UGS Reports Second Quarter Revenue of US$296.7 Million; Performance Marks 12th Consecutive Quarter of Revenue Growth for PLM Industry Leader
15 August 2006
UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced second quarter 2006 results.
Second quarter financial highlights include:
- Total revenue increased to US$296.7 million, 4 percent growth over the
same period a year earlier.
- Software revenue increased to US$221.2 million (including license and
maintenance revenues), or 5 percent growth as compared to the second
quarter 2005.
- Total revenue and software revenue increased in each geographic region
compared to the same period in 2005.
- cPDM software revenue grew 18 percent over the same period a year
earlier. (cPDM represents Teamcenter software revenue and excludes
digital manufacturing software revenue.).
- EBITDA (defined below) was US$69.3 million, or an 80 percent growth over
the same period a year earlier.
- Operating income increased to US$10.1 million and includes the impact of
acquisition-related intangible amortization costs of US$39.1 million.
- These amounts are not adjusted for the impact of deferred revenues
written off in connection with acquisitions. These write-offs had the
effect of reducing second quarter 2006 revenues by US$0.2 million and
2005 revenues by US$3.4 million.
"We continue our drive to sustain solid growth and improve operating income while we focus on executing our strategic plan to position the company for enhanced growth," said Tony Affuso, chairman, CEO and president of UGS. "As we complete the reorganization of our sales force to focus on verticals and mid-market channels, we are currently adding needed sales capacity. We have seen early progress in our mid-market channel strategy marked by strong double digit software growth in the quarter. During the second quarter we also continued to receive third-party accolades for our software and service through such prestigious designations as being named a Caterpillar Strategic Supplier, the Honda Engineering Supplier of the Year Award, Ford's Q1 Certification, GM's Supplier of the Year Award and Frost & Sullivan's PLM Company of the Year Award."
Business Highlights
- UGS mid-market approach continued to gain steam through UGS Velocity
Series(TM) portfolio wins as well as increased channel expansion.
Second quarter indirect channel revenue increased by 30 percent, and the
company signed more than 50 new partners in the first half of the year.
(see separate release)
- Kaltenbach Maschinenfabrik GmbH & Co. KG, a global supplier of machine
tools, has selected Solid Edge(R) 3D CAD software to develop its range
of circular and band saw machines as well as sectional steel processing
systems. Following evaluation of several competing products, Kaltenbach
selected Solid Edge for its flexibility, user-friendly design and
support. (see separate release)
- Radkersburger Metallwarenfabrik, an Austrian-based die manufacturer, has
selected NX CAM Express(R) software for manufacturing its deep drawing
dies. (see separate release)
- UGS today announced an original equipment manufacturer (OEM) agreement
with China's Jilin University (JLU) to integrate one-step formability
analysis technology developed by JLU into NX(TM) software, UGS' digital
product development solution. The technology, developed by JLU's
Institute of Auto-body and Die Engineering (IADE), helps improve design
and manufacturing processes and is expected to be available in NX
commercially in the third quarter of 2006. (see separate release)
The company expects to realize revenue from the contracts highlighted
above over multiple quarters.
UGS will host its second quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, August 14, 2006. Presentation slides will be posted on http://www.ugs.com at 8:30 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, JT, NX, Solid Edge, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are trademarks or registered 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 annual report on Form 10-K 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.
CONTACTS:
Doug Barnett - Financial Analysts
972-987-3352
barnettd@ugs.com
Mendi Paschal - Media
972-987-3210
paschal@ugs.com
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three months Three months
ended ended
June 30, June 30,
2006 2005
Revenue:
License $86,017 $81,777
Maintenance 135,142 128,301
Services and other 75,500 74,932
Total revenue 296,659 285,010
Cost of revenue:
License 2,175 5,944
Maintenance 15,695 14,495
Services and other 57,167 66,701
Amortization of capitalized software and
acquired intangible assets 37,713 31,038
Total cost of revenue 112,750 118,178
Gross profit 183,909 166,832
Operating expenses:
Selling, general and administrative 117,850 110,410
Research and development 47,388 38,659
In-process research and development - 4,100
Restructuring - 1,774
Amortization of other intangible assets 8,547 8,739
Total operating expenses 173,785 163,682
Operating income 10,124 3,150
Interest expense and amortization of deferred
financing fees (26,520) (25,216)
Other income (expense), net 7,703 (8,583)
Loss before income taxes (8,693) (30,649)
Benefit for income taxes (2,274) (8,625)
Net loss $(6,419) $(22,024)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Six months Six months
ended ended
June 30, June 30,
2006 2005
Revenue:
License $165,527 $154,896
Maintenance 260,831 239,908
Services and other 144,095 142,771
