MKS Inc.

MKS Inc.

June 01, 2005 16:07 ET

MKS Announces Record Revenue And Profitability For Fourth Quarter And Fiscal 2005

WATERLOO, ONTARIO--(CCNMatthews - June 1, 2005) - MKS Inc. (MKS)(TSX:MKX) today announced its financial results for the fourth quarter of fiscal 2005 and the year ended April 30, 2005. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Total revenue for the fourth quarter of fiscal 2005 was $12.5 million, an increase of $3.3 million or 36 percent over the fourth quarter of fiscal 2004, and an 18 percent or $1.9 million increase from $10.6 million in the third quarter of fiscal 2005. Net income for the fourth quarter of fiscal 2005 was $1.5 million, or $0.04 per share, an increase of 273 percent or $1.1 million over net income of $0.4 million or $0.01 per share in the fourth quarter of fiscal 2004, and an increase of 87 percent or $0.7 million increase over net income of $0.8 million or $0.02 per share in the third quarter of fiscal 2005.

Revenue for the fiscal year ended April 30, 2005 was $41.3 million, up 29 percent from $32.0 million in fiscal 2004. The Company's net income for the fiscal year ended April 30, 2005 was $2.7 million or $0.07 per share, compared to a net loss of $(1.5) million, or $(0.04) per share for the fiscal year ended April 30, 2004.

The Company's application lifecycle management (ALM) business segment (formerly reported as software configuration management (SCM)) enjoyed record performance during the fourth quarter. Fourth quarter ALM revenues increased to $10.2 million representing a 50 percent increase over ALM revenues of $6.8 million in the fourth quarter of fiscal 2004, and an increase of $1.9 million or 23 percent over ALM revenues in the third quarter of fiscal 2005. ALM revenues for fiscal 2005 increased 41 percent to $32.5 million from fiscal 2004 and this business segment generated operating income of $0.5 million compared with an operating loss of ($4.0) million in fiscal 2004.

The Company's cash position increased from $4.9 million to $7.8 million during the quarter.

As of the fourth quarter of 2005, MKS has changed the name of its primary operating segment to the ALM segment from the SCM segment to reflect the significant increases in the scope of that business. Software Configuration Management is an industry term describing the discipline that manages changes to computer source code. Application Lifecycle Management describes a superset of SCM capabilities entailing a more complete set of capabilities used to manage all activities surrounding the delivery of software applications within large enterprises, from requirements management through to final deployment. MKS launched an enterprise scale SCM product in July 2001, and since that time has enjoyed growing acceptance of its product line. During fiscal 2005, MKS increased the scope of its product line with the introduction of new capabilities including requirements management, server deployment, and data mining -- all fully integrated within a single product architecture -- transitioning the Company from the SCM to ALM markets. In accordance, the Company has renamed its operating segment to the more appropriate term Application Lifecycle Management.

"We were extremely satisfied with our Company's progress in 2005, both in financial and strategic terms," said Philip C. Deck, MKS chairman and CEO. "While setting all-time revenue and profit records and bringing our ALM business into profitability for the full year, we also dramatically expanded the scope of our enterprise product and accordingly, the customer markets we address. We firmly believe that our four year old strategy to build our enterprise software business is well on track to industry leadership."

"We were delighted with the enthusiastic customer response to our expanded enterprise ALM capability over the past 12 months. Prompted increasingly by regulatory compliance concerns, our customers chose to implement MKS's single platform system in order to enable improved productivity, traceability and visibility across their application development organizations," said Michael W. Harris, MKS chief operating officer. "With a significantly improved services organization MKS has developed numerous beachhead implementations into our target Global 1000 accounts worldwide, and continues to steadily deploy software within our existing customer organizations."

Highlights of the Quarter

- Significant customer wins at Austria Card; BNSF Railway; Citigroup; Continental Teves; Computer Sciences Corporation; Lufthansa; Motorola; NCR; Northrop Grumman; Robert Bosch; St. Paul Travelers; Toshiba Medical; UBS; and W&W Informatik.

- 41 contracts worth greater than $50,000, vs. 30 in the same period last year.

- ALM service revenue delivery year over year growth of 52 percent.

- Launch to market of MKS Integrity Suite™ 2005 including requirements management, dashboards for improved management decision support, e-signatures for regulatory compliance and greater support for advanced development techniques such as component reuse and refactoring.

- MKS named Software Development Times Top 100 Leader and Innovator for third year running.

- MKS recognized by IDC Research as a first-mover in the ALM market on issues of regulatory compliance.

During fiscal 2005, MKS changed its method of calculating revenue on its maintenance contracts from a monthly accrual basis to a daily accrual basis, resulting in restatement of revenue. The impact of this change decreased maintenance revenue by $117,000, $53,000 and $57,000 in fiscal years ended April 30, 2005, 2004 and 2003, respectively. The impact prior to May 1, 2002 was $500,000 and is reflected in opening deficit.

The Company expects that its trend of increasing annual revenue growth will continue in fiscal 2006 as the Company continues to grow ALM licensing opportunities through further development of existing customer relationships and the targeting of Global 1000 companies in its primary markets worldwide. The Company believes that anticipated growth in ALM revenue will lead to annual fiscal 2006 revenue in the range of $45 to $49 million and income from operations before tax in the range of $2 to $4 million. Factors to be considered in arriving at these ranges include the expectation that: the Company's Interoperability business will decline 5 to 10 percent over the course of the year; the intention of the Company to expand its sales and services staff; the Company will increase in marketing expenditures to drive growth in ALM business revenues; and the commitment of the Company to increase ALM research and development expenditures to ensure that the Company maintains its technical leadership in the ALM market.

