UGS Extends Strong Lead in High-Growth Collaborative Product Development Management (cPDM) Segment With 73.9 Percent Revenue Increase Year-Over-Year Including Acquisitions, or 42.3 Percent Without Acquisitions
UGS' growth in the cPDM and CAx segments was fueled by enterprise contracts -- which UGS defines as contracts with total contract value of more than US$1 million each -- in both core and new PLM industry segments. Enterprise contracts through the first half of 2005, on the strength of a double-digit number of enterprise signings in the second quarter, increased by more than 19 percent over the same period a year ago. In addition, new industry segment contract signings more than doubled in the first half of 2005 compared to the same period a year earlier.
Second quarter financial highlights include (numbers include the impact of UGS' acquisition of Tecnomatix, which closed on April 1, 2005):
* Total revenue increased to US$285.0 million, or 26.6 percent growth
over the same period a year earlier, and includes US$81.8 million in
license software revenue, or a 19.0 percent year-over-year increase.
Acquisitions added revenue of US$23.0 million. The company saw an
increase in total revenue in each geographic segment compared to the
same period in 2004.
* Adjusted operating income (defined below) was US$48.0 million compared
to US$31.0 million in the same period a year earlier. Reported
operating income was US$3.2 million and includes the impact of
acquisition related intangible amortization costs of US$39.0 million.
In addition, reported operating income includes an in-process research
and development charge of US$4.1 million and a restructuring charge of
US$1.8 million. In the same period a year prior, the company reported
an operating loss of US$37.6 million which included acquisition
related intangible amortization costs of US$17.8 million and an in
process research and development charge of US$50.8 million.
* Adjusted EBITDA (defined below) was US$52.1 million and was in line
with company expectations given the desire to increase the investment
in research and development, selling and marketing, and the increase
in costs associated with being an independent company. In the second
quarter of 2004, UGS recorded adjusted EBITDA of US$54.2 million.
* In the figures presented above, the company has not made adjustments
for the impact of deferred revenues written off in connection with the
acquisition of the company and acquisitions by the company. These
write offs had the effect of reducing second quarter 2005 revenues and
earnings by US$3.4 million and second quarter 2004 revenues and
earnings by US$10.4 million.
"During the second quarter, UGS marked its one year anniversary of operating independently, by continuing to drive revenue growth and exceeding market growth rates in both segments of the PLM market," said Tony Affuso, chairman, CEO and president of UGS. "Combining this strong financial performance with successful product introductions and major events directly reaching in excess of 100,000 customers and prospects, it was another banner quarter for UGS. As the value of PLM becomes more widely known, we're unarguably marching toward our vision to enable a world where organizations and their partners collaborate through global innovation networks."
Business Highlights
In the second quarter UGS (the company expects to realize revenue from the contracts highlighted below over multiple quarters):
* Signed several key CAx contracts, including:
- Fiat, which continued to invest in UGS technology and ordered
US$1.8 million for CAx software and other products and services.
- Dyson, the maker of no loss of suction vacuum cleaners and digital
motors, which ordered additional seats of UGS NX software. UGS is
Dyson's sole PLM provider, including CAD and CAM applications.
- Panasonic Factory Solutions Co., Ltd. of Osaka, Japan, which
purchased UGS' NX CAD/CAE and Teamcenter Engineering, adding to
their existing installation of UGS' NX digital product development
software. Panasonic Factory Solutions uses NX CAE applications to
perform digital engineering analysis and simulation on their high
technology industrial equipment used in the fabrication of printed
circuit boards.
* Announced several key contracts with customers in a wide range of
industries across each of the company's three geographic regions,
including P&G for Teamcenter Sourcing; IHI Marine United, Japan's
leading shipbuilding company, for NX and Teamcenter software; and
Patria Vehicles Oy, part of the Patria Group, which standardized on
UGS' NX(TM) and Teamcenter(TM) software and services for product
development throughout its organization and supply chain.
* Launched Teamcenter 2005, the world's first integrated software
solution to close the gap between idea capture and comprehensive
product lifecycle management. Teamcenter 2005 powers new product
ideas from concept to reality by integrating Idea Management and
Requirements Planning into the complete digital lifecycle management,
product development and manufacturing process. Strong UGS
relationships with Intel, HP and Microsoft complement solutions
targeted at the industry's most critical business initiatives
including Product Development and Introduction, Global Product
Development and Regulatory Compliance.
