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UGS Reports Second Quarter Revenue of US$296.7 Million; Performance Marks 12th Consecutive Quarter of Revenue Growth for PLM Industry Leader


Monday, August 14, 2006 - PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced second quarter 2006 results.
Second quarter financial highlights include:

* Total revenue increased to US$296.7 million, 4 percent growth over the same period a year earlier.
* Software revenue increased to US$221.2 million (including license and maintenance revenues), or 5 percent growth as compared to the second quarter 2005.
* Total revenue and software revenue increased in each geographic region compared to the same period in 2005.
* cPDM software revenue grew 18 percent over the same period a year earlier. (cPDM represents Teamcenter software revenue and excludes digital manufacturing software revenue.)
* EBITDA (defined below) was US$69.3 million, or an 80 percent growth over the same period a year earlier.
* Operating income increased to US$10.1 million and includes the impact of acquisition-related intangible amortization costs of US$39.1 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 second quarter 2006 revenues by US$0.2 million and 2005 revenues by US$3.4 million.

“We continue our drive to sustain solid growth and improve operating income while we focus on executing our strategic plan to position the company for enhanced growth,” said Tony Affuso, chairman, CEO and president of UGS. “As we complete the reorganization of our sales force to focus on verticals and mid-market channels, we are currently adding needed sales capacity. We have seen early progress in our mid-market channel strategy marked by strong double digit software growth in the quarter. During the second quarter we also continued to receive third-party accolades for our software and service through such prestigious designations as being named a Caterpillar Strategic Supplier, the Honda Engineering Supplier of the Year Award, Ford’s Q1 Certification, GM’s Supplier of the Year Award and Frost & Sullivan’s PLM Company of the Year Award.”

Business Highlights

* UGS mid-market approach continued to gain steam through UGS Velocity Series™ portfolio wins as well as increased channel expansion. Second quarter indirect channel revenue increased by 30 percent, and the company signed more than 50 new partners in the first half of the year. (see separate release)
* Kaltenbach Maschinenfabrik GmbH & Co. KG, a global supplier of machine tools, has selected Solid Edge® 3D CAD software to develop its range of circular and band saw machines as well as sectional steel processing systems. Following evaluation of several competing products, Kaltenbach selected Solid Edge for its flexibility, user-friendly design and support. (see separate release)
* Radkersburger Metallwarenfabrik, an Austrian-based die manufacturer, has selected NX CAM Express® software for manufacturing its deep drawing dies. (see separate release)
* UGS today announced an original equipment manufacturer (OEM) agreement with China’s Jilin University (JLU) to integrate one-step formability analysis technology developed by JLU into NX™ software, UGS’ digital product development solution. The technology, developed by JLU’s Institute of Auto-body and Die Engineering (IADE), helps improve design and manufacturing processes and is expected to be available in NX commercially in the third quarter of 2006. (see separate release)

The company expects to realize revenue from the contracts highlighted above over multiple quarters.

UGS will host its second quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, August 14, 2006. Presentation slides will be posted on at 8:30 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. 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 our business, results of operations expected financial performance 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 developments in the PLM industry, loss or downsizing of customers, competition, failure to innovate, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property and losses of key employees. 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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