Total revenue 570,453 537,575
Cost of revenue:
License 6,099 10,400
Maintenance 30,800 27,858
Services and other 113,105 122,697
Amortization of capitalized software and
acquired intangible assets 74,759 57,224
Total cost of revenue 224,673 218,179
Gross profit 345,780 319,396
Operating expenses:
Selling, general and administrative 225,661 205,579
Research and development 98,613 74,640
In-process research and development - 4,100
Restructuring (535) 1,774
Amortization of other intangible assets 17,366 16,309
Total operating expenses 341,105 302,402
Operating income 4,675 16,994
Interest expense and amortization of deferred
financing fees (52,967) (46,379)
Other income (expense), net 9,937 (13,407)
Loss before income taxes (38,355) (42,792)
Benefit for income taxes (12,782) (12,599)
Net loss $(25,573) $(30,193)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, December 31,
Assets: 2006 2005
Current assets
Cash and cash equivalents $61,472 $61,532
Accounts receivable, net 258,645 251,763
Prepaids and other 29,206 22,389
Deferred income taxes 17,351 26,471
Total current assets 366,674 362,155
Property and equipment, net 32,031 36,645
Goodwill 1,416,422 1,393,472
Capitalized and acquired software, net 434,919 464,994
Customer accounts, net 190,095 203,064
Other intangible assets, net 124,032 135,265
Other assets 36,910 39,623
Total assets $2,601,083 $2,635,218
Liabilities and Stockholder's Equity:
Current liabilities
Accounts payable and accrued liabilities $146,489 $159,976
Deferred revenue 173,827 133,027
Income taxes payable 9,245 11,895
Current portion of long-term debt 6,500 -
Total current liabilities 336,061 304,898
Other long-term liabilities 63,770 48,511
Deferred income taxes 107,706 147,440
Long-term debt 1,180,970 1,212,046
Stockholder's equity
Common stock, $ .01 par value, 3,000 shares
authorized; 100 issued and outstanding
at June 30, 2006 and December 31, 2005 - -
Additional paid-in capital 1,011,626 1,005,991
Retained deficit (88,775) (63,202)
Accumulated other comprehensive loss,
net of tax (10,275) (20,466)
Total stockholder's equity 912,576 922,323
Total liabilities and stockholder's
equity $2,601,083 $2,635,218
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, such as adjustments for purchase accounting, all of which are required in calculating covenant compliance under our senior secured credit facility. 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 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).
Three months Three months
ended ended
June 30, June 30,
2006 2005
Reconciliation of net loss to EBITDA:
Net loss $(6,419) $(22,024)
Interest expense 26,520 25,216
Benefit for income taxes (2,274) (8,625)
Depreciation and amortization 51,441 43,869
EBITDA $69,268 $38,436
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA $69,268 $38,436
Impact of revenue reduction resulting from
purchase accounting (a) 158 3,438
Impact of in-process research
and development (b) - 4,100
Restructuring (c) - 1,774
Other items (d) 1,893 2,226
Currency translation impact (e) (7,057) 3,027
Initial Sarbanes-Oxley certification (f) - 400
Tecnomatix cost savings (g) - 4,650
Compensatory payments to managers (h) 3,819 -
Adjusted EBITDA $68,081 $58,051
Six months Six months
ended ended
June 30, June 30,
2006 2005
Reconciliation of net loss to EBITDA:
Net loss $(25,573) $(30,193)
Interest expense 52,967 46,379
Benefit for income taxes (12,782) (12,599)
Depreciation and amortization 102,726 81,403
EBITDA $117,338 $84,990
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA $117,338 $84,990
Impact of revenue reduction resulting from
purchase accounting (a) 347 8,076
Impact of in-process research and
development (b) - 4,100
Restructuring (c) (535) 1,774
Other items (d) 5,838 4,263
Currency translation impact (e) (10,524) 6,109
Initial Sarbanes-Oxley certification (f) - 875
Tecnomatix cost savings (g) - 4,650
Compensatory payments to managers (h) 3,819 -
Adjusted EBITDA $116,283 $114,837
(a) Removes the impact of recording the deferred revenue balance at its
fair value in connection with the acquisition of UGS PLM Solutions
Inc. and Tecnomatix Technologies, Ltd. (Tecnomatix), which had the
effect of reducing revenue in periods subsequent to those
acquisitions.
(b) Removes the impact of the write-off of acquired in-process research
and development that resulted from the acquisition of Tecnomatix.
(c) Removes the impact of the restructuring.
(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, severance related expenses, and 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 non-U.S. dollar denominated intercompany debt that
resulted from the acquisition of UGS PLM Solutions Inc. and from
related hedging obligations used to offset foreign exchange currency
balance sheet exposures.
(f) Includes one time costs associated with our initial Sarbanes-Oxley
compliance.
(g) We acquired Tecnomatix on April 1, 2005. Accordingly, the operating
results of Tecnomatix were included in our results of operations from
the date of acquisition. This figure represents additional cost
savings we anticipate achieving related to the Tecnomatix acquisition.
(h) Represents compensatory payments to certain managers of UGS Corp. from
the capital contribution received from the parent companies. The
contribution was made with proceeds from UGS Capital Corp. II's
issuance of floating rate senior PIK notes.
Source: prnewswire
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