Exhibit 99.01
| Keynote Systems, Inc. 777 Mariners Island Blvd. San Mateo, CA 94404 Phone (650) 403-2400 Fax (650) 403-5500 |
PRESS RELEASE
Contacts:
Public Relations Dan Berkowitz Keynote Systems, Inc. (650) 403-3305 dberkowitz@keynote.com | Investor Relations Erin Kasenchak Keynote Systems, Inc. (650) 403-3314 erin.kasenchak@keynote.com |
Keynote Announces First Quarter
Fiscal Year 2004 Financial Results
| • | EPS of $0.03 Exceeds First Call Consensus Estimates for the Quarter |
| • | Revenue of $9.7 Million at High End of Range of First Call Consensus Estimates for the Quarter |
| • | Second Consecutive Quarter of Positive Income from Operations and Net Income |
| • | Eighth Consecutive Quarter of Positive Cash Flow from Operations of $4.3 Million |
| • | Management Solutions Revenue Up 23% Compared to Same Quarter Last Fiscal Year |
SAN MATEO, California – January 26, 2004 – Keynote Systems, Inc. (Nasdaq: KEYN), today announced financial results for its first quarter of fiscal year 2004 ended December 31, 2003.
Revenue for the first quarter of fiscal year 2004 was $9.7 million, a 2% increase from the preceding quarter and flat compared to the first quarter of fiscal year 2003. Net income for the first quarter of fiscal year 2004 was $667,000, or $0.03 per diluted share, compared to net income of $652,000, or $0.03 per diluted share, for the preceding quarter, and a net loss of $2.0 million, or $0.08 per share, for the first quarter a year ago.
Keynote generated cash flow from operations for the first quarter of fiscal year 2004 of $4.3 million, which includes the collection of an account receivable from a large customer that represents $1.2 million of prepaid deferred revenue as of December 31, 2003. Cash flow from
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operations was $2.2 million for the preceding quarter and $602,000 for the first quarter a year ago. Cash used for purchases of property, plant and equipment totaled $405,000 for the first quarter of fiscal year 2004 compared to $910,000 for the preceding quarter and $680,000 for the first quarter a year ago. We generated free cash flow, defined as cash flow from operations less cash used for purchases of property, plant and equipment, of $3.9 million for the first quarter of fiscal year 2004 compared to $1.3 million for the preceding quarter and we used free cash flow of $78,000 for the first quarter a year ago. The Company believes that free cash flow is an important measure of its performance as it provides investors with an additional method for evaluating its operating performance and liquidity, and reflects the resources available for the Company to invest in acquisitions or to repurchase stock.
“We are very pleased with this quarter’s results. We achieved profitability for the second consecutive quarter and delivered our eighth consecutive quarter of positive cash flow from operations,” said Umang Gupta, chairman and CEO of Keynote. “Our traditional performance measurement services continue to stabilize, while the performance management portion of our business was up 23% compared to the same quarter for last fiscal year.”
As of December 31, 2003, Keynote’s total worldwide customer base was approximately 2,200 companies and 18,100 individual subscribers. During the quarter, Keynote averaged a 99% monthly customer retention rate, which was the same as that achieved last quarter, and consistent with historical rates of 95% or better. New customers during the quarter included British Petroleum; Dionex Corporation (Nasdaq: DNEX); European Space Agency; Genuine Parts Company (NYSE: GPC); International Broadcasting Bureau (OTC: IBCS); Jaguar, a division of Ford Motor Company (NYSE: F); SAP, AG (NYSE: SAP).
Keynote currently provides its services to 72% of the comScore Media Metrix top 50 Web sites and more than half of the Fortune 100 companies. As of December 31, 2003, Keynote measured 7,231 URLs through its Perspective services and 7,897 Internet-connected devices through Red Alert. On average during the first quarter of fiscal year 2004, Keynote captured over 40 million Internet performance measurements daily.
