UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: March 26, 2005

Commission File Number: 000-30027

Moldflow Corporation

(Exact name of registrant as specified in its charter)

430 Boston Post Road, Wayland, MA 01778

(Address of principal executive offices, including zip code)

(508) 358-5848

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      There were 10,896,125 shares of our common stock, par value $0.01, outstanding on May 3, 2005.

MOLDFLOW CORPORATION

FORM 10-Q

For the Quarter Ended March 26, 2005

TABLE OF CONTENTS

PART I.     FINANCIAL INFORMATION

MOLDFLOW CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

The accompanying notes are an integral part of the condensed consolidated financial statements.

MOLDFLOW CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

The accompanying notes are an integral part of the condensed consolidated financial statements.

MOLDFLOW CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of the condensed consolidated financial statements.

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

      Moldflow Corporation (“Moldflow” or the “Company”) designs, develops, manufactures and markets computer software applications and enabling hardware for the design, engineering and manufacture of injection-molded plastic parts and, as such, revenues are derived primarily from the plastics design and manufacturing industry. The Company sells its products primarily to customers in the United States, Europe, Asia and Australia.

      The accompanying unaudited condensed consolidated financial statements include the accounts of Moldflow Corporation and its wholly-owned subsidiaries. The condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended June 30, 2004 included in the Company’s Annual Report on Form 10-K. The June 30, 2004 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of results for the interim periods presented. The results of operations for the three-month and nine-month periods ended March 26, 2005 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform to the fiscal 2005 presentation, including the reclassification of $1.2 million of marketable securities from short term to long term as of June 30, 2004.

      The Company’s fiscal year end is June 30. During the fiscal year, the Company follows a schedule in which each interim quarterly period ends on the Saturday of the thirteenth week of the reporting period. Beginning in the first quarter of fiscal 2006, the Company will follow a schedule in which each interim quarterly period ends on the last day of the calendar month. This change will have no material impact on the comparability of reporting periods.

      A summary of the Company’s stock option activity follows:

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      During the three months ended March 26, 2005, options to purchase 94,998 shares of common stock were exercised upon the receipt by the Company of 47,403 shares of common stock held by the option holder for greater than six months.

      No compensation cost has been recognized for employee stock-based awards for the three months and nine months ended March 26, 2005 and March 27, 2004. Had compensation cost been determined based on the fair value of options at the grant dates, the Company’s net income would have been the pro forma amounts indicated in the table below.

      The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table presents the calculation for both basic and diluted net income per common share:

      Options to purchase 290,317 and 1,034,210 shares of common stock were not included in the calculation of diluted net income per common share for the three months ended March 26, 2005 and March 27, 2004, respectively, because the option exercise prices were greater than the average market price of the Company’s common stock during those periods.

      Options to purchase 447,257 and 1,413,000 shares of common stock were not included in the calculation of diluted net income per common share for the nine months ended March 26, 2005 and March 27, 2004, respectively, because the option exercise prices were greater than the average market price of the Company’s common stock during those periods.

      The Company has established a hedging program designed to reduce the exposure to changes in currency exchange rates.

      At March 26, 2005, currency options and collars designated as hedging instruments with notional amounts of $1.2 million, $1.5 million and $1.2 million to exchange Euros, Japanese yen and Australian dollars for U.S. dollars, respectively, were outstanding. The fair values of these instruments, as derived from dealer quotations, were recorded as components of other current assets or other current liabilities, depending on their valuation. At March 26, 2005, instruments with fair values totaling $160,000 were recorded as components of other current assets. Net unrealized gains on these instruments of $35,000 were included in accumulated other comprehensive income. The Company expects these instruments to affect earnings over the next three months. During the three-month and nine-month periods ended March 26, 2005, net gains of $40,000 and $67,000, respectively, were recorded as components of other income (expense). These amounts were comprised of $40,000 and $87,000, respectively, of premiums paid for new instruments, net of $79,000 and $163,000 of gains, respectively, on the effective portion of options that were settled. As of March 26, 2005, there were no financial instruments or derivatives outstanding that did not qualify for hedge accounting.

