MKS Inc.

MKS Inc.

September 06, 2007 16:05 ET

MKS Announces Record Quarterly Revenue for First Quarter Fiscal 2008

WATERLOO, ONTARIO--(Marketwire - Sept. 6, 2007) - MKS Inc. (MKS) (TSX:MKX) today announced its financial results for the first quarter of fiscal 2008. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q1 2008 (compared with Q1 2007)

- Total revenue increased 8 percent to an all time quarterly record of $13.6 million from $12.6 million

- Net loss of ($0.3) million or ($0.01) per share compared to net loss of ($0.5) million or ($0.01) per share.

- Application lifecycle management (ALM) revenues increased 12 percent to $11.7 million from $10.5 million.

- ALM license revenue was $4.7 million compared to $4.7 million in first quarter fiscal 2007 and up 20 percent from $3.9 million recorded in fourth quarter fiscal 2007.

- ALM maintenance revenues increased 23 percent to $5.4 million from $4.4 million

- ALM service revenues increased 14 percent to $1.6 million from $1.4 million

- New contract wins at CSG, IT Frontier, Mitsubishi Research Institute, Northern Trust and Nova Scotia Power, and follow-on wins with Abbott, CIBC, Continental, Daimler Chrysler, dSpace, Iron Mountain, NCR and Tyco.

Closing cash balance at July 31, 2007 was $11.9 million, down from $15.3 million at April 30, 2007 showing the effects of normal maintenance renewal seasonality and the increased investment in receivables.

"Our business showed strength on all fronts on the way to record revenues," said Philip Deck, CEO of MKS. "And our careful control over costs produced good progress on profitability in spite of some unusual severance and currency related expenses."

"We had a healthy increase in licensing with a good balance of new accounts as well as rebounding licensing from existing large customers," said Michael Harris, MKS President and COO, "We were particularly pleased to see our Asia Pacific region achieve profitability for the first time during this period."

Financial Review

Total revenue for the first quarter of fiscal 2008 was $13.6 million, an increase of 8 percent over the first quarter of fiscal 2007. Net loss for the first quarter of fiscal 2008 declined to ($0.3) million, or ($0.01) per share, compared to net loss of ($0.5) million or ($0.01) per share in the first quarter of fiscal 2007.

First quarter fiscal 2008 application lifecycle management (ALM) revenues increased 12 percent to $11.7 million, compared to revenues of $10.5 million reported in the first quarter of fiscal 2007.

MKS's net loss of $(0.3) million included an unusual severance expense of approximately $0.5 million, unexpected costs of $0.4 million due to exchange rate fluctuation over the fourth quarter of fiscal 2007, and seasonal expenses of $0.5 million relating to MKS's annual worldwide sales conference.

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 committed to an early return to quarterly profitability and is managing its cost base with a view to sustaining current capacity and making further investments in sales resources only when acceptable levels of profitability are re-established. MKS expects full year profitability for fiscal 2008 based on increasing revenue and carefully managed costs.

MKS expects to maintain more than sufficient cash balances through fiscal 2008. The combination of expected improvements in net income, reduced capital expenditures over those in fiscal 2007, an expected continuation of lower overall receivables days, and expected stock option exercises due to expiry schedules are expected to more than offset the anticipated cash needed to fund higher license sales and the maintenance of the Company's dividend policy. The Company expects that seasonal factors will continue to cause outflows of cash in the first half of the fiscal year and inflows in the second half.

Conference Call Details

The Company will hold a conference call on September 6, 2007 at 5:00 p.m. EST to discuss its first 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 September 6, 2007 to September 13, 2007 and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21337074.