Conference Call Details

The Company will hold a conference call at 5:00 p.m. EDT after close of markets on June 1, 2005 to discuss its fourth quarter and year-end performance and results. Interested parties may access the call by dialing 888-633-8408 or 416-641-6675. A recording of the call will be available for one (1) week from June 1, 2005 to June 8, 2005 and may be accessed by dialing 800-558-5253 or 416-626-4100, reservation #21245926.

About MKS

MKS is the preeminent provider of enterprise technology management solutions for the global 1000. MKS's solution spans the application lifecycle from requirements management, through application development, to server deployment providing customers with greater visibility over software development activities, enhanced development productivity and improved IT controls for regulatory compliance. MKS solutions are distinguished by their ease of implementation and low total cost of ownership. Founded in 1984, MKS serves more than 10,000 customers in countries across the world. Whether through deployment of MKS's enterprise solutions strategically on an enterprise scale, or by leveraging individual components to solve project-level challenges, our customers can use MKS's technology to better 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 1-19-884-2251 (Rest of World).

Copyright (C) 2005 MKS Inc. MKS and design, MKS Integrity Suite 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. 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
(Dollar Amounts In US, In Thousands)

April 30
2005 2004

Current assets:
Cash and cash equivalents $ 7,799 $ 6,367
Accounts receivable, net of allowances
for doubtful accounts
of $148 (2004 - $201) 8,126 5,425
Other 2,039 1,393
Total current assets 17,964 13,185
Fixed assets 3,250 3,410
Intangibles 2 9
Goodwill 2,424 2,424
Other 395 1,017
Total assets $ 24,035 $ 20,045

Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 1,753 $ 2,129
Accrued liabilities 3,455 2,794
Income taxes payable 320 128
Deferred revenue 9,704 8,535
Total current liabilities 15,232 13,586

Long-term liabilities:
Deferred revenue 149 454
Deferred compensation - 301
Total liabilities 15,381 14,341

Shareholders' equity:
Share capital 47,933 47,583
Accumulated other comprehensive loss (1,332) (1,218)
Accumulated deficit (37,947) (40,661)
Total shareholders' equity 8,654 5,704
Total liabilities and shareholders' equity $ 24,035 $ 20,045

MKS Inc.
Consolidated Statements of Operations
(Dollar Amounts in US, In Thousands, Except Per Share Data)

Fiscal Year Ended April 30
2005 2004 2003
Restated Restated
License $ 22,120 $ 16,032 $ 18,644
Maintenance 15,517 13,575 11,085
Service 3,654 2,369 2,082
Total revenue 41,291 31,976 31,811

Operating expenses:
Cost of product and support 3,341 3,459 3,822
Cost of service 2,725 1,925 2,107
Sales and marketing 17,896 14,563 14,000
Research and development 8,532 8,050 8,171
General and administrative 6,095 5,246 5,207
Amortization of intangibles 7 217 243
Total operating expenses 38,596 33,460 33,550
Income (loss) from operations 2,695 (1,484) (1,739)
Interest income, net 19 16 10
Income (loss) before income taxes 2,714 (1,468) (1,729)
Income tax recovery - - (475)
Net income (loss) $ 2,714 $ (1,468) $ (1,254)

Earnings (loss) per share:
Basic $ 0.07 $ (0.04) $ (0.03)
Diluted 0.06 (0.04) (0.03)
Weighted average number
of shares outstanding 41,496 41,150 39,771

MKS Inc.
Consolidated Statements of Cash Flows
(Dollar Amounts in US, In Thousands)

Fiscal Year Ended April 30
2005 2004 2003
Restated Restated
Cash flows from operating
Net income (loss) $ 2,714 $ (1,468) $ (1,254)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Depreciation of fixed assets 855 836 1,187
Amortization of intangibles 7 217 243
Interest on deferred compensation 4 12 44
Stock based compensation - - 62
Loss on disposal of capital
assets 95 - -

Change in operating assets and
Accounts receivable (2,701) 1,107 (2,024)
Other (24) (1,569) 345
Accounts payable, net of
deferred compensation (380) 273 (347)
Accrued liabilities 661 (784) 53
Income taxes payable 192 5 (443)
Deferred revenue 864 275 1,834
Net cash provided by (used
for) operating activities 2,287 (1,096) (300)

Cash flows used for investing
Purchase of fixed assets (782) (721) (495)
Net cash used for investing
activities (782) (721) (495)

Cash flows provided by
financing activities:
Proceeds on issuance of common
shares 350 652 870
Payments of deferred compensation (301) (336) (358)
Net cash provided by financing
activities 49 316 512

Effect of exchange rate
changes on cash and cash equivalents (122) 132 86

Change in cash and cash
equivalents balances 1,432 (1,369) (197)
Cash and cash equivalents,
beginning of year 6,367 7,736 7,933
Cash and cash equivalents, end
of year $ 7,799 $ 6,367 $ 7,736

Supplemental cash flow information:

Cash paid for:
Interest $ 31 $ 39 $ 88
Income taxes $ 2 $ 23 $ 10

Contact Information

  • MKS Inc.
    Investor Contact: Robert Dietrich
    (519) 883-3210
    MKS Inc.
    Media Contact: Ellyn Robinson
    VP Marketing
    (519) 883-4346