      At March 27, 2004, currency options and collars designated as hedging instruments with notional amounts of $1.5 million, $6.1 million and $641,000 to exchange Euros, Japanese yen and Australian dollars for U.S. dollars, respectively, were outstanding. At March 27, 2004, the total fair values of all currency options and collars held by the Company of $196,000 and $147,000 were recorded as components of other current

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

assets and other current liabilities, respectively. Net unrealized losses on options and collars that qualified as hedging instruments of $64,000 were included in accumulated other comprehensive income. During the three-month and nine-month periods ended March 27, 2004, net losses of $19,000 and $136,000, respectively, were recorded as components of other income (expense) on the effective portion of options that were settled. For the three-month and nine-month periods ended March 27, 2004, unrealized losses of $0 and $64,000, respectively, were recognized on the ineffective portion of the options and collars designated as hedging instruments. As of March 27, 2004, there were no financial instruments or derivatives outstanding that did not qualify for hedge accounting.

      Intangible assets acquired in the Company’s business combinations include goodwill, customer base, developed technology, customer order backlog and non-compete agreements. All of the Company’s acquired intangible assets, except for goodwill, are subject to amortization over their estimated useful lives. No significant residual value is estimated for these intangible assets. A portion of the acquired intangible assets is recorded in the accounts of a French subsidiary of the Company and, as such, is subject to translation at the currency exchange rates in effect at the balance sheet date.

      In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company conducted its annual goodwill impairment test for fiscal 2005 as of the end of its third fiscal quarter, concluding that there was no indication of impairment. Changes in the carrying value of goodwill since June 30, 2004 were due to foreign currency translation adjustments.

      The components of acquired intangible assets, excluding goodwill, are as follows:

      Acquired intangible asset amortization for the nine months ended March 26, 2005 and March 27, 2004 was $331,000 and $371,000, respectively, of which $107,000 and $24,000, respectively, was reflected as cost of product revenue and $224,000 and $347,000, respectively, was reflected as amortization of acquired intangible assets in the condensed consolidated statement of income.

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table summarizes the expected remaining amortization of acquired intangible assets as of March 26, 2005:

      Inventories consisted of the following:

      Costs associated with the development of computer software and related products are expensed prior to establishing technological feasibility, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” and capitalized thereafter until the product is available for general release to customers. Software development costs eligible for capitalization were not significant for the three months ended March 26, 2005. In the nine months ended March 26, 2005, $201,000 of costs were capitalized. Development costs capitalized in the three months and nine months ended March 27, 2004 were $222,000 and $442,000, respectively. All such costs have been included in other assets in the Company’s condensed consolidated balance sheet and are being amortized to cost of product revenue over their estimated useful lives, which range from three to five years.

      A summary of capitalized software development costs follows:

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      Comprehensive income is comprised of net income and other comprehensive income and losses. Other comprehensive income (loss) includes certain changes in equity that are excluded from net income, such as cumulative foreign currency translation adjustments and unrealized gains and losses on the Company’s hedging instruments and marketable securities.

      The following table presents the calculation of comprehensive income:

      In January 2004, the Company initiated a corporate restructuring plan (the “January 2004 plan”) related to its January 2004 acquisition of American MSI Corporation (“AMSI”). The January 2004 plan included the termination of three employees from sales and management positions in the United States and Italy. As a result of the January 2004 plan, the Company recorded charges and related accruals of $508,000 in its third fiscal quarter of 2004. These charges were recorded as restructuring costs in the Company’s consolidated statement of operations. All significant activities under the January 2004 plan were completed as of March 27, 2004, except for cash payments of the remaining liabilities.

      The following table presents activity against the restructuring liability during the nine months ended March 26, 2005 and the remaining liability at the period end included in accrued expenses in the Company’s condensed consolidated balance sheet:

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      In April 2002, the Company enacted a corporate restructuring plan (the “April 2002 plan”) to resize the Company and to reduce overhead costs. The April 2002 plan included the involuntary termination of 37 employees, the closing of certain leased offices and the reduction in size of other leased offices. All significant activities under the April 2002 plan are complete, except for cash payments of the remaining liabilities. As a result of the April 2002 plan, the Company recorded pre-tax charges and related accruals in fiscal 2002 of $1.3 million. The remaining accrual balances as of March 26, 2005 relate to long-term contractual obligations from facility commitments that will be paid over approximately four years.