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Other Highlights:
| • | Keynote announced initial results on the performance of the Web sites for the presidential candidates and the official party sites for the Democrats, Republicans and Green Party and for MoveOn.org. Additionally, the Company announced it will issue regular performance reports until Election Day in November 2004. |
| • | Keynote issued regular reports on the performance of the Keynote E-Commerce Transaction Performance Index during the holiday shopping season. Keynote’s holiday data was reported in news articles across the country, including in The New York Times and The Washington Post. |
| • | Keynote announced its acquisition of the Internet Service suite, an Internet diagnostic service, from the Xaffire division of MarixNet Systems. Additionally, the Company announced the immediate availability of this service under the re-branded name “Keynote Network Perspective.” |
Expectations for the Second Quarter of Fiscal Year 2004
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 second quarter of fiscal 2004 ending March 31, 2004:
| • | total revenue will be between $9.4 million and $9.8 million; |
| • | total expenses will remain approximately constant compared to the first quarter of fiscal 2004; |
| • | interest income, net will be approximately $650,000, absent any additional transactions, and assuming no material changes in interest rates; |
| • | its effective income tax provision rate will be approximately 7.5%; |
| • | diluted weighted average shares outstanding will be approximately 20.5 million shares, assuming no additional acquisitions using shares of Keynote stock as the consideration and no other significant transactions involving Keynote’s equity securities; |
| • | diluted earnings per share will be between $0.01 and $0.03; |
| • | cash flow from operations will be between $1.9 million to $2.4 million; and |
| • | capital expenditures to be approximately $900,000, absent any acquisition costs or other extraordinary transactions. |
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Keynote will host a conference call and simultaneous Web cast at 2:00 pm (PST), today January 26, 2004. The web cast of the call will be available at the Investor section of our web site atwww.keynote.com andwww.streetevents.com. The replay will be available after the call by telephone by dialing (800) 642-1687, and the pass code is #4851979 or by Web cast at the Investor section of our web site atwww.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 revenues, operating expenses, margins and other 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 develop and introduce new services in a timely manner and customer acceptance of new services, the extent to which demand for Keynote’s performance measurement services fluctuates and the extent to which revenue from other service lines, including performance management solutions, can continue to increase, the extent to which existing customers renew their subscriptions and purchase additional services, particularly enterprise customers, pricing pressure with respect to Keynote’s services, competition in Keynote’s market, integration of acquired companies or technologies and costs associated with any future acquisitions, 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, 2003, 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”), The Internet Performance Authority®, is the worldwide leader in Web performance measurement and management services that improve the quality of e-business. Keynote’s services enable corporate enterprises to monitor, benchmark, test, diagnose and optimize their e-business systems both inside and outside the firewall. Approximately 2,200 corporate IT departments and 18,100 individual subscribers rely on the Company’s easy-to-use and cost-effective services to increase revenues and reduce downtime costs, without requiring additional complex and costly software implementations.
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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.© 2004 Keynote Systems, Inc.
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three months ended | |||||||||||
Dec 31 2003 | Sept 30 2003 | Dec 31 2002 | |||||||||
Revenue: | |||||||||||
Subscription services | $ | 8,671 | $ | 8,385 | $ | 8,841 | |||||
Consulting and support services | 1,052 | 1,129 | 917 | ||||||||
Total revenue | 9,723 | 9,514 | 9,758 | ||||||||
Expenses: | |||||||||||
Costs of subscription services | 1,506 | 1,619 | 2,483 | ||||||||
Costs of consulting and support services | 803 | 793 | 899 | ||||||||
Research and development | 1,624 | 1,452 | 2,182 | ||||||||
