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MKS Announces Second Quarter Fiscal 2010 Results and Increases Dividend

MKS Inc. (MKS) (TSX: MKX), the global application lifecycle management (ALM) technology leader, today announced its financial results for the second quarter of fiscal year 2010 and increased its quarterly cash dividend to US$0.15 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Waterloo, ON - November 24, 2009: MKS Inc. (MKS) (TSX: MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the second quarter of fiscal year 2010 and increased its quarterly cash dividend to US$0.15 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q2 2010 (compared with Q2 2009)

  • Net income increased 19% to $1.6 million or $0.16 per share compared to $1.4 million, or $0.13 per share
  • Total revenue of $14.7 million compared to $16.3 million, a decrease of 10%
  • ALM revenue decreased 9% to $13.0 million from $14.2 million
  • ALM operating income increased to $1.8 million compared to $1.4 million, a 28% increase
  • ALM license revenue decreased 40% to $3.0 million from $5.1 million
  • ALM maintenance revenue increased 10% to $7.0 million from $6.4 million
  • ALM Service revenue increased 6% to $3.0 million from $2.8 million
  • Average headcount increased to 309 from 305.

 

Closing cash balance at October 31, 2009 was $19.0 million, a $1.9 million increase from the $17.1 million balance at April 30, 2009. During the quarter, MKS paid $1.3 million in dividends.

MKS experienced sharp declines in license revenue in the late fall of 2008 as customers in the automotive, manufacturing and banking sectors, in particular, made drastic reductions in capital spending. The reductions in demand were acute over the past four quarters, with the exception of a large transaction in the first quarter of fiscal 2010. Maintenance revenue continued to grow steadily throughout this period as customers largely kept current on maintenance.

Throughout the last four quarters, MKS has won mandates from major new customers in spite of the inability of many to make immediate license purchases. New customers have continued to engage MKS services personnel to configure the Company's product for future implementations. Although MKS does not expect an increase in capital spending until the first calendar quarter of 2010, when the majority of customers typically establish new capital spending budgets for that year, MKS has begun to make additions to its sales force to respond to signs of increasing demand in key customer sectors.

"We have reported higher profitability in the first half of our fiscal year and have begun to add new sales and solution engineering headcount, which will be essential to re-establishing license revenue growth" said Michael Harris, President and CEO. "Our record services revenue these past two quarters demonstrate our larger and more strategic customers' willingness to invest in MKS Integrity™, even without capital budgets, as they prepare for extensive deployments."

"We are pleased to be able to raise our dividend based on continued growth in profitability and balance sheet strength" said Philip C. Deck, Executive Chairman. "Our healthy cash balance, even at this normal seasonal low point in our cash flow cycle, and the certainty over currency rates provided by our long term hedge position allows us to begin to make new investments in growth."

MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US$0.15 per share on the Company's outstanding common shares in accordance with its dividend policy, a 20 percent increase over the US$0.125 per share dividend in the previous quarter.

The cash dividend on MKS common shares will be payable on January 15, 2010 to shareholders of record at the close of business on December 31, 2009. The dividend is designated as an eligible dividend for the purposes of section 89 of the Income Tax Act (Canada).

Financial Review

Total revenue for the second quarter of fiscal 2010 was $14.7 million, down 10 percent from $16.3 million for the second quarter of fiscal 2009. Net income for the second quarter of fiscal 2010 increased 19 percent to $1.6 million, or $0.16 per share, compared to $1.4 million or $0.13 per share in the second quarter of fiscal 2009.

Six month revenues for fiscal 2010 decreased 4 percent to $30.4 million compared with revenue of $31.6 million for the same period in fiscal 2009. Six month net income was $3.0 million, or $0.30 per share, an increase of 53 percent from the net income of $2.0 million, or $0.19 per share, for the same period in fiscal 2009.

Second quarter fiscal 2010 ALM revenues were $13.0 million, down 9 percent from ALM revenues reported in the second quarter of fiscal 2009.

Six month ALM revenues for fiscal 2010 decreased 1 percent to $27.4 million from $27.6 million for the first six months of fiscal 2009.

Outlook

MKS is committed to profitable organic growth in its primary operating segment, ALM. The Company strives to maintain a balance between increasing current shareholder returns and funding research and sales force investments for long-term growth. The Company plans to make additional investments in its sales force in response to anticipated increases in demand in key customer sectors.

The Company expects a continued decline in the Interoperability business of approximately 10 percent annually.

Conference Call Details

The Company will hold a conference call November 24, 2009 at 4:00 p.m. EST to discuss its second quarter performance. 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 #21398704.

For summarized financial information, please click here.

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 © 2009 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.

For further information contact:

 

Douglas Sawatzky, Chief Financial Officer

MKS Inc.

Phone: 519-883-3252

Email: dsawatzky@mks.com
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