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MKS Announces Third Quarter Results for Fiscal 2007

Waterloo, ON – February 28, 2007: MKS Inc. (“MKS” or the “Company”) (TSX: MKX) today announced its financial results for the third quarter of fiscal 2007, which ended January 31, 2007. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Waterloo, ON – February 28, 2007: MKS Inc. (“MKS” or the “Company”) (TSX: MKX) today announced its financial results for the third quarter of fiscal 2007, which ended January 31, 2007. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q3 Fiscal 2007 (compared with Q3 Fiscal 2006)

  • Total revenue declined to $11.6 million from $13.4 million
  • Application lifecycle management (ALM) revenue decreased to $9.8 million from $11.6 million
  • Net income decreased from $1.6 million or $0.04 per share to a net loss of $(1.2) million or $(0.02) per share
  • ALM service revenue increased 38 percent to 1.6 million from $1.2 million
  • ALM maintenance revenue increased 23 percent to $4.9 million from $4.0 million
  • ALM license revenue declined 50 percent to $3.2 million from $6.5 million
  • Signed 23 contracts worth greater than $100,000, compared with 17 during the same period last year
  • New contract wins at Audi, Canonsoft, Mazda, Oceaneering, Parexel, Parker Hannifin, Perot Systems, Stolt Nielson Transportation Group, Tietonator, The TJX Companies, and Vertex Pharmaceuticals

Cash increased during the quarter to $15.1 million at January 31, 2007 from $14.7 million at October 31, 2006.

“Although we continued to experience sluggish license revenue during the quarter as more complex sales initiatives lengthened the overall sales cycles with larger customers, we are increasingly pleased with the progress we are making in these initiatives,” said Philip Deck, CEO of MKS. “We have made major investments in large account sales, packaged applications integrations and Asian expansion over the past few quarters and expect to see much stronger license revenue as a result in the near future.”

“This past quarter brought further progress with deployments of MKS Integrity in our traditional accounts where our expanding breadth of use continues to make MKS Integrity more mission critical to their operations” said Michael Harris, MKS President and COO. “Our investments in large account penetration represent a critical transition to a new level of enterprise sales for MKS – a transition that is time consuming and expensive but essential in creating market share among the most demanding customers in the world.”

Total revenue for the third quarter of fiscal 2007 was $11.6 million, down from $13.4 million in the third quarter of fiscal 2006. Net loss for the third quarter of fiscal 2007 was $(1.2) million, or $(0.02) per share, compared to net income of $1.6 million or $0.04 per share in the third quarter of fiscal 2006. Third quarter fiscal 2007 application lifecycle management (ALM) revenues were $9.8 million, compared with $11.6 million in the third quarter of fiscal 2006.

For the nine months ended January 31, 2007 total revenue remained relatively unchanged at $35.7 million compared with the nine months ended January 31, 2006 with a decrease in license revenue of 19 percent and increases in maintenance and service revenue of 18 percent and 22 percent, respectively. Net income for the nine moths ended January 31, 2007 decreased to ($2.4) million from $3.1 million for the same period in the prior fiscal year.

Outlook for Fiscal 2007
The Company believes that annual revenue for fiscal 2007 will be in the range of $50 to $52 million and income before tax will be in the range of ($1) to $1 million, revised down from the guidance given last quarter. The material factors and assumptions applied by the Company in arriving at these ranges and that could materially affect the Company’s liquidity are: the ability of the Company to successfully expand its ALM sales, services and research and development staff and to generate higher revenue in the ALM segment; the ability of the Company to make increased marketing expenditures in the ALM segment; increased ALM research and development expenditures to ensure the Company maintains its technical leadership in the ALM market; the Company will incur increased costs relating to 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 is recorded in the Company’s financial statements 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 percent to 36 percent. 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 at 5:00 p.m. EST to discuss its third 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 February 28, 2007 to March 7, 2007 and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21283995.

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), +65-6732-8768 (Singapore), +61 3 9674 0454 (Australia) and 1-519-884-2251 (Rest of World).

Copyright © 2007 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 may contain forward-looking statements that involve risks and uncertainties, which could 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 the Company’s 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 including fluctuations in quarterly results, the Company’s focus on the ALM market and the associated complex and lengthy sales cycle, exchange rate fluctuations, management of growth, dependence on and retention of management and key employees, importance of maintenance contracts, economic uncertainty, international sales, dependence on a limited number of products, acquisitions, distribution channels in the interoperability market, potential for undetected errors in software, protection of intellectual property, reliance on third party relationships, limited financial resources, litigation, concentration of ownership, intense competition, rapid technological change and development of the software application management market. 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.

Media Contact:
Douglas Sawatzky, Chief Financial Officer
MKS Inc.
Phone: 519-883-3252
Email: dsawatzky@mks.com

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