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MKS Announces Record First Quarter Revenues for Fiscal 2007

Waterloo, ON – September 7, 2006: MKS Inc. (“MKS” or the “Company”) (TSX: MKX) today announced its financial results for the first quarter of fiscal 2007, which ended July 31, 2006. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Waterloo, ON – September 7, 2006: MKS Inc. (“MKS” or the “Company”) (TSX: MKX) today announced its financial results for the first quarter of fiscal 2007, which ended July 31, 2006. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q1 Fiscal 2007 (compared with Q1 Fiscal 2006)

  • Total revenue increased from $10.8 million to $12.6 million
  • Net income decreased from $0.5 million, or $0.01 per share, to a net loss of $(0.5) million or $(0.01) per share
  • Application lifecycle management (ALM) revenue increased from $8.8 million to $10.5 million.
  • Announced new contract wins at Gemalto, Research in Motion, Overstock.com and Vertex Pharmaceuticals and follow-on wins at Arrow Electronics, BNSF Railway, Campbell Soup, Daimler Chrysler, EADS, HSBC, Industry Canada, L3 Communications, Magna, NCR, Parker Hannifin, and Skandia Life.
  • Signed 19 contracts worth greater than $100,000, compared with 16 during the same period last year.
  • On September 6, 2006 declared a quarterly cash dividend of US $0.02 per share on the Company’s outstanding common shares, payable on October 16, 2006 to shareholders of record at the close of business on September 29, 2006.

Cash decreased during the quarter to $15.4 million from $15.7 million at April 30, 2006.

"We were pleased to post record first quarter revenue driven by improvement in every aspect of our business" said Philip Deck, CEO of MKS. "We were even more delighted with the response to our product launch in May and are already seeing substantially improved levels of interest among senior IT and engineering managers to our new Portfolio Management and Deployment capabilities"

"This quarter we had a particular focus on integrating the numerous sales and services people added over the last few months and ramping up our Asian operations" said Michael Harris, MKS President and COO, "Although the additional sales costs affected profitability, we are very pleased with sales pipeline growth among our new hires and expect significant contributions in the quarters to come."

Financial Review

Total revenue for the first quarter of fiscal 2007 was $12.6 million, an increase of 17% compared with $10.8 million in the first quarter of fiscal 2006. Net loss for the first quarter of fiscal 2007 was $0.5 million, or $(0.01) per share, a decrease of 191 percent or $1.0 million compared to net income of $0.5 million or $0.01 per share in the first quarter of fiscal 2006. First quarter fiscal 2007 application lifecycle management (ALM) revenues were $10.5 million, an increase of 19 percent compared with the first quarter of fiscal 2006.

Outlook & Guidance

MKS expects that the trend of revenue growth experienced over the last three fiscal years will continue throughout fiscal 2007 as ALM licensing opportunities develop through expansion of existing customer relationships and through targeting of Global 1000 companies in MKS’s primary markets worldwide. The Company believes that the anticipated growth in ALM revenue will lead to annual fiscal 2007 revenue in the range of $57 to $60 million and income from operations before tax in the range of $4 to $6 million, unchanged from the outlook given last quarter. The material factors and assumptions applied by MKS in arriving at these ranges are: the ability of the Company to successfully expand its ALM sales and services staff and to generate higher revenue in the ALM segment; the ability of MKS to make increased marketing expenditures; increased ALM research and development expenditures to ensure the Company maintains its technical leadership in the ALM market; MKS will incur increased costs relating to the expensing of stock compensation charges; and the expectation that the Company’s Interoperability business will decline on an annual basis of approximately 10 percent over the course of the year.

Income tax expense will be recorded in the Company’s financial statements going forward at the prevailing tax rate in the jurisdiction where the income was generated to the extent a deferred tax asset has been recorded in that jurisdiction. Such rate may be higher than the average rate the Company expects to pay in the future across all jurisdictions. The Company expects the long term tax rate to be approximately 35% to 36%. This will be subject to an ongoing quarterly assessment of the valuation allowance by jurisdiction which may give rise to further increases or decreases to the existing tax asset.

Conference Call Details

The Company will hold a conference call today 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 07, 2006 to September 17, 2006 and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21283993

For summarized financial information please click here.

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 http://www.mks.com 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 © 2006 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 and Canada Media Contact:
Douglas Sawatzky, Chief Financial Officer
MKS Inc.
Phone: 519-883-3252
Email: dsawatzky@mks.com


Investor Contact:
David Mason
Equicom Group Inc.
Phone: 416-815-0700 x237
E-mail: dmason@equicomgroup.com

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