MKS Inc.
TSX : MKX

MKS Inc.

November 27, 2007 16:05 ET

MKS Announces Quarterly Profits on Record Revenues for Second Quarter Fiscal 2008

WATERLOO, ONTARIO--(Marketwire - Nov. 27, 2007) - MKS Inc. (MKS) (TSX:MKX) today announced its financial results for the second quarter of fiscal 2008 ended October 31, 2007. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q2 2008 (compared with Q2 2007)

- Total revenue increased 18 percent to a record $13.6 million from $11.5 million.

- Net income increased to $0.2 million or $0.00 per share from a net loss of ($0.7) million or ($0.01) per share.

- Application lifecycle management (ALM) revenues increased 23 percent to $11.9 million from $9.7 million.

- ALM license revenue rose 23 percent to $4.2 million from $3.4 million.

- ALM maintenance revenues increased 19 percent to $5.6 million from $4.7 million.

- ALM service revenues increased 33 percent to $2.1 million from $1.6 million.

- New business was won at Chase Paymentech, ING, Medtronic, Migaro and Professional Data Solutions, and follow-on wins with Continental, Fortis Bank, HSBC, IT Frontier, Torstar, Northrop Grumman, TietoEnator and Trading Technologies.

Closing cash balance at October 31, 2007 was $9.9 million, down from $11.9 million at July 31, 2007.

"We are pleased to report another quarter of record revenues as well as a return to overall profitability," said Philip Deck, CEO of MKS. "Solid improvements in ALM licensing, maintenance and services and focused cost control contributed to our profitability in spite of substantial currency-related cost increases."

"We accomplished our record revenue this quarter based on a series of relatively modest transactions from both long term accounts and new ones," said Michael Harris, MKS President and COO. "We continue to invest substantial field resources on several long term customer initiatives that are steadily maturing. We believe that the combination bodes well for growth looking forward."

Financial Review

Total revenue for the second quarter of fiscal 2008 was $13.6 million, an increase of 18 percent over the second quarter of fiscal 2007. Net income for the second quarter of fiscal 2008 was $0.2 million, or $0.00 per share, compared to a net loss of ($0.7) million or ($0.01) per share in the second quarter of fiscal 2007.

Six month revenues for fiscal 2008 increased 13 percent to $27.2 million compared with revenues of $24.1 million for the same period in fiscal 2007. Six month net loss was ($0.1) million, a decrease from a net loss of ($1.2) million for the same period in fiscal 2007.

Second quarter fiscal 2008 application lifecycle management (ALM) revenues increased 23 percent to $11.9 million, compared to revenues of $9.7 million reported in the second quarter of fiscal 2007.

Six month ALM revenues for fiscal 2008 increased 17 percent to $23.6 million from $20.2 million for the first six months of fiscal 2007.

Outlook & Guidance

MKS expects that ALM license revenue will improve in fiscal 2008 from the levels of fiscal 2007 which, combined with continued increases in maintenance and services revenue, will result in higher total revenue for the fiscal year compared to fiscal 2007, more than offsetting expected declines in Interoperability revenue.

MKS is managing its cost base to sustain current sales and marketing capacity and is making further investments in sales resources only to the extent that profitability can be expected throughout its planning horizon. MKS expects full year profitability for fiscal 2008 based on increasing revenue and carefully managed costs. For the fiscal year 2008, the significant volatility in MKS operating currencies has represented a substantial planning challenge.

MKS expects to maintain more than sufficient cash balances through fiscal 2008 through the combination of expected improvements in net income, reduced capital expenditures over those in fiscal 2007 and an expected continuation of lower overall receivables days net of current dividend policy. The Company expects that seasonal factors will cause inflows of cash in the second half of the fiscal year as the Company's annual maintenance renewals are more heavily weighted to the last two quarters of the fiscal year.

Conference Call Details

The Company will hold a conference call on November 27, 2007 at 5:00 p.m. EST to discuss its second quarter performance. Interested parties may access the call by dialing 877-871-9526 or 416-620-2400. A digital recording of the call will be available for one (1) week from November 28, 2007 to December 5, 2007 and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21337075.

About MKS

MKS is a globally recognized leader of software application management, harmonizing the disciplines of application lifecycle management and application service management to aid global companies in achieving higher levels of productivity, process standardization and rapid innovation. For more information about MKS, visit our Web site at http://www.mks.com.

About MKS Integrity

MKS Integrity is an enterprise software platform that coordinates and manages software application activities and configuration items through the establishment of a unified application data framework to deliver productivity, visibility and compliance. MKS Integrity's unified approach provides IT and software engineering organizations with end to end coverage across the application development lifecycle with capabilities including requirements management, software configuration management (SCM), software change management, build management and test management, through to deployment and release management, and IT portfolio management. MKS Integrity facilitates software applications management within large organizations that have a need for enterprise class scalability, multi-platform capability, support for multiple geographic locations, traceability, audit ability and granular access control and security. By spanning all aspects of the application development lifecycle, MKS supports critical business transformations including SOA, application rationalization and IT outsourcing.

MKS Integrity's unique single architecture approach to ALM delivers uncompromised visibility, flexibility and scalability across software projects, platforms (Windows, UNIX, System i and Mainframe), custom and packaged applications (SAP and Oracle/PeopleSoft), and connects diverse teams and locations. MKS Integrity automates any IT process, supporting maturity frameworks such as ITIL, CMMI and CobiT, enabling global development organizations to better meet IT governance and compliance goals, achieve high levels of software process maturity, measure project performance with real-time software metrics and make substantial productivity gains for an overall low total cost of ownership.