      The following table presents activity against the restructuring liability during the nine months ended March 26, 2005 and the remaining liability at the period end.

      Of the balance remaining at March 26, 2005, $374,000 has been included in other long-term liabilities and $110,000 has been included in accrued expenses in the Company’s condensed consolidated balance sheet.

      In January 2005, the Company completed the renewal of its unsecured $5.0 million working capital credit facility with a domestic bank. The terms of the facility, which expires February 2, 2007, are substantially the same as those of the previous facility. The available borrowing base of the facility is subject to a calculation that is based upon eligible accounts receivable. Advances may be in the form of loans, letters of credit, foreign exchange contracts or other cash management lines. Loans against the facility bear interest at the bank’s prime rate. The facility included certain restrictive covenants, all of which the Company was in compliance with as of March 26, 2005. These covenants included certain liquidity and profitability measures and restrictions that limited the ability of the Company to merge, acquire or sell certain assets without prior approval from the bank. As of March 26, 2005, the Company had utilized $747,000 of the available borrowing base of the facility through outstanding foreign exchange contracts and letters of credit. These advances do not incur interest charges. As of March 26 2005, there were no loans advanced against the facility and the remaining available borrowing base was $4.3 million.

      Certain subsidiaries of the Company have established unsecured credit facilities with two separate financial institutions primarily for the purposes of establishing foreign exchange contracts. Advances against these facilities bear interest at the institutions’ published rates plus 2% per annum and are guaranteed by the Company. There were no advances against these facilities as of March 26, 2005.

      Certain subsidiaries of the Company have established other credit facilities, totaling $251,000 at March 26, 2005, with two separate financial institutions for general working capital requirements and foreign exchange facilities. Advances against these facilities bear interest at the institutions’ published rates, plus 1.5% per annum. Advances against these facilities are unsecured. There were no advances against these facilities as of March 26, 2005.

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      In the fourth quarter of fiscal 2004, the Company reorganized into two separate business units: the Design Analysis Solutions unit and the Manufacturing Solutions unit. These business units are considered reportable segments as defined by SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information.” Under this revised organizational structure, there are significant functions, and therefore costs, that are considered corporate expenses and are not allocated to the reportable segments for the purposes of assessing performance and making operating decisions. These unallocated corporate expenses include certain marketing, development and general and administrative costs. Costs and expenses of each reporting unit include direct costs associated with selling, supporting, developing and marketing the products and services sold by each reporting unit, as well as amortization of acquired intangible assets and certain allocated costs. The basis of allocation of all such costs and expenses includes significant judgment and estimation.

      Asset information by reportable segment is not reported as the Company does not accumulate such information internally. The Company had no customers from which it derived more than 10% of the total revenue of either reporting unit for the fiscal periods presented.

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The Company licenses and sells its products to customers throughout the world. Sales and marketing operations outside the United States are conducted principally through the Company’s foreign sales subsidiaries in Europe and Asia. The Company’s research and development centers are located in Australia, the United States, France and the United Kingdom. Geographic information regarding the Company’s revenue was as follows:

      Revenue from unaffiliated customers in Japan for the three months ended March 26, 2005 and March 27, 2004 was $3.3 million and $2.8 million (21% and 21% of total revenue), respectively. Revenue from unaffiliated customers in Japan for the nine months ended March 26, 2005 and March 27, 2004 was

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

$9.2 million and $7.4 million (20% and 22% of total revenue), respectively. Substantially all of the revenue in the Americas region is derived from the United States.

      All of the net fixed assets included in the Americas are located in the United States.

12.     Contingencies, Commitments and Guarantor Arrangements

      The following is a summary of agreements and provisions the Company has determined are within the scope of Financial Accounting Standards Board Interpretation (“FIN”) No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34.”

