SAN MATEO, Calif., May 02, 2006 (BUSINESS WIRE) -- Keynote Systems, Inc., (Nasdaq:KEYN)
-- Reported Total Revenue of $12.7 Million
-- Grew Subscription Services Revenue to $9.9 Million
-- Delivered $2.6 Million in Cash from Operations and $1.8
Million in Free Cash Flow
-- Recorded GAAP Net Loss of $58,000 or $0.00 per Share and
Non-GAAP Net Income of $1.5 Million or $0.07 per Share
Keynote Systems, Inc., (Nasdaq:KEYN), The Internet Performance
Authority(R), today announced financial results for its second quarter
of fiscal year 2006, which ended March 31, 2006.
Umang Gupta, chairman and CEO of Keynote, said: "While our second
quarter total revenue was disappointing primarily due to a shortfall
in our customer experience management (CEM) engagements, our service
level management (SLM) subscriptions grew sequentially this quarter,
albeit modestly. Additionally, we generated $2.6 million in cash from
operations and $1.8 million in free cash flow."
"As previously announced, we recently made some significant
organizational changes to increase overall sales growth, especially in
the CEM business, and to establish greater predictability in revenue
forecasting. Also, we acquired SIGOS, a German based technology leader
in mobile data network testing and active service monitoring, with
more than 55 customers including many major mobile operators in
Europe."
Total revenue for the quarter was $12.7 million. Subscription
services revenue increased to $9.9 million, up three percent compared
to the second quarter of 2005, reflecting an increased demand for
transaction, broadband and mobile monitoring services and a reduction
in single-page and single-device Internet monitoring services.
Professional services revenue was $2.8 million, a 21 percent decrease
compared to the quarter a year ago, primarily due to a reduction of
CEM engagements. For the second quarter of fiscal year 2006, the net
loss was $58,000, or $0.00 per share, which included $812,000 in
stock-based compensation expenses, required under generally accepted
accounting principles (GAAP). For the second quarter of fiscal year
2005, the net income was $1.0 million, or $0.05 per share. The
non-GAAP net income for the quarter was $1.5 million, or $0.07 per
diluted share, compared to non-GAAP net income of $1.6 million, or
$0.08 per diluted share, for the same quarter a year ago. The company
defines non-GAAP net income as net income adjusted for provision for
income taxes less cash tax expense, stock-based compensation expense,
and amortization of purchased intangibles. Non-GAAP net income per
diluted share equals non-GAAP net income divided by the weighted
diluted share count as of that period end.
For the quarter, cash provided by operating activities was $2.6
million, compared to $1.8 million for the same period last year. Cash
used for purchases of property, equipment and software totaled
$843,000 for the second quarter of 2006, compared to $724,000 for the
same period last year. Keynote generated free cash flow, defined as
cash flow from operations less cash used for purchases of property,
equipment, and software, of $1.8 million for the quarter, compared to
$1.1 million for the second quarter of 2005.
As a result of the recent acquisition of SIGOS and the requirement
to amortize most of SIGOS' software license revenues over a
twelve-month period, the company believes for the next three quarters
both GAAP and non-GAAP income will be negatively impacted. Therefore,
cash provided by operating activities and free cash flow will be
important metrics to measure Keynote's financial performance during
that period.
As of March 31, 2006, Keynote's total worldwide customer base was
approximately 2,400 companies, up from approximately 2,200 customers
in the same quarter a year ago. Keynote currently provides its
services to 70 percent of the comScore Media Metrix's top 50 Web sites
and approximately half of the Fortune 100 companies. As of March 31,
2006, Keynote measured 9,269 Internet URLs and 6,904
Internet-connected devices through its Red Alert services, as compared
8,302 Internet URLs and 7,719 devices in the same quarter a year ago.
Currently, Keynote captures over 94 million Internet performance
measurements daily.
