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UGS Reports First Quarter Revenue of US$273.8 Million; Performance Marks 11th Consecutive Quarter of Revenue Growth for PLM Industry Leader


Company’s Software Revenue Increases by 11 Percent to US$205.2 Million, or 15 Percent on a Constant Currency Basis

Thursday, May 11, 2006, PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced first quarter 2006 results.

First quarter financial highlights include:

* Total revenue increased to US$273.8 million, an 8 percent growth over the same period a year earlier, or 13 percent growth on a constant currency basis.
* Software revenue increased to US$205.2 million (including license and maintenance revenues), or an 11 percent growth as compared to the first quarter 2005. On a constant currency basis the company saw an increase of 15 percent.
* Total revenue and software revenue increased in each geographic region compared to the same period in 2005.
* cPDM revenue increased 29 percent including acquisitions, or 8 percent growth without acquisitions, over the same period a year earlier. On a constant currency basis cPDM revenue increased 33 percent with acquisitions, or 12 percent without acquisitions.
* EBITDA (defined below) was US$48.1 million, or 3 percent growth over the same period a year earlier.
* Operating loss was US$5.5 million and includes the impact of acquisition-related intangible amortization costs of US$39.3 million.
* These amounts are not adjusted for the impact of deferred revenues written off in connection with acquisitions. These write-offs had the effect of reducing first quarter 2006 revenues by US$0.2 million and 2005 revenues by US$4.6 million.

“UGS’ solid results were led by overall software revenue growth and our relentless focus on customer success which is at the heart of our leadership and vision of enabling global innovation networks,” said Tony Affuso, chairman, CEO and president of UGS. “Today, one year after closing the Tecnomatix acquisition, we announce an exciting competitive win at Northrop Grumman that underscores our momentum as the market leader in digital manufacturing.”

Customer Win Announcements

* Northrop Grumman Ship Systems (NGSS), one of the leading full service companies for the design, engineering, construction and lifecycle support of major surface ships, standardized on Tecnomatix™ software, UGS’ comprehensive digital manufacturing solution, for all ship programs. NGSS will combine Tecnomatix with UGS’ Teamcenter® software, which provides NGSS the integrated data environment to manage all product information and processes related to the program lifecycle.
* Sandvik Mining and Construction, the world’s leading supplier of mining equipment, will replace its current product data management solution with UGS’ Teamcenter portfolio to standardize its PLM program.
* Peguform, a leading global supplier of interior systems for the automotive industry, has expanded its use of UGS’ Tecnomatix software.
* Röhm GmbH, a leading global manufacturer and supplier of customized and standard tools for machinery, has expanded its use of Solid Edge® software, UGS’ industry-leading, value-based 3D computer-aided design (CAD) system for the mainstream PLM market, for its 3D design platform.
* Research Designs & Standards Organization (RDSO), Lucknow, Research and Design Center of Ministry of Railways, Government of India, has selected NX™ software, UGS’ comprehensive digital product development solution for 3D computer-aided-design (CAD), and NX Nastran for solving its sophisticated engineering simulation models.