      In the normal course of business, the Company has indemnified third parties and has commitments and guarantees under which it may be required to make payments in certain circumstances. These indemnities, commitments and guarantees include indemnities to various lessors in connection with facility leases; indemnities to customers related to performance of services subcontracted to other providers; indemnities to vendors that guarantee expenses incurred by employees of the Company and indemnities and guarantees to financial institutions related to sales of the Company’s equity securities and performance under credit facilities of the Company’s subsidiaries. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has never incurred material costs to settle claims or defend lawsuits related to these indemnities, commitments and guarantees. As a result, the estimated fair value of these agreements is minimal. Accordingly, no liabilities have been recorded for these agreements as of March 26, 2005.

      The Company generally warrants that its products will perform in all material respects in accordance with its standard published specifications in effect at the time of delivery of the products to the customer for a period of from 90 days to two years from the date of shipment or any longer period that may be required by

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

local law. The Company records a liability based upon its history of claims against the contractual warranty provisions. The following table presents changes to the accrued warranty liability:

      The Company leases certain of its office space, autos and equipment under non-cancelable operating leases, which expire at various dates through 2012. At March 26, 2005, the Company had no outstanding capital lease obligations. Future minimum operating lease commitments as of March 26, 2005 were as follows:

      Future minimum operating lease commitments include the full cash commitment for a leased facility in the United Kingdom. The Company’s April 2002 restructuring plan included a reduction in the use of this facility, resulting in a charge of $606,000 at that time.

      In January 2005, the Company entered into a seven-year operating lease agreement for a facility that will serve as the Company’s new corporate headquarters in Framingham, Massachusetts. Future operating lease commitments under this agreement are approximately $3.1 million over the seven-year term and have been included in the table above.

MOLDFLOW CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The Company has various contractual obligations for the purchase of goods or services that are enforceable and legally binding on the part of the Company. Future purchase commitments as of March 26, 2005 were as follows:

      In November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 151, “Inventory Costs.” This Statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This Statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of “abnormal”. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for the Company’s 2006 fiscal year. The Company does not expect that the adoption of this Statement will have a material impact on its results of operations.

      In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” (“FAS No. 123(R)”) which revises SFAS No. 123, “Accounting for Stock-Based Compensation” and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. In addition to revising FAS 123, FAS No. 123(R) supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” SFAS No. 123(R) will be effective for the Company’s 2006 fiscal year. The Company is currently assessing the impact of FAS No. 123(R) on its share-based compensation programs. However, the requirement to expense stock options and other stock-based compensation that have been or will be granted to employees will significantly increase the Company’s operating expenses and result in lower earnings per common share.

      We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with a review of our overall strategy and the strategy for our two business units to give the reader a view of the goals of our business and the direction in which our business and products are moving. This is followed by a discussion of the Critical Accounting Policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our Results of Operations for the three and nine months ended March 26, 2005 compared to the three and nine months ended March 27, 2004. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled “Liquidity and Capital Resources,” “Contractual Obligations” and “Off-Balance Sheet Financing Arrangements.”

Forward-Looking Statements

      This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained in this report include, but are not limited to, statements concerning growth opportunities for our business, taxes, working capital and capital expenditure requirements, FAS No. 123(R), inflation, and international operations. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” and “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition, or state other “forward-looking” information.

      We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including those factors described in “Risk Factors and Important Factors That May Affect Future Results.” Readers should not place undue reliance on our forward-looking statements. We do not undertake any obligation to update any of our forward-looking statements to reflect events occurring after the date of this report.

Business Overview

      Our goal is to be the world’s leading provider of software and enabling hardware solutions for the optimization and automation of plastics-focused manufacturing. We offer customers a broad range of solutions to improve the way they design and produce parts and molds through powerful and robust technology-based products and services. Our focus is to help customers manufacture less expensive and more reliable plastic products by increasing the effectiveness of their designs and their manufacturing operations and improving efficiencies across the entire design-through-manufacture process.