Expectations for the Third Quarter of Fiscal Year 2006
The following company outlook for the third quarter of fiscal 2006
also includes expectations for Keynote SIGOS, acquired on April 3,
2006. Keynote will consolidate SIGOS' financial reporting under U.S.
GAAP rules starting in its current fiscal quarter ending June 30,
2006. Because the SIGOS' financial statements will be presented in
U.S. GAAP, rather that German GAAP, SIGOS' system license revenue will
be required to be ratably recognized over the initial duration of each
customer contract, which is usually twelve months.
As a result of the aforementioned accounting change, Keynote will
be able to recognize as revenues only a fraction of SIGOS sales during
the remainder of fiscal 2006. Accordingly, the acquisition will be
dilutive to Keynote's U.S. GAAP net income for the three quarters
after the acquisition, although cash flow from operations is expected
to be positive throughout.
For the upcoming three quarters, the company intends to delineate
Keynote SIGOS' contribution to total revenues and net after-tax income
or loss, as well as expected cash taxes to be paid in Germany. After
three quarters, the company will have integrated Keynote SIGOS
operations to a large extent, and the company will report consolidated
revenues and net income (loss) without calling out Keynote SIGOS
separately.
The statements in this section of this press release are forward
looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Keynote currently expects that for the third fiscal quarter ending
June 30, 2006:
-- Total revenue is expected to be between $13.5 million and
$14.0 million, including a net revenue contribution from
Keynote SIGOS of between $700,000 and $800,000.
-- Total stock-based compensation expense and amortization of
intangible assets is expected to be approximately $2.6
million.
-- Interest income, net is expected to be approximately $1.0
million absent any additional acquisition transactions,
assuming no material changes in interest rates, and assuming
Keynote continues to repurchase common stock under its
approved plan.
-- Cash paid for income taxes is expected to be approximately
$550,000 to $650,000, most of which will be due to Keynote
SIGOS.
-- Basic weighted average shares outstanding are expected to be
approximately 18.0 million shares, and diluted weighted
average shares outstanding are expected to be approximately
18.5 million shares.
-- Net loss per share is expected to be between $(0.11) and
$(0.13) with Keynote SIGOS contributing a loss per share
between $(0.08) and $(0.10).
-- Non-GAAP loss per share is expected to be between $(0.07) and
$(0.09) with Keynote contributing a non-GAAP earnings per
share of between $0.02 and $0.04.
-- Cash provided by operating activities is expected to be
between $2.0 million and $2.5 million.
-- Capital expenditures will be approximately $1.0 million,
absent any acquisition costs or other extraordinary
transactions; therefore, free cash flow is expected to be
between $1.0 million and $1.5 million.
Keynote will host a conference call and simultaneous Web cast at
2:00 pm (PDT), today May 2, 2006. The web cast of the call will be
available at the Investor section of our web site at www.keynote.com.
The replay will be available after the call by telephone by dialing
(800) 642-1687, and the pass code is #7806076, or by Web cast at the
Investor section of our web site at www.keynote.com.
Forward-Looking Statements
This press release contains forward-looking statements that are
not purely historical regarding the Company or management's
intentions, hopes, beliefs, expectations and strategies for the
future. Because such statements deal with future events, they are
subject to various risks and uncertainties, and actual results could
differ materially from the Company's current expectations.
