MKS Inc.
TSX : MKX

MKS Inc.

February 24, 2009 16:00 ET

MKS Announces Third Quarter Fiscal 2009 Financial Results

WATERLOO, ONTARIO--(Marketwire - Feb. 24, 2009) - MKS Inc. (MKS) (TSX:MKX), the global application lifecycle management (ALM) technology leader, today announced its financial results for the third quarter ended January 31, 2009. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q3 2009 (compared with Q3 2008)

- Year to date revenue increased 12% to $44.8 million from $40.0 million

- Revenue for the quarter increased 3% to $13.2 million from $12.8 million

- Income from operations for the quarter increased $1.2 million to $0.4 million from a loss of $0.8 million

- Net income for the quarter increased to $0.3 million or $0.01 per share compared to a net loss of $0.8 million

- Quarterly ALM revenue increased 5% to $11.6 million from $11.0 million

- Quarterly ALM license revenue decreased 12% to $2.8 million from $3.1 million

- Quarterly ALM services revenue increased 21% to $2.5 million from $2.1 million

- Quarterly ALM maintenance revenue increased 8% to $6.3 million from $5.8 million

- Secured new contract wins at Abbott Laboratories, Magna Electronics, Northrop Grumman, Royal Bank of Canada, TomoTherapy Incorporated, Verizon Wireless, Vertex Pharmaceuticals, and Wincor Nixdorf

Closing cash balance at January 31, 2009 was $16.3 million, up from $12.9 million at April 30, 2008 and up from $10.6 million at October 31, 2008. During the quarter, MKS did not repurchase any shares under the terms of its Normal Course Issuer Bid.

"We were pleased to report continued growth in revenue and profitability for the current quarter and the first nine months of this fiscal year," said Philip Deck, CEO of MKS Inc. "We also enjoyed strong cash generation as we completed our largest seasonal quarter for maintenance renewals and collections." "While our license result was below our general quarter to quarter trend, we continue to enjoy a solid pipeline of follow-on and new license opportunities" said Michael Harris, president and COO, MKS Inc. "The current economic climate has made some of our traditionally strong markets more challenging, but we continue to find demand from organizations where the benefits of better management of software development can drive faster release cycles and higher productivity."

Financial Review

Revenue for the third quarter of fiscal 2009 was $13.2 million, up 3 percent from $12.8 million from the third quarter of the prior fiscal year. Net income for the third quarter of fiscal 2009 was $0.3 million, or $0.01 per share, compared to a loss of $0.8 million, or $0.01 per share, reported in the third quarter of fiscal 2008.

Nine month revenues for fiscal 2009 increased 12 percent to $44.8 million compared with revenues of $40.0 million for the same period in fiscal 2008. Nine month net income was $2.3 million, an increase from a net loss of $0.9 million for the same period in fiscal 2008.

Third quarter fiscal 2009 Application Lifecycle Management (ALM) revenue was $11.6 million, up 5 percent, compared to revenues of $11.0 million reported in the third quarter of fiscal 2008.

Nine month ALM revenues for fiscal 2009 increased 13 percent to $39.2 million from $34.6 million for the first nine months of fiscal 2008.

Outlook

The Company is performing well under the current economic climate.

MKS has grown its revenue and profit to date in fiscal 2009 driven by the positive performance of the Company's primary operating segment, ALM. During the quarter, the Company did not see any deterioration in its historical maintenance renewal rate which remains at over 90%. Service revenue continues to grow and backlog remains stable.

While MKS' license pipeline growth has slowed due to the economic uncertainties faced by its customers, the Company believes that the level of licensing in the third quarter of fiscal 2009 was primarily attributable to normal quarter to quarter variability in major transactions, as it was in third quarter of fiscal 2008, rather than to the deterioration of ongoing license opportunities.

MKS expects that license revenue, total revenue and income from operations will be higher in the fourth quarter of fiscal 2009 compared with the third quarter of fiscal 2009.

MKS recorded growing operating profits and cash flow through the first nine months of this fiscal year. The Company maintains a policy to pay quarterly dividends to limit the accumulation of cash excess to the needs of its business.

The Company expects a continued decline in the Interoperability business of approximately ten percent annually.

Conference Call Details

Interested parties may access the call by dialing 800-734-1246 or 1-416-620-2013. A digital recording of the call will be available for seven (7) days following the call and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21398702.

About MKS

MKS Inc., the global application lifecycle management (ALM) technology leader, enables software engineering and IT organizations to seamlessly manage their worldwide software development activities. With its flagship product, MKS Integrity, MKS offers support for all software development activities through a single enterprise application, resulting in better global collaboration and higher productivity. MKS supports customers worldwide with offices across North America, Europe and Asia. For more information about MKS, visit our Web site at http://www.mks.com.