      We believe that our key competitive strength is our extensive domain knowledge in the fields of materials science and characterization, numerical methods and predictive modeling through simulation and analysis, coupled with our expertise in packaging and delivering this knowledge to our customers in easy-to-use software and hardware applications. We develop software products internally and through cooperative research relationships with a number of public and private educational and research organizations around the world. In addition, some of our products are developed by commercial contractors. Because of the strong body of intellectual property and knowledge that we have created over the course of twenty-six years in serving the plastics design and manufacturing market, we have become the leading provider of highly sophisticated predictive software applications for the plastics design engineering and manufacturing communities.

      Plastics are pervasive throughout a broad range of vertical industry applications including the automotive, electronics, packaging, medical products and consumer goods industries. These industries are generally large and growing and their use of plastic is increasing. Because the supply chains that support the design and production of plastic parts in these industries are often fragmented and comprised of multiple companies in

various geographies around the globe, we have developed a wide range of applications that can be used by participants at all stages of the plastics value chain to optimize their process and reduce their costs. Our strategy is to deliver our deep domain expertise in plastics packaged in software and system solutions that address the specific issues of the participants in each of these stages and increase our penetration of these industries by making our products available through a combination of direct and independent sales representatives, resellers and engineering consultants around the globe.

      For the design of plastic parts and molds, our strategy is to provide products which enable analysis-driven design, in the earliest stages of product development, by making analysis technology more integral to the design process. In doing so, we seek to make our technology available to a wider audience of potential users in mainstream design markets, including those engineers who are not specialists in plastics design. By building upon our existing technology categories, we bring powerful solutions which are easy to learn and use, providing low cost of deployment and rapid return on investment.

      For manufacturers of plastic parts, our strategy is to offer a range of products which address the need for optimizing, automating and monitoring the setup of the primary equipment while controlling and monitoring the temperature, flow of materials and other elements in the manufacturing process. Our solutions include applications which provide real-time business performance management information that enables companies to manage their manufacturing operations throughout the production process. Because of our extensive knowledge of the material properties of plastics and the physics involved in the process of converting raw plastic to finished goods, we can assist companies to obtain higher production yields, reduced cycle times, improved process reliability and better part quality.

      Our growth strategy is derived from these strengths. We continue to increase the business value of our design analysis solutions and manufacturing solutions for our customers in a number of ways. We improve the performance and functionality of existing products with each new release. We develop products addressing specific vertical market needs in each of the target market segments of our business. In the design phase, for example, we provide applications which address the process of microchip encapsulation, a process which is involved in the manufacture of semiconductors. In the manufacturing phase, we offer solutions to the die cast market, a conversion process that is similar to the plastics injection molding process.

      Expanding our geographic coverage is a key element of our growth strategy. We believe that the rapidly developing economies in China and other developing countries present significant longer-term growth opportunities for our business. Our ability to conduct research and development at various locations throughout the world allows us to optimize product development and lower costs. International development, however, also involves significant costs and challenges, including whether we can adequately protect our intellectual property and derive significant revenue in areas where laws regarding intellectual property are not in place or not effectively enforced.

      A significant part of our growth strategy is based upon building on the customer loyalty that we have achieved and the large installed base that we have built. We receive approximately 60% to 70% of our overall revenue from repeat customers. We deliver product releases on a regular and timely basis which incorporate significant functionality improvements to ensure that our customers have access to the latest technology developments. We focus on customer satisfaction through programs aimed at involving our customers in the future direction of our products, enhancing their ease of use and user experience and providing multiple points of contact within the company to ensure that their needs are met.

      Our uses of cash include capital expenditures to support our operations and our product development, mergers and acquisitions, and investments in growth initiatives. We continue to evaluate merger and acquisition opportunities to the extent they support our strategy and our growth objectives.

Design Analysis Solutions

      The Design Analysis Solutions business unit serves the product, part and mold tooling design markets. Our strategy is to provide powerful and sophisticated solutions that enable our customers to optimize the

design of parts and molds in order to reduce the time to market, improve the reliability of the production process, improve part quality and lower the cost of manufacture for parts once in production.