Partnerships and Consortiums

* UGS last week announced a multiyear, global strategic alliance with Microsoft that will help UGS deliver its full suite of PLM technology currently used by more than two million users — including digital lifecycle management — on the Microsoft® platform. This equips manufacturers with the ability to create and manage all their product data in an easy to use and secure environment, while allowing global team members, customers, partners and vendors to participate in the creative process.
* UGS today announced that India’s Tata Consultancy Services (TCS), a leading global services organization, joined the UGS Partner Program as a UGS System Integration Alliance Partner. The two companies will work to create focused solutions for key vertical markets such as telecom, pharmaceutical, chemical, oil and gas and media and entertainment, using UGS’ PLM technology. The relationship will help UGS enhance its market presence, reach new markets and penetrate into TCS’ customer base with its PLM products while TCS will leverage its global delivery capability and industry domain expertise to deliver customer specific solutions that provide strong return on investment. This agreement, which further strengthens the long-standing relationship between the two companies, defines a more closely aligned sales, marketing and delivery strategy.
* Robert Bosch GmbH, the world’s largest automotive supplier, has joined Caterpillar, DaimlerChrysler, Ford, General Motors, Siemens and several other influential organizations to become a Corporate member of the JTTM Open Program, the rapidly expanding PLM industry initiative that is committed to making 3D product data easily accessible to a broad and diverse global audience.
* In March UGS and A.T. Kearney Procurement Solutions, a leading global sourcing services firm, launched the Asian Sourcing Network (ASN), a groundbreaking initiative designed to enable manufacturers to connect companies from low-cost countries to their global innovation networks through a first-ever joint solution of information technology, software and consulting services. TCS opened the first ASN center in Coimbatore, India. Powered by UGS software and category-specific sourcing best practices from A.T. Kearney, the ASN center offers suppliers access to PLM technology for product and process automation and enables them register their capability on UGS’ technology. The three companies will help Western-based companies find, develop and on-board suppliers for engineered parts.
* During the first quarter UGS announced its Lifecycle Simulation strategy to provide the PLM industry’s first end-to-end integrated digital simulation solution, enabling real-time product development simulation in a collaborative, visual, managed and open environment. The company also opened its Computer Aided Engineering (CAE) Center of Excellence that has led to business with companies such as Freightliner, General Atomics Aeronautical Systems and Orbital Sciences.

UGS announced or received several awards during the first quarter of 2006.

* General Motors selected UGS as a 2005 Supplier of the Year for its overall business performance in enabling GM to transform its process of innovation by significantly reducing up-front vehicle development time.
* Ford Motor Company honored UGS with the Ford Q1 Certification which designates UGS as a preferred supplier of engineering software products and services, and recognizes the company for achieving excellence in four critical areas: capable systems, continuous improvement, ongoing performance and customer satisfaction.
* Teamcenter, UGS’ digital lifecycle management solution, was recognized in the first quarter as the winner of IndustryWeek magazine’s Technology of the Year Award for 2005.
* UGS’ NX™ 4 software was voted 2005 Product of the Year by the readers of NASA Tech Briefs. NX 4 received more votes from NASA Tech Brief readers than any other nominated product.
* UGS and its products received several awards from prominent Chinese media including “AI (Automobile Industry) Outstanding Solutions Provider” and “Top 100 IT Provider” in the automobile industry for 2005 by Automobile Industry; “TOP 10 International IT Supplier of 2005” by MIE of China; “Best PLM Provider of 2005” by ERP World; “Golden Software of 2005” by Software World; “Recommended Best Design Software of 2005” by e-Manufacturing, for NX software; and “Star Product of 2005” by CWEEK for Teamcenter software.
* Frost & Sullivan, a global growth consulting company, presented UGS with the 2006 Product Lifecycle Management Solutions Company of the Year Award.
The company expects to realize revenue from the contracts highlighted above over multiple quarters.

UGS will host its first quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Thursday, May 11, 2006. Presentation slides will be posted on at 8:00 a.m. Central time. See below for webcast/teleconference access information.

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About UGS
UGS is a leading global provider of product lifecycle management (PLM) software and services with nearly 4 million licensed seats and 46,000 customers worldwide. Headquartered in Plano, Texas, UGS’ vision is to enable a world where organizations and their partners collaborate through global innovation networks to deliver world-class products and services while leveraging UGS’ open enterprise solutions, fulfilling the mission of enabling them to transform their process of innovation.

Note: UGS, JT, NX, Solid Edge, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are trademarks or registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. Microsoft is a trademark or registered mark of Microsoft Corporation or its subsidiaries in the United States and in other countries. Nastran is a trademark or registered mark of NASA. Catia is a trademark or registered mark of Dassault Systémes or its subsidiaries in the United States and in other countries. All other trademarks, registered trademarks or service marks belong to their respective holders.

The statements in this news release that are not historical statements, including statements regarding the expected benefits of the customer relationship, the successfulness of the implementation and other statements identified by forward looking terms such as “may,” “will,” “expect,” “plan,” “anticipate” or “project,” are forward-looking statements. These statements are subject to numerous risks and uncertainties which could cause actual results to differ materially from such statements, including, among others, risks relating to loss or downsizing of customers, competition, international operations and exchange rate fluctuations, changes in pricing models, and intellectual property. UGS has included a discussion of these and other pertinent risk factors in its annual report on Form 10-K most recently filed with the SEC. UGS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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