Forward-looking statements in this release include, but are not
limited to, forecasts concerning Keynote's expected revenue, earnings
per share, cash flow from operations, income tax rate, results of
SIGOS and other future financial results. It is important to note that
actual outcomes and Keynote's actual results could differ materially
from those in such forward-looking statements. Factors that could
cause actual results to differ materially include risks and
uncertainties such as Keynote's ability to successfully market and
sell its current services to new or existing customers, Keynote's
ability to develop and introduce new services in a timely manner and
customer acceptance of new services, the extent to which demand for
Keynote's various services fluctuates and the extent to which revenue
from other service lines, can continue to increase, the extent to
which existing customers renew their subscriptions and purchase
additional services, particularly enterprise customers, Keynote's
ability to retain customers of SIGOS, Keynote's ability to operate
SIGOS and manage related costs successfully, Keynote's ability to
retain key employees, pricing pressure with respect to Keynote's
services, Keynote's ability to increase sales of its CEM services, and
the risk that its organizational changes will not result in improved
results, unforeseen expenses, competition in Keynote's markets,
integration of acquired companies or technologies and costs associated
with any future acquisitions, Keynote's ability to manage expanded
international operations, Keynote's ability to keep pace with changes
in the Internet infrastructure as well as other technological changes,
and the success of Keynote's international operations. Readers should
also refer to the risks outlined in Keynote's reports filed with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for its fiscal year ended September 30, 2005, and its
quarterly reports on Form 10-Q and any current reports on Form 8-K
filed during the fiscal year.
All forward-looking statements and reasons why results might
differ included in this release are made as of the date of this press
release, based on information available to Keynote as of the date of
this press release, and Keynote assumes no obligation to update any
such forward-looking statement or reasons why results might differ.
About Keynote
Founded in 1995, Keynote Systems (Nasdaq "KEYN") is the worldwide
leader in services that improve online business performance and
communications technologies. Keynote helps approximately 2,400
corporate customers and 10,000 individual subscribers become "the best
of the best" online. As an independent and trusted third-party,
Keynote provides IT and marketing executives with unbiased
benchmarking data, competitive analysis and operational metrics from
the customer perspective. This data measures service levels and
customer experience of Web sites, broadband services and mobile
communications.
Known as The Internet Performance Authority(R), Keynote manages a
market-leading infrastructure of 1,200+ measurement computers and
mobile devices in over 114 locations and 66+ metropolitan areas
worldwide that assess service levels and a panel of over 160,000
consumers who participate in interactive Web site tests that assess
user experience. These online user experience tests capture customer
attitude and behavior to answer the critical "why" behind the "what."
Keynote's geographically distributed measurement services, on-site
monitoring appliances, competitive intelligence and custom studies
ensure that its customers outpace their competitors in online service
levels and overall user experience.
Keynote Systems, Inc. is headquartered in San Mateo, California
and can be reached at www.keynote.com or by phone in the U.S. at
650-403-2400.
Keynote, The Internet Performance Authority and Perspective are
registered trademarks of Keynote Systems, Inc. Other trademarks are
the property of their respective owners. (C) 2006 Keynote Systems,
Inc.
Keynote Systems, Inc. and Subsidiaries
----------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended
Mar 31 Dec 31 Mar 31
2006 2005 2005
---------------------
Revenue:
Subscription services $9,947 $9,820 $9,652
Professional services 2,792 3,896 3,513
---------------------
Total revenue 12,739 13,716 13,165
Expenses:
Costs of subscription services 1,552 1,459 1,309
Costs of professional services 2,195 2,445 2,440
Research and development 2,059 1,989 2,074
Sales and marketing 4,003 3,369 2,987
Operations 1,824 1,647 1,440
General and administrative 1,693 2,209 1,841
Excess occupancy costs (40) (10) 114
Amortization of identifiable intangible assets 418 397 677
---------------------
Total expenses 13,704 13,505 12,882
---------------------
Income (loss) from operations (965) 211 283
Interest income and other, net 1,280 1,108 783
---------------------
Income before provision for income taxes 315 1,319 1,066
Provision for income taxes 373 732 69
---------------------
Net income (loss) $(58) $587 $997
=====================
Income per share:
Basic $0.00 $0.03 $0.05
Diluted $0.00 $0.03 $0.05
Weighted average common shares outstanding used:
Basic 18,902 18,724 20,096
Diluted 18,902 19,724 21,214
Keynote Systems, Inc. and Subsidiaries
----------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
March 31, Sept. 30,
2006 2005
-------------------
Assets
Current assets:
Total cash, cash equivalents and short-term
investments $137,289 $133,803
Accounts receivable, net 6,283 6,387
Prepaids and other current assets 2,567 2,623
Deferred tax assets 367 405
--------- ---------
Total current assets 146,506 143,218
Property and equipment, net 34,237 34,669
Goodwill, net 23,565 21,186
Identifiable intangible assets, net 3,426 3,760
Deferred tax assets 6,142 6,995
--------- ---------
Total assets $213,876 $209,828
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,566 $538
Accrued expenses 7,696 9,088
Current portion of capital lease obligation 32 40
Deferred revenue 7,133 6,217
--------- ---------
Total current liabilities 16,427 15,883
Long term portion of capital lease obligation 15 27
--------- ---------
Total liabilities 16,442 15,910
--------- ---------
Stockholders' equity:
Common stock 19 20
Treasury stock (1,582) (11,037)
Additional paid-in capital 328,714 335,350
Accumulated deficit (129,515) (130,044)
Accumulated other comprehensive loss (202) (371)
--------- ---------
Total stockholders' equity 197,434 193,918
--------- ---------
Total liabilities and stockholders' equity $213,876 $209,828
========= =========
Keynote Systems, Inc. and Subsidiaries
----------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Mar 31 Dec 31 Mar 31
2006 2005 2005
-------------------------
Cash flows from operating activities:
Net income (loss) $(58) $587 $997
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 919 905 801
Stock-based compensation 812 796 -
Charges to bad debt and billing
adjustment reserves 33 83 59
Amortization of intangible assets 418 397 677
Amortization of debt investment
premium 118 147 999
Deferred tax assets 283 608 -
Changes in operating assets and
liabilities, net of acquired assets
and liabilities:
Accounts receivable, net 771 (775) (1,772)
Prepaids and other assets (422) 396 353
Accounts payable and accrued
expenses (1,375) 907 (421)
Deferred revenue 1,123 (334) 145
-------------------------
Net cash provided by operating
activities 2,622 3,717 1,838
-------------------------
Cash flows from investing activities:
Purchase of property, equipment and
software (843) (549) (724)
Purchase of businesses and assets (142) (2,520) (296)
Sales / (Purchases) of short-term
investments, net 19,740 (214) 5,285
-------------------------
Net cash provided by (used in)
investing activities 18,755 (3,283) 4,265
-------------------------
Cash flows from financing activities:
Repayment of credit facility (11) (9) (12)
Repurchase of outstanding common stock - (1,479) (2,321)
Proceeds from issuance of common stock and
exercise of stock options 1,025 1,771 2,321
-------------------------
Net cash provided by financing
activities 1,014 283 (12)
-------------------------
Net increase in cash and cash equivalents 22,391 717 6,091
Cash and cash equivalents at beginning of
the period 47,651 46,934 18,429
-------------------------
Cash and cash equivalents at end of the
period (1) $70,042 $47,651 $24,520
=========================
(1) Excludes $67.2 million, $87.0 million, and $124.8 million of
short-term investments at March 31, 2006, December 31, 2005,
and March 31, 2005, respectively.
Keynote Systems, Inc. and Subsidaries
(In Thousands)
(Unaudited)
Three months ended
Mar 31, Dec 31, Mar 31,
2006 2005 2005
-------- -------- --------
Revenue categories:
SLM Subscriptions $8,876 $8,782 $8,783
SLM Engagements 905 1,127 1,082
-------- -------- --------
Subotal SLM Revenue 9,781 9,909 9,865
Mobile Subscriptions 488 539 338
Mobile Engagements - - -
-------- -------- --------
Subotal Mobile Revenue 488 539 338
-------- -------- --------
CEM Subscriptions 583 499 531
CEM Engagements 1,887 2,769 2,431
-------- -------- --------
Subtotal CEM Revenue 2,470 3,268 2,962
-------- -------- --------
Total Revenue $12,739 $13,716 $13,165
======== ======== ========
Non GAAP Net Income and EPS:
GAAP net income (loss) $(58) $587 $997
(Benefit) provision for income taxes 373 732 69
Stock based compensation(a) 812 796 -
Amortization of purchased intangibles 418 397 677
-------- -------- --------
Non GAAP income before income tax 1,545 2,512 1,743
Cash tax expense (80) (107) (113)
-------- -------- --------
Non GAAP Net income 1,465 2,405 1,630
Non GAAP Weighted average common shares
outstanding (diluted) used: 19,698 - -
Weighted average common shares outstanding
(diluted) used: - 19,724 21,214
Non GAAP EPS $0.07 $0.12 $0.08
(a)Stock based compensation by category:
Costs of professional services $146 $121 $-
Research and development 183 186 -
Sales and marketing 238 246 -
Operations 159 150 -
General and administrative 86 93 -
-------- -------- --------
$812 $796 $-
======== ======== ========
Keynote Systems, Inc. and Subsidiaries
(In Thousands)
(Unaudited)
Three months ended Twelve
months
ended
Dec 31 March 31 June 30 Sept 30 Sept 30
-------- -------- -------- -------- --------
FY 2006
SLM Subscriptions $8,782 $8,876
SLM Engagements 1,127 905
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,909 9,781
Mobile Subscriptions 539 488
CEM Subscriptions 499 583
CEM Engagements 2,769 1,887
-------- -------- -------- -------- --------
Subtotal CEM Revenue 3,268 2,470
-------- -------- -------- -------- --------
Total Revenue $13,716 $12,739
======== ======== ======== ======== ========
FY 2005
SLM Subscriptions $8,625 $8,783 $9,160 $8,883 $35,451
SLM Engagements 822 1,082 881 1,026 3,811
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,447 9,865 10,041 9,909 39,262
Mobile Subscriptions 803 338 442 585 2,168
CEM Subscriptions 595 531 441 432 1,999
CEM Engagements 2,743 2,431 2,541 2,548 10,263
-------- -------- -------- -------- --------
Subtotal CEM Revenue 3,338 2,962 2,982 2,980 12,262
-------- -------- -------- -------- --------
Total Revenue $13,588 $13,165 $13,465 $13,474 $53,692
======== ======== ======== ======== ========
FY 2004
SLM Subscriptions $8,364 $8,416 $8,688 $8,957 $34,425
SLM Engagements 812 808 813 1,196 3,629
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,176 9,224 9,501 10,153 38,054
Mobile Subscriptions 358 414 555 700 2,027
CEM Subscriptions 73 111 420 518 1,122
CEM Engagements 116 70 238 776 1,200
-------- -------- -------- -------- --------
Subtotal CEM Revenue 189 181 658 1,294 2,322
-------- -------- -------- -------- --------
Total Revenue $9,723 $9,819 $10,714 $12,147 $42,403
======== ======== ======== ======== ========
FY 2003
SLM Subscriptions $8,824 $8,492 $8,549 $8,203 $34,068
SLM Engagements 676 662 388 873 2,599
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,500 9,154 8,937 9,076 36,667
Mobile Subscriptions 132 214 286 311 943
CEM Subscriptions 46 52 46 61 205
CEM Engagements 80 138 163 66 447
-------- -------- -------- -------- --------
Subtotal CEM Revenue 126 190 209 127 652
-------- -------- -------- -------- --------
Total Revenue $9,758 $9,558 $9,432 $9,514 $38,262
======== ======== ======== ======== ========
SOURCE: Keynote Systems, Inc.
Keynote Systems, Inc.
Dan Berkowitz, 650-403-3305 (Public Relations)
dberkowitz@keynote.com
Jack Andrews, 650-403-3431 (Investor Relations)
jandrews@keynote.com