Sales and marketing | 2,709 | 2,135 | 4,445 | ||||||||
Operations | 1,255 | 1,262 | 1,718 | ||||||||
General and administrative | 1,164 | 1,597 | 1,504 | ||||||||
Excess occupancy costs | 266 | 275 | 285 | ||||||||
Amortization of identifiable intangible assets and stock-based compensation | 362 | 371 | 403 | ||||||||
Total expenses | 9,689 | 9,504 | 13,919 | ||||||||
Income (Loss) from operations | 34 | 10 | (4,161 | ) | |||||||
Interest income and other, net | 663 | 642 | 2,164 | ||||||||
Income (Loss) before provision for income taxes | 697 | 652 | (1,997 | ) | |||||||
Provision for income taxes | (30 | ) | — | — | |||||||
Net income (loss) | $ | 667 | $ | 652 | $ | (1,997 | ) | ||||
Income (Loss) per share: | |||||||||||
Basic | $ | 0.04 | $ | 0.03 | $ | (0.08 | ) | ||||
Diluted | $ | 0.03 | $ | 0.03 | $ | (0.08 | ) | ||||
Weighted average common shares outstanding used: | |||||||||||
Basic | 19,031 | 18,750 | 25,885 | ||||||||
Diluted | 20,435 | 19,877 | 25,885 | ||||||||
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
| December 31, 2003 | September 30, 2003 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 26,238 | $ | 23,242 | ||||
Short-term investments | 139,481 | 136,972 | ||||||
Total cash, cash equivalents and short-term investments | 165,719 | 160,214 | ||||||
Accounts receivable, net | 4,737 | 4,349 | ||||||
Prepaid and other current assets | 1,390 | 1,506 | ||||||
Total current assets | 171,846 | 166,069 | ||||||
Property and equipment, net | 33,345 | 33,928 | ||||||
Goodwill, net | 501 | 195 | ||||||
Identifiable intangible assets, net | 1,941 | 2,176 | ||||||
Total assets | $ | 207,633 | $ | 202,368 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 530 | $ | 654 | ||||
Accrued expenses | 7,210 | 7,077 | ||||||
Deferred revenue | 5,804 | 4,357 | ||||||
Total current liabilities | 13,544 | 12,088 | ||||||
Total liabilities | 13,544 | 12,088 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 19 | 19 | ||||||
Treasury stock | (29 | ) | (29 | ) | ||||
Additional paid-in capital | 335,221 | 331,912 | ||||||
Accumulated deficit | (141,389 | ) | (142,056 | ) | ||||
Accumulated other comprehensive income | 267 | 434 | ||||||
Total stockholders’ equity | 194,089 | 190,280 | ||||||
Total liabilities and stockholders’ equity | $ | 207,633 | $ | 202,368 | ||||
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Three months ended | ||||||||||||
Dec 31 2003 | Sept 30 2003 | Dec 31 2002 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 667 | $ | 652 | $ | (1,997 | ) | |||||
Adjustments to reconcile net income / (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,088 | 1,594 | 1,707 | |||||||||
Amortization of deferred stock-based compensation | — | 1 | 24 | |||||||||
Amortization of intangible assets | 362 | 370 | 379 | |||||||||
Amortization of debt investment premium | 1,017 | 804 | 754 | |||||||||
Changes in operating assets and liabilities, net of acquired assets and liabilities: | ||||||||||||
Accounts receivable, net | (331 | ) | (41 | ) | (625 | ) | ||||||
Prepaids and other assets | 116 | (264 | ) | 109 | ||||||||
Accounts payable and accrued expenses | (40 | ) | (767 | ) | (337 | ) | ||||||
Deferred revenue | 1,439 | (185 | ) | 588 | ||||||||
Net cash provided by operating activities | 4,318 | 2,164 | 602 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (405 | ) | (910 | ) | (680 | ) | ||||||
Purchase of businesses and assets | (582 | ) | (309 | ) | 35 | |||||||
Sales / (Purchases) of short-term investments, net | (3,693 | ) | 6,366 | 31,439 | ||||||||
Net cash provided by (used in) investing activities | (4,680 | ) | 5,147 | 30,794 | ||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of common stock | 3,358 | 1,200 | 398 | |||||||||
Repurchase of outstanding common stock | — | (28 | ) | (34,474 | ) | |||||||
Net cash provided by (used in) financing activities | 3,358 | 1,172 | (34,076 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 2,996 | 8,483 | (2,680 | ) | ||||||||
Cash and cash equivalents at beginning of the period | 23,242 | 14,759 | 20,874 | |||||||||
Cash and cash equivalents at end of the period (1) | $ | 26,238 | $ | 23,242 | $ | 18,194 | ||||||
| (1) | Excludes $139.5 million, $137.0 million and $185.2 million of short-term investments at December 31, 2003, September 30, 2003 and December 31, 2002, respectively. |
Keynote Systems, Inc. and Subsidiaries
Revenue Metrics
(In thousands)
(Unaudited)
| Three months ended | |||||||||
| Dec 31 2003 | Sept 30 2003 | Dec 31 2002 | |||||||
Performance Measurement Services | 7,053 | 6,886 | 7,595 | ||||||
Performance Management Solutions | 2,670 | 2,628 | 2,163 | ||||||
Total Revenue | $ | 9,723 | $ | 9,514 | $ | 9,758 | |||