Copyright (C) 2008 MKS Inc. MKS and MKS Integrity are 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)

January 31 April 30
2009 2008
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Assets:

Current assets:
Cash and cash equivalents $ 16,254 $ 12,933
Accounts receivable, net of allowances for
doubtful accounts of $180 (April 30, 2008 - $217) 8,776 16,054
Deferred income taxes 1,384 1,384
Other 1,302 1,539
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Total current assets 27,716 31,910

Fixed assets 4,295 4,530
Intangible assets 90 155
Goodwill 2,424 2,424
Deferred income taxes 1,759 3,245
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Total assets $ 36,284 $ 42,264
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Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 2,407 $ 2,430
Accrued liabilities 2,708 5,149
Income taxes payable 367 656
Deferred revenue 16,620 15,460
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Total current liabilities 22,102 23,695

Shareholders' equity:
Share capital 55,342 56,408
Accumulated other comprehensive loss (3,244) (1,894)
Accumulated deficit (37,916) (35,945)
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Total shareholders' equity 14,182 18,569
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Total liabilities and shareholders' equity $ 36,284 $ 42,264
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MKS Inc.
Consolidated Statements of Operations
(U.S. dollars, thousands, except per share data, unaudited)

Three Months Ended Nine Months Ended
January 31 January 31
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2009 2008 2009 2008
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Revenue:
License $ 3,702 $ 4,120 $ 16,283 $ 15,050
Maintenance 6,980 6,584 21,066 19,191
Service 2,521 2,086 7,487 5,784
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13,203 12,790 44,836 40,025

Operating expenses:
Cost of product and support 1,242 1,122 3,679 3,108
Cost of service 1,628 1,478 5,371 4,232
Sales and marketing 4,782 5,486 16,038 16,897
Research and development 3,182 3,364 9,310 10,330
General and administrative 2,022 1,971 5,852 5,928
Foreign exchange loss (gain) (213) (27) 340 (330)
Stock based compensation 142 202 721 505
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12,785 13,596 41,311 40,670
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Income from operations 418 (806) 3,525 (645)

Interest income, net 11 44 72 255
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Income before income taxes 429 (762) 3,597 (390)

Income tax provision (recovery):

Current (122) - (88) (196)
Deferred 226 (8) 1,388 683
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Income tax provision (recovery) 104 (8) 1,300 487
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Net income (loss) $ 325 $ (754) $ 2,297 $ (877)
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Earnings (loss) per share:
Basic and diluted $ 0.01 $ (0.01) $ 0.05 $ (0.02)

Basic weighted average number of
shares outstanding 49,667 50,751 50,526 50,652

Diluted weighted average number of
shares outstanding 49,698 50,751 50,859 50,652



MKS Inc.
Consolidated Statements of Cash Flows
(U.S. dollars, thousands, unaudited)
Three Months Ended Nine Months Ended
January 31 January 31
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2009 2008 2009 2008
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Cash flows from operating
activities:

Net income (loss) $ 325 $ (754) $ 2,297 $ (877)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation of fixed assets 358 368 1,019 994
Amortization of intangible assets 22 22 65 64
Stock based compensation 142 202 721 505
Deferred income taxes 226 (8) 1,388 683
Loss on disposal of fixed assets 21 30 62 73

Change in operating assets and
liabilities:
Accounts receivable 2,845 289 7,278 (3,174)
Other (21) (97) 237 (114)
Accounts payable (1,052) (454) (23) (217)
Accrued liabilities (388) (549) (2,441) 163
Income taxes payable (131) 238 (289) 41
Deferred revenue 3,881 2,565 1,160 1,045
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Net cash provided by (used for)
operating activities 6,228 1,852 11,474 (814)

Cash flows used for investing
activities:
Purchase of fixed assets (235) (401) (935) (1,003)
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Net cash used for investing
activities (235) (401) (935) (1,003)

Cash flows used for financing
activities:
Proceeds on issuance of common
shares 71 265 514 390
Cash paid for shares repurchased for
cancellation - - (3,534) -
Dividends paid (995) (1,015) (3,035) (3,040)
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Net cash used for financing
activities (924) (750) (6,055) (2,650)
Effect of exchange rate changes on
cash and cash equivalents 570 53 (1,163) (159)
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Change in cash and cash equivalents
balances 5,639 754 3,321 (4,626)
Cash and cash equivalents, beginning
of period 10,615 9,878 12,933 15,258
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Cash and cash equivalents, end of
period $ 16,254 $ 10,632 $ 16,254 $ 10,632
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