* Hosted or participated in numerous major events across the world
through which more than 60 UGS customers provided endorsements of
their experiences deploying UGS solutions. These events included:
- UGS' annual Analyst and Media Forum in New York, which served as the
platform for launching Teamcenter 2005 along with concurrent launch
events in London, Paris, Munich and Hong Kong.
- UGS' annual Asia Pacific Executive Client Event, held this year in
Korea and at which GM Daewoo Auto & Technology won the company's
Asia Pacific PLM Excellence Award.
- UGS' Digital Manufacturing Symposium in Detroit, where attendance
has now quadrupled in only two years.
- UGS' Supplier Collaboration Summit in Tokyo, featuring General
Motors and Siemens -- two JT Open corporate members -- discussing
how the lightweight 3D JT data format has helped enable their
successful product lifecycle collaboration projects.
- PLM World in Dallas, annually the world's largest PLM user
community, featuring attendance of nearly 1,600.
* Completed the acquisition of Tecnomatix to create the number one
digital manufacturing solutions provider in the PLM market for
approximately $228 million. Tecnomatix became the digital
manufacturing brand offered by UGS. The acquisition was UGS' fourth
since launching independent operations in May 2004.
* Announced the signing of major systems integrator agreements with CSC
and EDS. These alliances complement the company's existing alliances
with HP and Capgemini.
* Announced that Asahi Electronics (AEC), Japan's leading provider of
real time 3D graphics and virtual reality solutions, joined the JT
Open Program, continuing the strong global momentum for this rapidly
expanding initiative. The JT Open program now has more than 100
members.
UGS will host its second quarter 2005 earnings with securities analysts live on the Internet at 10:30 a.m. Central time, Thursday, August 11, 2005. Presentation slides will be posted on http://www.ugs.com at 8:00 a.m. Central time. See below for webcast/teleconference access information.
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About UGS
UGS is a leading global provider of product lifecycle management (PLM) software and services with nearly 4 million licensed seats and 46,000 customers worldwide. Headquartered in Plano, Texas, UGS' vision is to enable a world where organizations and their partners collaborate through global innovation networks to deliver world-class products and services while leveraging UGS' open enterprise solutions, fulfilling the mission of enabling them to transform their process of innovation. For more information on UGS products and services, visit http://www.ugs.com .
Note: UGS and Teamcenter are registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. Tecnomatix, JT2GO and Open Manufacturing Backbone are trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. All other trademarks, registered trademarks or service marks belong to their respective holders.
The statements in this news release that are not historical statements, including statements regarding our business, results of operations expected financial performance and other statements identified by forward looking terms such as "may," "will," "expect," "plan," "anticipate" or "project," are forward-looking statements. These statements are subject to numerous risks and uncertainties which could cause actual results to differ materially from such statements, including, among others, risks relating to developments in the PLM industry, loss or downsizing of customers, competition, failure to innovate, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property and losses of key employees. UGS has included a discussion of these and other pertinent risk factors in its registration statement on Form S-4 most recently filed with the SEC. UGS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Adjusted operating income represents operating income (loss) adjusted for amortization of acquisition related intangible assets, restructuring charges, and charges for in-process research and development. Adjusted operating income is not a recognized term under generally accepted accounting principles, or GAAP. Adjusted operating income does not represent operating income (loss), as that term is defined under GAAP, and should not be considered as an alternative to operating income (loss) as an indicator of our operating performance. We have included information concerning adjusted operating income because we use such information when evaluating operating income to better evaluate the underlying performance of the Company. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted operating income and operating income (loss), the GAAP measure we believe to be most directly comparable to adjusted operating income (in thousands).