Copyright (C) 2007 MKS Inc. MKS and MKS Toolkit are trademarks or registered trademarks of MKS Inc. All other trademarks mentioned in this release are the property of their respective owners.

This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect the Company's current views with respect to future events and are subject to such risks and uncertainties. Although the Company believes the expectations represented by such forward looking statements are reasonable, there can be no assurance that those expectations will prove to be correct. Many factors could cause our actual results to differ materially from the statements made including those factors detailed from time to time in filings made by the Company with Canadian securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. The Company does not intend and does not assume any obligation to update these forward-looking statements.



US GAAP
MKS Inc.
Consolidated Balance Sheets
(U.S. dollars, thousands, unaudited)

October April 30
31 2007 2007
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Assets:

Current assets:
Cash and cash equivalents $ 9,878 $ 15,258
Accounts receivable, net of allowances for
doubtful accounts of $260 (April 30, 2007 - $233) 9,581 6,118
Deferred income taxes 1,847 1,847
Income taxes receivable 127 -
Other 1,963 1,946
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Total current assets 23,396 25,169

Fixed assets 4,674 4,709
Intangible assets 198 240
Goodwill 2,424 2,424
Deferred income taxes 2,273 2,964
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Total assets $ 32,965 $ 35,506
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Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 1,719 $ 1,482
Accrued liabilities 3,434 2,722
Income taxes payable - 70
Deferred revenue 12,263 13,783
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Total current liabilities 17,416 18,057

Shareholders' equity:
Share capital 55,265 54,837
Accumulated other comprehensive loss (1,851) (1,671)
Accumulated deficit (37,865) (35,717)
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Total shareholders' equity 15,549 17,449
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Total liabilities and shareholders' equity $ 32,965 $ 35,506
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US GAAP
MKS Inc.
Consolidated Statements of Operations
(U.S. dollars, thousands, except per share data, unaudited)

Three Months Ended Six Months Ended
October 31 October 31
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2007 2006 2007 2006
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Revenue:
License $ 5,128 $ 4,425 $ 10,930 $ 10,439
Maintenance 6,402 5,491 12,607 10,696
Service 2,098 1,593 3,698 2,993
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13,628 11,509 27,235 24,128

Operating expenses:
Cost of product and support 983 992 1,986 2,031
Cost of service 1,435 1,146 2,754 2,267
Sales and marketing 5,612 5,637 11,783 11,932
Research and development 3,163 2,895 6,581 5,660
General and administrative 1,761 1,718 3,667 3,489
Stock based compensation 187 279 303 525
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13,141 12,667 27,074 25,904
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Income (loss) from operations 487 (1,158) 161 (1,776)

Interest income, net 92 120 211 271
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Income (loss) before income taxes 579 (1,038) 372 (1,505)
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Income tax provision (recovery):
Current (147) (330) (196) (330)
Deferred 529 (18) 691 3
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Income tax provision (recovery) 382 (348) 495 (327)
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Net income (loss) $ 197 $ (690) $ (123) $ (1,178)
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Earnings (loss) per share:
Basic and diluted $ 0.00 $ (0.01) $ (0.00) $ (0.02)

Basic weighted average
number of shares outstanding 50,624 50,469 50,602 50,327

Diluted weighted average
number of shares outstanding 51,030 50,469 50,602 50,327



US GAAP
MKS Inc.
Consolidated Statements of Cash Flows
(U.S. dollars, thousands, unaudited)

Three Months Ended Six Months Ended
October 31 October 31
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2007 2006 2007 2006
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Cash flows from operating
activities:

Net income (loss) $ 197 $ (690) $ (123) $ (1,178)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation of fixed assets 333 213 626 421
Amortization of intangible assets 21 1 42 1
Stock based compensation 187 279 303 525
Deferred income taxes 530 (18) 691 3
Loss on disposal of fixed assets 43 - 43 -

Change in operating assets and
liabilities:
Accounts receivable (1,638) 1,689 (3,463) 3,404
Other 407 348 (17) 293
Accounts payable 68 (203) 237 (178)
Accrued liabilities (78) (306) 712 (244)
Income taxes payable (146) (150) (197) (188)
Deferred revenue (685) (288) (1,520) (1,198)
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Net cash provided by operating
activities (761) 875 (2,666) 1,661

Cash flows used for investing
activities:
Purchase of fixed assets (157) (599) (602) (970)
Purchase of intangible assets - (7) - (229)
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Net cash used for investing
activities (157) (606) (602) (1,199)
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Cash flows provided by
financing activities:
Proceeds on issuance of
common shares 87 151 125 770
Dividends paid (1,014) (1,010) (2,025) (2,018)
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Net cash provided by (used for)
financing activities (927) (859) (1,900) (1,248)

Effect of exchange rate changes
on cash and cash equivalents (184) (59) (212) (186)
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Change in cash and cash
equivalents balances (2,029) (649) (5,380) (972)

Cash and cash equivalents,
beginning of period 11,907 15,370 15,258 15,693
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Cash and cash equivalents,
end of period $ 9,878 $ 14,721 $ 9,878 $ 14,721
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