About MKS

MKS is the premier provider of application lifecycle management solutions for the global 1000. MKS's flagship ALM solution, MKS Integrity, is the most highly integrated ALM platform in the industry today, spanning all aspects of the software development lifecycle and supporting critical business transformations including SOA, application rationalization and outsourcing. MKS Integrity's single architecture drives high levels of user productivity, facilitates rapid deployment and process standardization while delivering a complete view of application development activity through real time metrics, trends and reporting. MKS Integrity also provides essential support for IT operations through software deployment and issue management. Founded in 1984, MKS serves more than 10,000 customers in countries across the world. Whether through deployment of MKS's solution strategically on an enterprise scale, or by leveraging individual components to solve project-level challenges, our customers can use MKS's software to enable higher levels of process maturity, better manage global development activity and safeguard their most critical business applications and software assets. Under its widely known MKS Toolkit brand, MKS also provides UNIX-Windows co-existence and system administration that significantly cut development and administrative costs and reduce time to market, while enabling enhanced performance. More information about MKS can be found at or by calling 1-800-265-2797 (US & Canada), +49-711-351775-0 (Germany), +44-1483-733900 (United Kingdom) and 1-519-884-2251 (Rest of World).

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.

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

July 31 April 30
2007 2007


Current assets:
Cash and cash equivalents $ 11,907 $ 15,258
Accounts receivable, net of allowances for doubtful
accounts of $234 (April 30, 2007 - $233) 7,943 6,118
Deferred income taxes 1,847 1,847
Prepaid expenses and other assets 2,370 1,946
Total current assets 24,067 25,169

Fixed assets 4,865 4,709
Intangible assets 219 240
Goodwill 2,424 2,424
Deferred income taxes 2,803 2,964
Total assets $ 34,378 $ 35,506

Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 1,651 $ 1,482
Accrued liabilities 3,512 2,722
Income taxes payable 19 70
Deferred revenue 12,948 13,783
Total current liabilities 18,130 18,057

Shareholders' equity:
Share capital 54,991 54,837
Accumulated other comprehensive loss (1,695) (1,671)
Accumulated deficit (37,048) (35,717)
Total shareholders' equity 16,248 17,449
Total liabilities and shareholders' equity $ 34,378 $ 35,506

MKS Inc.
Consolidated Statements of Operations
(U.S. dollars, thousands, except per share data, unaudited)

Three Months Ended
July 31
2007 2006

License $ 5,802 $ 6,014
Maintenance 6,205 5,205
Service 1,600 1,400
13,607 12,619

Operating expenses:
Cost of product and support 1,003 1,039
Cost of service 1,319 1,121
Sales and marketing 6,171 6,295
Research and development 3,418 2,765
General and administrative 1,906 1,771
Stock based compensation 116 246
13,933 13,237
Operating loss (326) (618)
Interest income 119 151
Loss before income taxes (207) (467)

Income tax provision (recovery):
Current (49) -
Deferred 162 21
Income tax provision 113 21
Net loss $ (320) $ (488)

Loss per share:
Basic $ (0.01) $ (0.01)
Diluted $ (0.01) $ (0.01)

Weighted average number of shares outstanding 50,581 50,182
Diluted weighted average number of shares outstanding 50,581 50,182

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

Three Months Ended
July 31
2007 2006
Cash flows provided by (used for) operating

Net loss $ (320) $ (488)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation of fixed assets 293 208
Amortization of intangible assets 21 -
Stock based compensation 116 246
Deferred income taxes 161 21

Change in operating assets and liabilities:
Accounts receivable (1,825) 1,715
Prepaid expenses and other assets (424) (55)
Accounts payable 169 25
Accrued liabilities 790 62
Income taxes payable (51) (38)
Deferred revenue (835) (910)
Net cash provided by (used for) operating activities (1,905) 786
Cash flows used for investing activities:
Purchase of fixed assets (445) (371)
Purchase of intangibles - (222)
Net cash used for investing activities (445) (593)
Cash flows used for financing activities:
Proceeds on issuance of common shares 38 619
Dividends paid (1,011) (1,008)
Net cash used for financing activities (973) (389)
Effect of exchange rate changes on cash and cash
equivalents (28) (127)
Change in cash and cash equivalents balances (3,351) (323)
Cash and cash equivalents, beginning of period 15,258 15,693
Cash and cash equivalents, end of period $ 11,907 $ 15,370

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