CIMdata PLM Industry Summary Online Archive
23 August 2007
Financial News
Moldflow Reports Preliminary Results From Continuing Operations for Its Fourth Quarter and Full 2007 Fiscal Year
Moldflow Corporation announced preliminary results for the fourth quarter and full 2007 fiscal year which were in line with the Company's previously issued guidance and reflect the sale of the assets of the Manufacturing Solutions business division on June 30, 2007. As discussed in more detail below, the results of operations reported in this release are preliminary, subject to the resolution of comments received in the normal course from the Securities and Exchange Commission concerning one aspect of the Company's revenue recognition practices.
Preliminary Results for the Fourth Quarter of Fiscal 2007:
• Revenue of $15.0 million was up 17% from the corresponding quarter of fiscal 2006 and 2% sequentially.
• Total product revenue of $7.5 million represented a 20% increase over the same period of the prior year, and a 7% sequential decrease.
• Total services revenue of $7.5 million represented a 13% increase over the same period of the prior year, and a 12% sequential increase.
• Non-GAAP net income from continuing operations was $2.8 million, or $0.23 per diluted share, up 38% from our fourth fiscal quarter of 2006; net income from continuing operations as reported in accordance with GAAP was $2.0 million or $0.17 per diluted share, which included a charge of $850,000, net of related tax effects, for share-based compensation expense, and compared to $907,000 or $0.08 per diluted share in the same period of the prior fiscal year.
• Operating activities generated $4.0 million dollars of cash during the fourth quarter.
Preliminary Results for the Full 2007 Fiscal Year:
• Revenue of $55.9 million was up 14% from fiscal 2006.
• Total product revenue of $28.4 million represented an increase of 16% over fiscal 2006.
• Total services revenue of $27.5 million represented an increase of 12% over fiscal 2006.
• Non-GAAP net income from continuing operations was $10.6 million, or $0.89 per diluted share, up 20% from the full fiscal 2006 year; net income from continuing operations as reported in accordance with GAAP was $8.5 million, or $0.73 per diluted share, which included a charge of $2.0 million, net of related tax effects, for share-based compensation expense, and compared to $5.3 million or $0.45 per diluted share for the full fiscal 2006 year.
• EBITDA for the full fiscal 2007 year was $11.4 million, an increase of 15% over the same period of the prior year.
• Operating activities generated $12.2 million of cash for the full fiscal 2007 year.
"We are very pleased with the fourth quarter results which were in line with the upper range of our expectations. Particularly noteworthy was the strength of the sales performances in North America, which provided its highest quarterly year-on-year growth rate in Moldflow's history, and in Asia which continues to produce strong results quarter after quarter," said Roland Thomas, Moldflow Corporation's president and CEO. "Fiscal 2007 has produced solid results for Moldflow. During the year we provided the market with major releases of our two main products, Moldflow Plastics Advisers® and Moldflow Plastics Insight®, and continued our geographic expansion by targeting resources on emerging growth regions. This focus allowed us to grow our total revenue 14% year-over-year, a marked improvement over fiscal 2006. As we head into fiscal 2008, we are confident in the strength of our core business and believe we are strongly positioned to take advantage of the continuing growth of the worldwide CAE market and further our leadership position."
Thomas concluded, "The sale of our Manufacturing Solutions business division to Husky Injection Molding Systems Ltd. in the fourth quarter, and the subsequent transition of this business division have been smooth. We believe the transaction will not only benefit both companies, but also the customers who will now be supported by the Husky worldwide infrastructure. The sale, which included substantially all of the net assets of the division, did not include the software portion of the Moldflow Plastics Xpert® (MPX®) product, which Husky will resell. We look forward to a productive and on-going relationship with Husky as we jointly provide service and product upgrades to our mutual MPX customer base."
