Mechanical Dynamics Reports 19% Revenue Growth for Q3 2000
25 October 2000
Mechanical Dynamics Reports 19% Revenue Growth for Q3 2000; Operating Profits Up Sharply
ANN ARBOR, Mich., Oct. 24 Continued strong growth in
software license and maintenance revenues drove Mechanical Dynamics, Inc.
, a worldwide supplier of software and services for the
functional virtual prototyping market, to a 19% increase in third quarter 2000
revenue, totaling $11.6 million compared to $9.7 million for the corresponding
period in 1999.
The company reported third quarter 2000 net income of $668,000, or $0.11
diluted earnings per share, compared to net income of $640,000, or $0.10
diluted earnings per share, in Q3 1999. The company's 1999 net income
included a one-time benefit of $504,000 in research and development tax
credits realized during the third quarter of 1999.
Michael E. Korybalski, chairman and chief executive officer of Mechanical
Dynamics, said, "The need for manufacturers to increase overall product
testing and quality assurance while reducing their reliance on hardware
prototyping is driving heightened global demand for our unique functional
virtual prototyping software and services. We're pleased to report continued
progress in our goals of delivering to expectations, strengthening our balance
sheet, improving revenue visibility, and expanding our product offerings. We
are successfully executing to plan, and translating revenue growth into
profit, as evidenced by the consistent increases in our software license and
maintenance revenue and the significant growth in our operating income -- from
$69,000 in Q3 1999 to $810,000 in Q3 2000."
Korybalski said the company's balance sheet was strengthened by an
additional $1.1 million in cash generated during Q3 2000. On a year-over-year
basis, deferred revenue increased 34% to $6.9 million compared to $5.2 million
a year ago. The company closed the third quarter with more than $20.6 million
in cash and investments, no long-term debt, and a net book value of $4.44 per
share.
During the quarter, each of the company's geographic regions posted gains.
Asia generated 51% growth over Q3 1999, with Japan alone charting a 47%
increase. In Europe, the company generated revenue growth of 12%, but the
region lost approximately $570,000 of Q3 revenue due to currency degradation.
In constant currencies, Europe grew approximately 30% over Q3 1999.
"Europe's results were highlighted by more than $170,000 in business from
Minsk Automobile Plant, our first notable customer in Russia," Korybalski
said. "This deal was landed by our Eastern European sales team headquartered
in the Czech Republic, which was established in late 1999."
During the third quarter, Mechanical Dynamics received cumulative orders
valued at more than $100,000 from each of 23 different companies, including
Audi, BMW, Canon, Dortec Industries, Ford, Honda, MTS Systems Corp., Rover
Group, Suzuki, Toyota, TRW Automotive, Volkswagen, and Volvo, among others.
Significant orders of less than $100,000 each came from a number of customers,
including Bombardier, Borg-Warner, General Motors, Kubota Solid Technology
Corp., Michelin, Mitsubishi Electric, Mitsubishi Motors, Nippon Denso, Nortel
Networks, Robert Bosch Corp., and Toshiba, among others.
Another positive highlight for the quarter, Korybalski said, was the 92%
growth posted by the company's Dynamic Designer line of products for the
midrange computer-aided design (CAD) market. "Our new product offerings and
continual channel expansion efforts are paying off in terms of greater
momentum in this critical market," he said.
Korybalski reported that the company has repurchased 129,300 shares of
MDII stock to date under the stock repurchase plan authorized by the board of
directors in April 2000. "Security and Exchange Commission regulations have
limited the amount of shares that the company could repurchase in any single
day," he said.
"I continue to be confident that our operating plans for the balance of
this year and for the year 2001 will enable us to drive the expansion of our
marketplace, while we strengthen our position relative to our competition,"
Korybalski said. "We remain optimistic about the long-term prospects for
Mechanical Dynamics and believe we are well-positioned to capitalize on the
growth forecasted for the virtual prototyping market in the years ahead."
(Condensed consolidated balance sheets and statements of income follow)
Mechanical Dynamics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, December 31,
in thousands 2000 1999
Assets: (Unaudited)
Current assets:
Cash and cash equivalents $20,620 $17,741
Accounts receivable, net 9,865 10,454
Prepaid and deferred expenses 2,564 2,755
Total current assets 33,049 30,950
Property and equipment, net 2,576 3,118
Goodwill, net 3,062 3,436
Other assets 942 685
Total assets $39,629 $38,189
Liabilities and Shareholders' Equity:
Current liabilities:
Borrowings under lines of credit $50 $14
Accounts payable 1,576 1,447
Accrued expenses 3,024 3,246
Deferred revenue 6,895 5,832
Total current liabilities 11,545 10,539
Minority interest 533 479
Shareholders' equity:
Common stock 22,275 22,586
Preferred stock 0 0
Retained earnings 5,252 4,168
Accumulated other comprehensive
income 24 417
Total shareholders' equity 27,551 27,171
Total liabilities and shareholders'
equity $39,629 $38,189
Mechanical Dynamics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended Nine Months Ended
in thousands except share September 30, September 30,
and per share data 2000 1999 2000 1999
Revenue:
Software licenses $5,463 $4,572 $17,241 $13,868
Software maintenance
services 3,147 2,097 7,868 5,696
Professional services and
other 2,971 3,060 8,292 9,689
Total revenue 11,581 9,729 33,401 29,253
Cost of revenue:
Software licenses 940 871 3,042 2,520
Services 2,808 2,797 8,130 8,354
Total cost of revenue 3,748 3,668 11,172 10,874
Gross profit 7,833 6,061 22,229 18,379
Operating expenses:
Sales and marketing 4,344 3,631 12,698 11,416
Research and development 1,528 1,362 4,448 4,118
General and administrative 1,038 886 3,082 2,770
Goodwill amortization 113 113 340 340
Total operating expenses 7,023 5,992 20,568 18,644
Operating income (loss) 810 69 1,661 (265)
Other income, net 181 116 396 415
Income before income taxes and
minority interest 991 185 2,057 150
Provision (credit) for income
taxes 297 (449) 615 (459)
Net income before minority
interest 694 634 1,442 609
Minority interest in net income
(loss) of subsidiary 26 (6) 54 (2)
Net income $668 $640 $1,388 $611
Basic net income per common
share $0.11 $0.10 $0.22 $0.10
Weighted average common
shares 6,208,463 6,260,443 6,251,996 6,247,778
Diluted net income per
common share $0.11 $0.10 $0.22 $0.10
Weighted average common and
common equivalent
shares 6,210,668 6,260,443 6,254,046 6,247,778