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MKS Announces Record Revenue and Earnings for Fiscal 2006

Waterloo, ON - June 7, 2006: MKS Inc. (MKS) (TSX: TSX) today announced its financial results for the fourth quarter and fiscal year ended April 30, 2006. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Company Institutes $0.02 Quarterly Dividend

Waterloo, ON - June 7, 2006: MKS Inc. (MKS) (TSX: TSX) today announced its financial results for the fourth quarter and fiscal year ended April 30, 2006. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Fiscal 2006 (compared with fiscal 2005)
  • Total revenue increased from $41.3 million to $48.3 million
  • Net income rose from $2.7 million, or $0.07 per share, to $9.1 million, or $0.20 per share ($3.9 million or $0.09 per share, before income tax recovery)
  • Application lifecycle management (ALM) revenue increased from $32.5 million to $40.0 million
  • ALM operating income increased by $0.8 million, from $0.5 million to $1.3 million.
Q4 2006 (compared with Q4 2005)
  • Total revenue increased from $12.5 million to $12.6 million
  • Net income rose from $1.5 million, or $0.04 per share, to $6.0 million* or $0.12 per share ($0.8 million, or $0.02 per share, before income tax recovery)
  • Application lifecycle management (ALM) revenue decreased from $10.2 million to $10.0 million.
  • Announced new contract wins at Motorola and SafeNet, and follow-on wins at France Telecom, Iron Mountain, NCR, Renault, Toronto Dominion Bank and Siemens.
  • Signed 21 contracts worth greater than $100,000, compared with 16 during the same period last year.
  • Total headcount rose from 297 in Q3 2006 to 311, including eight new sales reps.

*Net income in the fourth quarter of $6.0 million included a non- cash gain of $5.2 million from an income tax recovery relating to the revaluation of MKS's tax assets. This is described in greater detail in MKS's Fiscal 2006 Management's Discussion & Analysis of Financial Condition and Results of Operations.

Cash increased during the quarter to $15.7 million from $13.2 million at January 31, 2006 and from $7.8 million at April 30, 2005.

"We are pleased to report another year of growth for MKS, highlighted by record revenue and profits," said Philip Deck, CEO of MKS. "To fuel our continued growth, we are about to release the most significant upgrade of our market leading ALM platform ever - one that will extend our product leadership further, accelerate enterprise-wide deployments throughout our growing base of Global 1000 accounts and deliver new levels of value to our customers' senior management. MKS Integrity 2006 will conclusively demonstrate the advantages of our one product approach to solving the key business issues in IT today -- application rationalization, service oriented architectures, and IT strategy alignment with business goals."

"During the fourth quarter, we made significant progress in sales force recruiting, adding eight new direct reps, a 33 percent improvement over the prior quarter ," said Michael Harris, MKS President and COO, "ALM licensing in the fourth quarter was below the long term growth trend, affected by poor conversion of pipeline into closed transactions, the effects of delays we have experienced in growing our sales team throughout the year, and from management focus on recruiting during the fourth quarter. We are confident that our growth will quickly return to its normally robust levels based on our growing pipeline and the increasing visibility of the MKS Integrity platform in the ALM marketplace. Adding to our confidence is our excitement about MKS Integrity 2006, which is already receiving critical acclaim from customers and industry analysts alike."

MKS also announced today that it has adopted a policy to pay a regular quarterly dividend, in such amount as MKS's Board of Directors may from time to time determine. As a result, MKS has also announced today that its Board of Directors has declared, for the first time, a quarterly cash dividend of US $0.02 per share on the Company's outstanding common shares. The initial cash dividend will be payable on July 17, 2006, to shareholders of record at the close of business on June 30, 2006.

"Our long term strategy and commitment to profitable organic growth, has resulted in steady growth in cash," said Mr. Deck, "Our dividend is intended to act as a long term mechanism to reduce the accumulation of excess cash by returning it to its owners."

Financial Review

Revenue for fiscal 2006 was $48.3 million, an increase of $7.0 million or 17 percent over the prior year. Net income for fiscal 2006 was $9.1 million, or $0.20 per share, compared to net income of $2.7 million, or $0.07 per share, reported in fiscal 2005. Income before income taxes for fiscal 2006 was $3.9 million, or $0.09 per share, up 45 percent from fiscal 2005.

Total revenue for the fourth quarter of fiscal 2006 was $12.6 million, compared with $12.5 million in the fourth quarter of fiscal 2005. Net income for the fourth quarter of fiscal 2006 was $6.0 million, or $0.12 per share, an increase of 296 percent or $4.5 million compared to net income of $1.5 million or $0.04 per share in the fourth quarter of fiscal 2005. Net income before taxes for the fourth quarter of fiscal 2006 was $0.8 million, or $0.02 per share.

Fourth quarter fiscal 2006 application lifecycle management (ALM) revenues were $10.0 million, a decline of 2 percent compared with the fourth quarter of fiscal 2005.

Outlook & Guidance

MKS expects that the trend of revenue growth experienced over its 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. MKS believes that the positive financial results in FY06 and 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. The material factors and assumptions applied by MKS in arriving at these ranges are: the intention of MKS to expand its ALM sales and services staff; increased marketing expenditures; increased ALM research and development expenditures to ensure MKS maintains its technical leadership in the ALM market, increased costs relating to the expensing of stock compensation charges and the expectation that MKS'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 MKS'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 MKS expects to pay in the future across all jurisdictions. MKS 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

MKS will hold a conference call today at 5:00 p.m. EST to discuss its fourth quarter and fiscal 2006 performance. Interested parties may access the call by dialing 1-877-871-9526 or 1-416-620-2400. A digital recording of the call will be available for one (1) week from June 07, 2006 to June 13, 2006 and may be accessed by dialing 1-800-558 5253 or 1-416-626-4100 and entering reservation #21268925.

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
Email: dmason@equicomgroup.com

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