SEC Comment Letter
In December 2006, the Company received a comment letter from the SEC's Division of Corporation Finance which was made in the normal course of the SEC's review of the Company's periodic filings. Specifically, the Company is currently discussing with the SEC its policies for determining the fair value of maintenance contracts when they are sold to customers together with perpetual licenses for software products. Generally accepted accounting principles require that the Company determine what portion of the revenue to recognize in the current period and what portion to recognize over the term of the maintenance contract. This determination requires significant judgment. Should the SEC not agree with the Company's judgments in this area, revenue from certain sales may be required to be recognized in different time periods, both historically and prospectively. The SEC's comments do not question the validity of the orders recorded or the collectibility of the related receivables, and do not impact the Company's cash position. The Company is in the process of responding to the SEC's comments but, as that process is on-going, the results presented today should be considered preliminary until the Company files its Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
Business Outlook
The Company is providing preliminary fiscal 2008 guidance below. This guidance has been prepared on the same basis as that of the Company's preliminary 2007 financial results and is subject to the conclusion of the on-going SEC comment letter process described earlier in this press release. This guidance is provided on both a GAAP and non-GAAP basis. Non-GAAP guidance excludes the estimated charges for share-based compensation costs. Because there are significant limitations in estimating the impact of share-based compensation costs and related taxes, the tax benefits and estimated charges associated with share-based issuances are unpredictable. For these reasons, the actual impact of share-based compensation on our financial results may differ materially from the estimated amounts included in the guidance below.
The current business outlook is based on information as of August 23, 2007 and is current as of that day only. For our full fiscal 2008 year we expect revenue to grow in the range of 10% to 13% when compared to fiscal 2007. We expect EBITDA to grow in the range of 13% to 20% in fiscal 2008 when compared to fiscal 2007. We expect non-GAAP net income per diluted share of approximately $0.94 to $1.00, based upon an estimated 12.1 million diluted shares. Non-GAAP net income per diluted share excludes charges for share-based compensation expenses which are expected to be approximately $1.8 million, net of related tax effects, and assumes an effective tax rate of approximately 21%. GAAP net income per diluted share for fiscal 2008 is expected to be between $0.78 and $0.84 based upon an estimated 12.1 million diluted shares. This GAAP estimate assumes an annual effective tax rate of approximately 25%.
Use of Non-GAAP Financial Measures
The Company has provided non-GAAP net income, non-GAAP net income per diluted share and EBITDA as supplemental measures regarding the Company's operating performance. Non-GAAP net income and non-GAAP net income per diluted share exclude the impact of share-based compensation expense and therefore have not been calculated in accordance with GAAP. EBITDA is defined as GAAP net income from continuing operations plus any interest expense, income taxes, depreciation, amortization and share-based compensation expense less interest earned and therefore has not been calculated in accordance with GAAP. Moldflow is presenting these measures because management uses this information in evaluating the results of the Company's operations and for internal planning and forecasting purposes and believes that this information provides additional insight into our operating results, as well as enables comparison of these results to prior periods. These measures should not be considered an alternative to measurements required by GAAP, such as net income from continuing operations and net income per diluted share from continuing operations, and should not be considered a measure of our liquidity. In addition, these non-GAAP financial measures may not be comparable to similar measures reported by other companies. With respect to the non-GAAP financial measures for the fourth quarter, the full 2007 fiscal year and as presented in our business outlook for fiscal 2008, the GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed in this press release and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the Investors page of the Moldflow Web site at http://www.moldflow.com/stp/english/investors/index.htm .
Information Dissemination
Moldflow will host a conference call to discuss the preliminary fourth quarter and full 2007 fiscal year results as well as future outlook at 11:00 a.m. US Eastern time, Thursday, August 23, 2007. The call will be recorded with replay (dial-in # 800-642-1687, PIN# 10140446) which will be available until August 30, 2007. In addition, a live Webcast of the conference call, together with this press release and supplemental financial information, can be accessed through the Company's Website at http://www.moldflow.com/ in the Investors section. The call, press release and supplemental information will be archived and can be accessed through the same link.
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