      Our primary offerings are our Moldflow Plastics Advisers (“MPA”) for part and mold design optimization and our Moldflow Plastics Insight (“MPI”) for in-depth simulation for part and mold design validation and optimization.

Manufacturing Solutions

      The Manufacturing Solutions business unit serves the plastics-focused discrete manufacturing sector. Our strategy is to provide powerful integrated solutions that enable our customers to optimize and automate the set-up of an injection molding machine, monitor and control the injection molding process, control the temperature and flow of plastic into the mold and monitor and report on the process and production at both the machine and plant-wide level. These products enable customers to improve the reliability of their production process, improve their production yield and efficiency and reduce their costs of production by reducing material usage and cycle times.

      Our primary offerings are our Altanium systems for temperature and process control, our Moldflow Plastics Xpert (“MPX”) for process set-up, optimization and control, our Shotscope process monitoring and control application and our Celltrack product, formerly known as MMS/ Production Monitoring, for monitoring and reporting on the operations across the factory floor. Our Manufacturing Solutions products are an integration of our internally developed MPX product with Shotscope, Celltrack and Altanium, all of which were initially developed by companies we have acquired.

      We sell our products and services internationally through our direct sales operations in 14 countries. We also sell through a network of distributors and value-added resellers and through distribution arrangements with developers of other design software products.

Critical Accounting Policies and Significant Judgments and Estimates

      The preparation of consolidated financial statements requires estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, bad debts, inventories, income taxes, warranty obligations, intangible assets, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

      The accounting policies that we believe are most critical in order to fully understand our condensed consolidated financial statements include: revenue recognition, asset valuation allowances, acquisition accounting, impairment of acquired intangible assets, goodwill and other long-lived assets, income tax accounting, restructuring charges, hedge accounting, capitalization of software development costs and stock option accounting. For a more detailed explanation of the judgments included in these areas, refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2004.

Overview of Results of Operations for the Three Months and Nine Months Ended March 26, 2005

      Total revenue in our third quarter and first nine months of fiscal 2005 increased 20% and 38%, respectively, from the comparable periods of fiscal 2004. The increase in both periods was primarily a result of growth in our Design Analysis Solutions product sales in our European and Asia/ Australia regions and also due to sales of hot runner process controllers, the main product of American MSI Corporation (“AMSI”), a company which we acquired in January 2004. In both the three-month and nine-month periods ended March 26, 2005, the value of the U.S. dollar relative to the currencies of some of the other countries in which we conduct business was weaker than that of the comparable periods of fiscal 2004. These foreign currency movements contributed 3% and 5%, respectively, of the increases in total revenue.

      Cost of revenue in our third quarter and first nine months of fiscal 2005 increased 15% and 72%, respectively, from the comparable periods of fiscal 2004. The increase in both periods was primarily a result of increased direct material costs associated with our hot runner process controllers, the costs of distribution personnel added in our acquisition of AMSI and higher amortization of capitalized software.

      Operating expenses in our third quarter and first nine months of fiscal 2005 increased 13% and 18%, respectively, from the comparable periods of fiscal 2004. The increase in both periods was primarily due to the cost of personnel added in our acquisition of AMSI, higher variable sales costs related to the current sales performance, increased professional service fees, including those related to our Sarbanes-Oxley compliance effort, and the decline in value of the U.S. dollar relative to the local currencies in which we incur expenses.

      In the nine months ended March 26, 2005, we generated $5.1 million of cash from our operating activities as compared to $3.4 million in the nine months ended March 27, 2004, primarily a result of our increased net income. We finished the first nine months of fiscal 2005 with $58.8 million of cash and marketable securities, compared to $51.7 million of cash and marketable securities as of June 30, 2004. We have no long-term debt.

      Beginning in July 2005, our employee-related expenditures will increase substantially when we are required by accounting standard changes to record compensation expense related to grants of employee stock options or other equity-based compensation to our employees.

Results of Operations

      The following table sets forth statement of income data for the periods indicated as a percentage of total revenue:

      We generate revenue from three principal sources:

      The following table sets forth our total revenue by geographic region for the three-month and nine-month periods ended March 26, 2005 and March 27, 2004: