Keynote Systems (KEYN) 8-K Results of Operations and Financial Condition

Exhibit 99.01

Keynote Reports Fiscal Second Quarter 2009 Results

• Total Revenue Increased 11% to $19.6 Million for the Second Quarter 2009, Compared to the Same Period a Year Ago
• GAAP Net Loss Per Share Improved to $0.02 for the Second Quarter 2009, Compared to $0.08 a Year Ago
• Non-GAAP EPS Grew to $0.13 for the Second Quarter 2009, Compared to $0.03 a Year Ago
• Revenue, GAAP Net Loss and Non-GAAP Earnings Meet Company’s Guidance

SAN MATEO, Calif.--(BUSINESS WIRE)--April 28, 2009--Keynote Systems (Nasdaq: KEYN), the global leader in on-demand mobile and Internet test & measurement solutions for continuously improving the online experience, reported financial results for its fiscal second quarter ended March 31, 2009.

Umang Gupta, chairman and CEO of Keynote, said: “Continuing our solid 2009 performance, we increased our revenue to $19.6 million, up 11 percent from a year ago in the face of unfavorable exchange rate trends. Our mobile business sustained its momentum, as mobile revenue grew 27 percent compared to the second quarter 2008. In addition to maintaining revenue growth, we remain focused on managing costs and improving profitability. For just the first half of fiscal year 2009, our non-GAAP earnings per diluted share of $0.31 exceeded our earnings for the entire fiscal year 2008 of $0.27.”

Second Quarter 2009 Financial Summary

Revenue for the second quarter of fiscal year 2009 was $19.6 million, up from $17.6 million in the second quarter of fiscal year 2008. Under generally accepted accounting principles (GAAP), net loss for the second quarter of fiscal year 2009 was $258,000, or $0.02 per share, which included a non-cash charge of $601,000, or $0.04 per share, associated with the return by the company’s CEO of two previous stock option grants: one to purchase 400,000 shares of common stock at an exercise price of $14.99 per share that was originally issued in November 2007 and another to purchase 300,000 shares of common stock at an exercise price of $70.00 per share that was originally issued in January 2000. The loss for the current quarter compares to a net loss of $1.3 million, or $0.08 per share, for the second quarter of fiscal year 2008.

The non-GAAP net income for the second quarter of fiscal year 2009 was $1.9 million, or $0.13 per diluted share, compared to $496,000, or $0.03 per diluted share, for the second quarter of fiscal year 2008. The company defines non-GAAP net income as net income (loss) adjusted for provision for income taxes, stock-based compensation expense, and amortization of purchased intangibles less cash taxes from on-going operations. Non-GAAP net income per share equals non-GAAP net income divided by the diluted weighted average shares outstanding for the period.

Management also believes the non-GAAP figure of earnings before interest, taxes, depreciation and amortization (EBITDA) provides a useful measure of operations. EBITDA for the second quarter of fiscal year 2009 was $2.8 million, or 14% of revenue, compared to $1.0 million, or 6% of revenue, for the second quarter of fiscal year 2008.

Cash Flow and Deferred Revenue Summary

In the second quarter of fiscal year 2009, cash provided by operating activities was $1.2 million, compared to $2.5 million in the second quarter of fiscal year 2008. Cash used for purchases of property, equipment and software totaled $736,000 for the second quarter of fiscal year 2009, compared to $1.0 million for the second quarter of fiscal year 2008. Keynote defines free cash flow as cash flow from operations less cash used for purchases of property, equipment, software and acquired technology. The company generated free cash flow of $513,000, compared to second quarter of fiscal year 2008 in which the company generated $1.5 million of free cash flow. Cash from operating activities and free cash flow for the current quarter were negatively impacted by a special cash payment of $4.0 million to the German tax authorities for taxes associated with prior years’ operations and with IP migration that occurred in 2008. At March 31, 2009, Keynote had $50.9 million in total cash, cash equivalents and short-term investments.

Keynote’s net deferred revenue was $21.3 million at March 31, 2009, compared to $25.2 million at March 31, 2008 and $19.8 million at December 31, 2008. Keynote’s gross deferred revenue, defined as the sum of net deferred revenue and unpaid deferred revenue, was $26.8 million at March 31, 2009, compared to $31.5 million at March 31, 2008 and $27.6 million at December 31, 2008. The year-over-year comparison was impacted by the strengthening of the U.S. dollar to Euro exchange rates.

The total shares outstanding, net of treasury shares, at March 31, 2009 was 14.3 million, compared to 13.8 million at March 31, 2008.

Operational Metrics Summary

As of March 31, 2009, Keynote’s total worldwide customer base was approximately 2,800 companies. Keynote currently provides its services to 50 percent of the comScore Media Metrix’s top 50 Web sites and approximately 43 percent of the Fortune 100 companies. As of March 31, 2009, Keynote measured approximately 16,500 Internet pages, as compared to 13,000 Internet pages in the same quarter a year ago.

Expectations for the Third Quarter of Fiscal Year 2009

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 the following for the third fiscal quarter ending June 30, 2009:

• Total revenue is expected to be between $18.25 million and $18.75 million.
• GAAP earnings (loss) per share are expected to be between ($0.02) and $0.02.
• Non-GAAP earnings per share are expected to be between $0.08 and $0.11.

The above guidance was based on the following assumptions. Foreign exchange rates do not change materially. Total stock-based compensation expense and amortization of intangible assets is currently expected to be approximately $1.3 million. Depreciation is expected to be approximately $1.4 million. Interest income, net is expected to be approximately $250,000, assuming no material changes in interest rates and currently planned uses of cash. Cash paid for income taxes from on-going operations is expected to be approximately $50,000. Basic weighted average shares outstanding are expected to be approximately 14.3 million shares and diluted weighted average shares outstanding are expected to be approximately 14.4 million shares, assuming no additional issuances of equity or equity-related securities and significant changes in the company’s stock price.

Conference Call

Keynote will host a conference call and simultaneous webcast at 2:00 p.m. (PST) today, April 28, 2009. To access the call in the U.S., please dial 866-271-6228; international callers please dial 973-638-3423, approximately 10 minutes prior to the start of the conference call. The webcast of the call will be available at the investor section of the company’s web site at www.keynote.com. The replay will be available after the call by telephone by dialing 800-642-1687 in the U.S. and 706-645-9291 internationally; the pass code is 93909452. The webcast is at the investor section of the company’s 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, GAAP and Non-GAAP earnings per share, and the related underlying assumptions in calculating those amounts, future acquisitions 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 the uncertain impact that the current global economic recession will have on Keynote’s business or the businesses of current or potential customers, 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 increase, the extent to which existing customers renew their subscriptions and purchase additional services, particularly enterprise customers, Keynote’s ability to attract and retain new customers, Keynote’s ability to operate SIGOS and its other international operations 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 other services, unforeseen expenses, competition in Keynote’s markets, costs associated with any future acquisitions, the effect of acquisitions by competitors in Keynote’s target markets, Keynote’s ability to keep pace with changes in the mobile and 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, 2008, 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.

Non-GAAP Measures

This press release includes information on Non-GAAP net income, Non-GAAP net earnings per share, EBITDA, free cash flow and gross deferred revenues. These measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies. Non-GAAP net income is calculated by adjusting GAAP net income (loss) for provision for income taxes less cash taxes from on-going operations, stock-based compensation expense and amortization of purchased intangibles. Non-GAAP earnings per share are calculated by dividing Non-GAAP net income by the weighted average number of diluted shares outstanding for the period. Free cash flow is defined as cash flow from operations less cash used for purchases of property, equipment, and software. Gross deferred revenue is defined as the sum of net deferred revenue and unpaid deferred revenue. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP, and because these amounts are not determined in accordance with GAAP, they should not be used exclusively in evaluating the Company’s business and operations. Because the Company has made a number of acquisitions in the past, as well as because of the effect of SFAS 123(R), the Company’s financial statements have changed significantly from prior periods. Accordingly, the Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company’s operating performance, when reviewed in conjunction with the Company’s GAAP financial statements. Management also reviews this information as an additional means for measuring the performance of the Company. The Company compensates for these limitations by realizing that these amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating its business and operations.

About Keynote

Keynote Systems (Nasdaq “KEYN”) is the global leader in on-demand test & measurement solutions for continuously improving the online experience. For over a decade, Keynote has been providing measurement data and testing capabilities that allow companies to understand and improve their customers’ online and mobile experience. Keynote has four test and measurement businesses: Web performance, mobile quality, streaming & VoIP, and customer experience/UX.

Known as The Mobile and Internet Performance Authority™, Keynote has a market-leading infrastructure of over 3,000 measurement computers and mobile devices in over 240 locations around the world. Keynote’s 2,800 customers represent top Internet and mobile companies including American Express, Dell, Disney, eBay, E*TRADE, Expedia, Microsoft, SonyEricsson, Sprint, T-Mobile, Verizon, Vodafone and YouTube.

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 1-800-KEYNOTE.

Keynote, The Internet Performance Authority, Perspective and WebEffective are registered trademarks and The Mobile and Internet Performance Authority, True Experience and FlexUse are trademarks of Keynote Systems, Inc. Other trademarks are the property of their respective owners. © 2009 Keynote Systems, Inc.

Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
			Three months ended									Six months ended
			Mar 31			Dec 31			Mar 31			Mar 31			Mar 31
				2009			2008			2008			2009			2008
Net revenue:
	Subscription services		$	11,341		$	11,473		$	11,092		$	22,814		$	21,964
	Ratable licenses			5,915			6,043			4,605			11,958			8,607
	Professional services			2,308			3,121			1,937			5,429			4,783
		Total revenue, net		19,564			20,637			17,634			40,201			35,354
Costs and expenses:
	Costs of revenue:
		Direct costs of subscription services		2,319			2,256			2,225			4,575			4,336
		Direct costs of ratable licenses		1,639			1,488			1,111			3,127			2,714
		Direct costs of professional services		1,495			1,678			1,794			3,173			3,599
		Operations		2,248			2,162			2,024			4,410			4,027
		Development		3,191			3,083			3,160			6,274			6,293
		Amortization of intangible assets - software		288			288			211			576			416
		Total costs of revenue		11,180			10,955			10,525			22,135			21,385
	Sales and marketing			6,317			6,180			6,529			12,497			12,296
	General and administrative			2,551			2,820			2,501			5,371			4,988
	Excess occupancy income, net			(251	)		(220	)		(309	)		(471	)		(590	)
	Amortization of intangible assets - other			263			269			542			532			1,079
		Total costs and expenses		20,060			20,004			19,788			40,064			39,158
		Income (loss) from operations		(496	)		633			(2,154	)		137			(3,804	)
Interest income and other, net				370			673			881			1,043			2,031
Income (loss) before provision for income taxes				(126	)		1,306			(1,273	)		1,180			(1,773	)
Provision for income taxes				(132	)		(420	)		(45	)		(552	)		(289	)
		Net income (loss)	$	(258	)	$	886		$	(1,318	)	$	628		$	(2,062	)
Net income (loss) per share:
		Basic	$	(0.02	)	$	0.06		$	(0.08	)	$	0.04		$	(0.12	)
		Diluted	$	(0.02	)	$	0.06		$	(0.08	)	$	0.04		$	(0.12	)
Weighted average common shares outstanding:
		Basic		14,259			14,186			16,130			14,222			17,180
		Diluted		14,259			14,302			16,130			14,330			17,180

Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
			March 31, 2009			September 30, 2008
Assets
Current assets:
	Cash and cash equivalents		$	50,776		$	46,769
	Short-term investments			172			2,562
		Total cash, cash equivalents and short-term investments		50,948			49,331
	Accounts receivable			5,958			7,316
	Prepaids, deferred costs and other current assets			4,259			2,909
	Inventories			1,136			1,081
	Deferred tax assets			988			1,042
		Total current assets		63,289			61,679
Deferred costs and other long-term assets				2,584			2,788
Property and equipment, net				35,409			36,405
Goodwill				62,133			64,396
Identifiable intangible assets, net				7,149			8,430
Deferred tax assets				1,913			2,146
	Total assets		$	172,477		$	175,844
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	1,763		$	2,505
	Accrued expenses			8,507			12,767
	Current portion of capital lease obligation			13			14
	Notes payable			243			256
	Deferred revenue			19,896			19,029
	Total current liabilities			30,422			34,571
	Long-term portion of capital lease obligation			9			17
	Deferred rent and other long term liabilities			2,103			2,605
	Long-term deferred revenue			1,435			904
	Long-term deferred tax liability			277			236
	Total liabilities			34,246			38,333
Stockholders' equity:
	Common stock			14			14
	Additional paid-in capital			279,379			275,316
	Accumulated deficit			(142,579	)		(143,207	)
	Accumulated other comprehensive income			1,417			5,388
	Total stockholders' equity			138,231			137,511
	Total liabilities and stockholders' equity		$	172,477		$	175,844

Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Three months ended						Six Months ended
				Mar 31			Mar 31			Mar 31			Mar 31
					2009			2008			2009			2008
Cash flows from operating activities:
	Net income (loss)			$	(258	)	$	(1,318	)	$	628		$	(2,062	)
	Adjustments to reconcile net income (loss) to net cash
	provided by operating activities:
		Depreciation and amortization			1,824			2,025			3,815			4,054
		Stock-based compensation			1,596			1,160			2,637			2,260
		Charges to bad debt and billing adjustment reserves			59			47			196			98
		Amortization (accretion) of debt investment premium (discount)			-			114			3			(437	)
		Collection of tax credit receivable within deferred tax assets			-			-			181			-
		Deferred tax provision			-			-			20			-
		Changes in operating assets and liabilities, net			(1,972	)		499			(4,211	)		(1,056	)
			Net cash provided by operating activities		1,249			2,527			3,269			2,857
Cash flows from investing activities:
	Purchase of property, equipment and software				(736	)		(1,034	)		(1,397	)		(2,385	)
	Payment of acquisition costs for Zandan				-			-			(170	)		-
	Sales of short-term investments, net				-			40,447			2,380			47,975
			Net cash provided by (used in) investing activities		(736	)		39,413			813			45,590
Cash flows from financing activities:
	Payment of capital lease obligations				(4	)		(8	)		(8	)		(15	)
	Repurchase of outstanding common stock				-			(49,156	)		-			(58,971	)
	Proceeds from issuance of common stock and exercise of stock options				674			1,477			1,426			3,072
			Net cash provided by (used in) financing activities		670			(47,687	)		1,418			(55,914	)
Effect of exchange rate changes on cash and cash equivalents					(1,166	)		1,760			(1,493	)		2,168
Net increase (decrease) in cash and cash equivalents					17			(3,987	)		4,007			(5,299	)
Cash and cash equivalents at beginning of the period					50,759			41,563			46,769			42,875
Cash and cash equivalents at end of the period (1)				$	50,776		$	37,576		$	50,776		$	37,576
(1) Excludes $0.2 million and $17.5 million of short-term investments at March 31, 2009 and March 31, 2008, respectively.

Keynote Systems, Inc. and Subsidiaries
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share data)
(Unaudited)
	Three months ended									Six months ended
	Mar 31			Dec 31			Mar 31			Mar 31			Mar 31
		2009			2008			2008			2009			2008
Revenue categories:
Internet Subscriptions	$	9,333		$	9,664		$	9,438		$	18,997		$	18,970
Internet Engagements		2,308			3,121			1,937			5,429			4,783
Subtotal Internet Revenue		11,641			12,785			11,375			24,426			23,753
Mobile Subscriptions		2,008			1,809			1,654			3,817			2,994
Mobile Ratable Licenses		5,915			6,043			4,605			11,958			8,607
Subtotal Mobile Revenue		7,923			7,852			6,259			15,775			11,601
Total Revenue, Net	$	19,564		$	20,637		$	17,634		$	40,201		$	35,354
Non-GAAP net income and income per share:
GAAP net income (loss)	$	(258	)	$	886		$	(1,318	)	$	628		$	(2,062	)
Provision for income taxes		132			420			45			552			289
Stock-based compensation *		1,596			1,041			1,160			2,637			2,260
Amortization of intangible assets - other		263			269			542			532			1,079
Amortization of intangible assets - software		288			288			211			576			416
Non-GAAP income before income tax		2,021			2,904			640			4,925			1,982
Cash taxes from on-going operations		(149	)		(294	)		(144	)		(443	)		(366	)
Non-GAAP net income	$	1,872		$	2,610		$	496		$	4,482		$	1,616
Weighted average common shares outstanding (diluted):		14,358			14,302			16,459			14,330			17,765
Non-GAAP income per share	$	0.13		$	0.18		$	0.03		$	0.31		$	0.09
EBITDA:
GAAP net income (loss)	$	(258	)	$	886		$	(1,318	)	$	628		$	(2,062	)
Provision for income taxes		132			420			45			552			289
Interest income and other, net		(370	)		(673	)		(881	)		(1,043	)		(2,031	)
Stock-based compensation *		1,596			1,041			1,160			2,637			2,260
Amortization of intangible assets - other		263			269			542			532			1,079
Amortization of intangible assets - software		288			288			211			576			416
Depreciation		1,172			1,328			1,272			2,500			2,559
EBITDA	$	2,823		$	3,559		$	1,031		$	6,382		$	2,510
*Stock-based compensation by category:
Direct costs of ratable licenses	$	27		$	29		$	66		$	56		$	115
Direct costs of professional services		214			80			124			294			239
Operations		210			123			178			333			323
Development		344			230			274			574			504
Sales and marketing		566			364			413			930			740
General and administrative		235			215			105			450			339
	$	1,596		$	1,041		$	1,160		$	2,637		$	2,260
Included in the March 31, 2009 stock-based compensation expense is a $601,000 non-recurring charge associated with the return of stock options granted to the CEO.

Keynote Systems, Inc. and Subsidiaries
REVENUE DETAIL
(In thousands)
(Unaudited)
	Three months ended									Year ended
		Dec 31		March 31		June 30		Sep 30			Sep 30
FY 2009
Internet Subscriptions		$	9,664	$	9,333	$	-	$	-		$	18,997
Internet Engagements			3,121		2,308		-		-			5,429
Subtotal Internet Revenue			12,785		11,641		-		-			24,426
Mobile Subscriptions			1,809		2,008		-		-			3,817
Mobile Ratable Licenses			6,043		5,915		-		-			11,958
Subtotal Mobile Revenue			7,852		7,923		-		-			15,775
Total Revenue, Net		$	20,637	$	19,564	$	-	$	-		$	40,201
FY 2008
Internet Subscriptions		$	9,532	$	9,438	$	9,529	$	9,933		$	38,432
Internet Engagements			2,846		1,937		2,631		2,360			9,774
Subtotal Internet Revenue			12,378		11,375		12,160		12,293			48,206
Mobile Subscriptions			1,340		1,654		1,912		1,976			6,882
Mobile Ratable Licenses			4,002		4,605		6,426		6,787			21,820
Subtotal Mobile Revenue			5,342		6,259		8,338		8,763			28,702
Total Revenue, Net		$	17,720	$	17,634	$	20,498	$	21,056		$	76,908
FY 2007
Internet Subscriptions		$	9,510	$	9,620	$	9,722	$	9,461		$	38,313
Internet Engagements			3,102		2,778		3,064		2,929			11,873
Subtotal Internet Revenue			12,612		12,398		12,786		12,390			50,186
Mobile Subscriptions			997		1,113		1,158		1,080			4,348
Mobile Ratable Licenses			2,206		3,203		3,443		4,368			13,220
Subtotal Mobile Revenue			3,203		4,316		4,601		5,448			17,568
Total Revenue, Net		$	15,815	$	16,714	$	17,387	$	17,838		$	67,754
FY 2006
Internet Subscriptions		$	9,281	$	9,459	$	9,499	$	9,743		$	37,982
Internet Engagements			3,896		2,792		2,419		3,034			12,141
Subtotal Internet Revenue			13,177		12,251		11,918		12,777			50,123
Mobile Subscriptions			539		488		855		962			2,844
Mobile Ratable Licenses			-		-		1,094		1,447			2,541
Subtotal Mobile Revenue			539		488		1,949		2,409			5,385
Total Revenue, Net		$	13,716	$	12,739	$	13,867	$	15,186		$	55,508

Keynote Systems, Inc. and Subsidiaries
CASH FLOW FROM OPERATING ACTIVITIES AND FREE CASH FLOW
(In thousands)
(Unaudited)
	Three months ended												Year ended
	Dec 31			March 31			June 30			Sept 30			Sept 30
FY 2009
Total Revenue	$	20,637		$	19,564								$	40,201
Cash Flow from Operations	$	2,020		$	1,249								$	3,269
% of Revenue		10	%		6	%								8	%
Purchase of PP&E	$	661		$	736								$	1,397
Free Cash Flow *	$	1,359		$	513								$	1,872
% of Revenue		7	%		3	%								5	%
FY 2008
Total Revenue	$	17,720		$	17,634		$	20,498		$	21,056		$	76,908
Cash Flow from Operations	$	330		$	2,527		$	1,522		$	565		$	4,944
% of Revenue		2	%		14	%		7	%		3	%		6	%
Purchase of PP&E	$	1,351		$	1,034		$	1,602		$	1,878		$	5,865
Free Cash Flow *	$	(1,021	)	$	1,493		$	(80	)	$	(1,313	)	$	(921	)
% of Revenue		-6	%		8	%		0	%		-6	%		-1	%
FY 2007
Total Revenue	$	15,815		$	16,714		$	17,387		$	17,838		$	67,754
Cash Flow from Operations	$	4,680		$	6,847		$	5,883		$	2,970		$	20,380
% of Revenue		30	%		41	%		34	%		17	%		30	%
Purchase of PP&E	$	704		$	1,383		$	2,073		$	1,380		$	5,540
Free Cash Flow *	$	3,976		$	5,464		$	3,810		$	1,590		$	14,840
% of Revenue		25	%		33	%		22	%		9	%		22	%
FY 2006
Total Revenue	$	13,716		$	12,739		$	13,867		$	15,186		$	55,508
Cash Flow from Operations	$	3,505		$	2,941		$	2,938		$	1,231		$	10,615
% of Revenue		26	%		23	%		21	%		8	%		19	%
Purchase of PP&E	$	337		$	1,055		$	792		$	874		$	3,058
Free Cash Flow *	$	3,168		$	1,886		$	2,146		$	357		$	7,557
% of Revenue		23	%		15	%		15	%		2	%		14	%
* Keynote defines free cash flow as cash flow from operations less cash used for purchases of property, equipment, software and acquired technology.

Keynote Systems, Inc. and Subsidiaries
DEFERRED REVENUE
(In thousands)
(Unaudited)
		March 31, 2009		December 31, 2008		March 31, 2008
Deferred revenue, net
	Domestic	$	6,107	$	5,658	$	6,818
	International		15,224		14,168		18,409
	Total	$	21,331	$	19,826	$	25,227
Add back: unpaid deferred revenue
	Domestic	$	3,210	$	2,693	$	2,276
	International		2,304		5,033		4,043
	Total	$	5,514	$	7,726	$	6,319
Deferred revenue, gross
	Domestic	$	9,317	$	8,351	$	9,094
	International		17,528		19,201		22,452
	Total	$	26,845	$	27,552	$	31,546

CONTACT:
Keynote Systems, Inc.
Anshu Agarwal, 650-403-3250 (Public Relations)
anshu.agarwal@keynote.com
Kirsten Chapman, 415-433-3777 (Investor Relations)
kchapman@lhai.com