and profitability on the manufacturing floor. Its collaboration with academia, industry and customers around the world has led to a reputation for constant innovation in the complete design-to-manufacture process. Headquartered in Wayland, Massachusetts, Moldflow has offices and research and development centers in the United States, Europe, Australia and the Asia Pacific region. For more information about Moldflow visit or call 508-358-5848; fax 508-358-5868.

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