Successor Predecessor
Period of Period of
Three months May 27, 2004 April 1, 2004
ended through through
June 30, 2005 June 30, 2004 May 26, 2004
Reconciliation of
operating income (loss)
to adjusted operating
income:
Operating income (loss) $3,150 $(33,204) $(4,441)
Acquisition related
intangible amortization 39,025 12,783 5,017
Restructuring 1,774 --- ---
In-process research and
development 4,100 50,819 ---
Adjusted operating income $48,049 $30,398 $576
EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior secured credit facility entered into May 2004. Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense as described below. EBITDA and Adjusted EBITDA are not a recognized terms under generally accepted accounting principles, or GAAP. EBITDA and Adjusted EBITDA do not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures (including capitalized software expense), tax payments and debt service requirements. UGS Corp. considers EBITDA and Adjusted EBITDA to be key indicators of our ability to pay our debt. We have included information concerning EBITDA and Adjusted EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures. The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the GAAP measure we believe to be most directly comparable to EBITDA and Adjusted EBITDA (in thousands).
Successor Predecessor
Period of Period of
Three months May 27, 2004 April 1, 2004
ended through through
June 30, 2005 June 30, 2004 May 26, 2004
Reconciliation of net
(loss) income to EBITDA:
Net (loss) income $(22,024) $(44,688) $(3,068)
Interest expense 25,216 7,956 812
(Benefit) provision for
income taxes (8,625) 3,748 (1,616)
Depreciation and
amortization 43,869 14,005 13,262
EBITDA $38,436 $(18,979) $9,390
Reconciliation of EBITDA to
Adjusted EBITDA:
EBITDA $38,436 $(18,979) $9,390
Impact of revenue reduction
resulting from purchase
accounting (A) 3,438 10,413 ---
Impact of in-process research
and development (B) 4,100 50,819 ---
Restructuring (C) 1,774 --- ---
Other items (D) 1,445 2,600 ---
Currency translation
impact (E) 2,956 --- ---
Adjusted EBITDA $52,149 $44,853 $9,390
Successor Predecessor
Period of Period of
Six months May 27, 2004 January 1, 2004
ended through through
June 30, 2005 June 30, 2004 May 26, 2004
Reconciliation of net
(loss) income to EBITDA:
Net (loss) income $(30,193) $(44,688) $22,393
Interest expense 46,379 7,956 2,021
(Benefit) provision for
income taxes (12,599) 3,748 10,092
Depreciation and
amortization 81,403 14,005 33,471
EBITDA $84,990 $(18,979) $67,977
Reconciliation of EBITDA
to Adjusted EBITDA:
EBITDA $84,990 $(18,979) $67,977
Impact of revenue reduction
resulting from purchase
accounting (A) 8,076 10,413 ---
Impact of in-process research
and development (B) 4,100 50,819 ---
Restructuring (C) 1,774 --- ---
Other items (D) 3,395 2,600 ---
Currency translation
impact (E) 6,756 --- ---
Adjusted EBITDA $109,091 $44,853 $67,977
(A) Removes the purchase accounting impact for the adjustment to deferred
revenue.
(B) Removes the impact of acquired in-process research and development
that resulted from the acquisition of UGS PLM Solutions Inc. for the
period of May 27, 2004 through June 30, 2004 and from the acquisition
of Tecnomatix Technologies, Ltd. for the three months ended
June 30, 2005.
(C) Removes the impact of the restructuring charge.
(D) Represents the impact of management, consulting and advisory fees and
related expenses paid to our parent companies and affiliates of each
of our sponsors, as well as expenses associated with our retention
incentive plan for certain members of management.
(E) Represents the net effect of unrealized gains and losses from
revaluing the intercompany debt that resulted from the acquisition of
UGS PLM Solutions Inc. and from hedging obligations used to offset
foreign exchange currency balance sheet exposures.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor Predecessor
UGS Corp. UGS PLM
Solutions Inc.
Period of Period of
Three months May 27, 2004 April 1, 2004
ended through through
June 30, 2005 June 30, 2004 May 26, 2004
Revenue:
Software $81,777 $40,470 $28,236
Maintenance 128,301 34,799 60,982
Services and other 74,932 26,705 33,942
Total revenue 285,010 101,974 123,160
Cost of revenue:
Software 5,944 2,476 1,517
Maintenance 14,495 5,379 6,777
Services and other 66,701 21,061 32,208
Amortization of
capitalized software
and acquired intangible
assets 31,038 8,990 9,568
Total cost of revenue 118,178 37,906 50,070
Gross profit 166,832 64,068 73,090
Operating expenses:
Selling, general and
administrative 110,410 31,923 57,277
Research and development 38,659 11,006 19,254
In-process research and
development 4,100 50,819 ---
Restructuring 1,774 --- ---
Amortization of other
intangible assets 8,739 3,524 1,000
Total operating expenses 163,682 97,272 77,531
Operating income (loss) 3,150 (33,204) (4,441)
Interest expense and
amortization of deferred
financing fees (25,216) (7,956) (812)
Other (expense) income, net (8,583) 220 569
Loss before income taxes (30,649) (40,940) (4,684)
Provision (benefit) for
income taxes (8,625) 3,748 (1,616)
Net loss $(22,024) $(44,688) $(3,068)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor Predecessor
UGS Corp. UGS PLM
Solutions Inc.
Period of Period of
Six months May 27, 2004 January 1, 2004
ended through through
June 30, 2005 June 30, 2004 May 26, 2004
Revenue:
Software $154,896 $40,470 $100,780
Maintenance 239,908 34,799 163,012
Services and other 142,771 26,705 94,011
Total revenue 537,575 101,974 357,803
Cost of revenue:
Software 10,400 2,476 7,163
Maintenance 27,858 5,379 21,177
Services and other 122,697 21,061 81,259
Amortization of
capitalized software
and acquired intangible
assets 57,224 8,990 23,540
Total cost of revenue 218,179 37,906 133,139
Gross profit 319,396 64,068 224,664
Operating expenses:
Selling, general and
administrative 205,579 31,923 136,817
Research and development 74,640 11,006 52,851
In-process research and
development 4,100 50,819 ---
Restructuring 1,774 --- ---
Amortization of other
intangible assets 16,309 3,524 2,500
Total operating
expenses 302,402 97,272 192,168
Operating income (loss) 16,994 (33,204) 32,496
Interest expense and
amortization of deferred
financing fees (46,379) (7,956) (2,021)
Other (expense) income, net (13,407) 220 2,010
(Loss) income before
income taxes (42,792) (40,940) 32,485
Provision (benefit) for
income taxes (12,599) 3,748 10,092
Net (loss) income $(30,193) $(44,688) $22,393
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Successor
June 30, December 31,
Assets: 2005 2004
Current assets
Cash and cash equivalents $73,074 $58,400
Accounts receivable, net 238,291 233,180
Prepaids and other 19,945 23,869
Deferred income taxes 56,978 62,890
Total current assets 388,288 378,339
Property and equipment, net 36,651 33,751
Goodwill 1,429,655 1,317,948
Capitalized and acquired software, net 493,620 435,816
Customer accounts, net 216,032 217,961
Other intangible assets, net 146,880 116,501
Other assets 42,252 42,696
Total assets $2,753,378 $2,543,012
Liabilities and Stockholders' Equity:
Current liabilities
Accounts payable and accrued liabilities $164,608 $150,290
Deferred revenue 157,867 110,027
Income taxes payable 299 337
Current portion of long-term debt --- 5,000
Total current liabilities 322,774 265,654
Other long-term liabilities 47,255 41,011
Deferred income taxes 221,170 217,122
Long-term debt 1,243,719 1,049,623
Stockholders' equity
Common stock, $ .01 par value, 3,000
shares authorized; 100 issued and
outstanding at June 30, 2005 and
December 31, 2004 --- ---
Additional paid-in capital 1,005,439 1,005,479
Retained deficit (71,329) (41,136)
Accumulated other comprehensive (loss)
income, net of tax (15,650) 5,259
Total stockholders' equity 918,460 969,602
Total liabilities and
stockholders' equity $2,753,378 $2,543,012
CONTACTS:
Doug Barnett - Financial Analysts
972-987-3352
Email Contact
Mendi Paschal - Media
972-987-3210
Email Contact
CONTACT: financial analysts, Doug Barnett, +1-972-987-3352, or
Email Contact , or media, Mendi Paschal, +1-972-987-3210, or
Email Contact , both of UGS
Web site: http://www.ugs.com/