CHORDIANT SOFTWARE FILES ANNUAL REPORT ON FORM 10-K
FOR THE FOURTH QUARTER AND FISCAL YEAR 2005
ENDED SEPTEMBER 30, 2005
CUPERTINO, California - December 9, 2005 -- Chordiant Software, Inc. (Nasdaq: CHRD) today announced final financial results for the fourth quarter and fiscal year (FY) 2005 ended September 30 and filed its Annual Report on Form 10-K with the Securities and Exchange Commission (SEC). On December 6, 2006, the Company announced that it intended to restate its interim financial statements for the quarters ended December 31, 2004, March 31, 2005, and June 30, 2005 due to certain accounting errors. All financial information contained in the Annual Report on Form 10-K filed on December 9, 2005, gives effect to these restatements.
Fourth Quarter and Fiscal Year 2005 Results
Total revenues for the fourth quarter of FY 2005 were $21.3 million, which compares to revenues of $24.0 million reported for the three months ended September 30, 2004. For the Fiscal Year 2005, revenues were $83.7 million, compared to $80.6 million for the same period of the prior year. License revenues for the fourth quarter of FY 2005 were $6.7 million, compared to $9.0 million reported for the three months ended September 30, 2004. For the Fiscal Year 2005, license revenues were $31.7 million, compared to $32.9 million reported for the same period of 2004. After the close of the September 2005 quarter and before filing its FORM 10-K on December 9, certain significant customers increased the scope of work on their projects which impacted Chordiant's percent of completion revenue calculation. As a result, license revenue for the September, 2005 quarter was reduced by approximately $2.5 million and deferred revenue was increased by an equal amount. Deferred revenue increased to $26.2 million as of September 30, 2005, compared to a balance of $20.6 million as of September 30, 2004. Service revenues for the fourth quarter of FY 2005 were $14.6 million, compared to $15.0 million reported for the three months ended September 30, 2004. For the Fiscal Year ended September 30, 2005, service revenues were $52.0 million, compared to $47.7 million for the same period of 2004.
Backlog of Business
Since an increasingly material portion of Chordiant's revenues has been derived from large orders, as major customers deploy the Company's products, Chordiant is now disclosing its backlog. As of September 30, 2005, the Company had approximately $33 million in backlog, which is defined as non-cancelable contractual commitments by the Company's customers through purchase orders or contracts. Backlog is comprised of current software license orders which have not met all of the required criteria for revenue recognition, deferred revenue from customer support contracts, and deferred consulting and education orders for services not yet completed or delivered. The backlog of Chordiant's business is not necessarily indicative of revenues to be recognized in a specified future period.
Cash Position
Chordiant increased its cash balances in the fourth quarter and had $40.9 million in cash and cash equivalents, restricted cash, and marketable securities at September 30, 2005.
GAAP and Non-GAAP Financial Measures
Chordiant posted a U.S. GAAP (Generally Accepted Accounting Principles) net loss of $5.5 million, or $0.07 per share loss for the fourth quarter of FY 2005 ended September 30, 2005, compared to a GAAP net profit of $1.5 million, or $0.02 per share for the three months ended September 30, 2004. Chordiant reported a fourth quarter FY 2005 non-GAAP financial measure loss of $2.8 million (which excludes stock-based compensation, amortization of intangible assets and restructuring expense), or a non-GAAP loss of $0.04 per share, compared to non-GAAP net income (which excludes, stock-based compensation, amortization of intangible assets and restructuring expense) of $0.8 million, or non-GAAP income of $0.01 per share for the three months ended September 30, 2004.
Non-GAAP Financial Measurements
The Company's management believes that the presentation of a non-GAAP financial measure of net income or net loss, excluding purchased in-process research and development, amortization of deferred stock-based compensation, amortization of intangible assets and restructuring expenses, provide useful information regarding the Company's financial performance and earnings potential by calculating and quantifying the effect of certain charges of net income or net loss per share calculated in accordance with GAAP and gives investors and analysts insight into profitability of the Company's operating business. Management also believes that the presentation of the non-GAAP financial measures is consistent with its past practice, as well as industry practice in general, and will enable investors and analysts to compare current non-GAAP measures with non-GAAP measures presented in prior periods. The non-GAAP financial information may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Operating Expenses
General and administrative expenses were $4.5 million for the three months ended September 30, 2005, compared to $3.1 million for the same period of 2004. The increase in these expenses was mainly attributable to an increase in consulting and professional services fees and expenses associated with efforts to comply with the Sarbanes-Oxley Act of 2002 (SOX) and to fill vacant accounting positions.
Sales and marketing expenses were $7.4 million for the three months ended September 30, 2005, compared to $6.1 million for the same period of 2004. The increase is attributable to personnel related expenses such as commissions and travel expenses due to a higher number of sales representatives.
Research and development expenses were $4.4 million for the three months ended September 30, 2005, compared to $4.5 million for the same period of 2004.
Customer Success
"From a market perspective momentum remains strong," said Stephen Kelly, Chordiant CEO. "We completed four $1.0 million-plus license transactions with new and existing customers. Notable customer wins included Capital One, HSBC, RSA Data Solutions - a unit of Fiserv, Inc., and O2. In fiscal 2005, we added 15 new customers, compared to seven new customers in fiscal 2004," Kelly added. "In terms of market perspective, we are continuing to see strong demand in our target markets of financial services, with on-going improvements in the wireless areas of telecommunications. The pipeline remains strong especially in North America."
About Chordiant Software, Inc.
Chordiant solutions automate and manage operational business processes for leading service-driven global organizations with a focus on retail finance and telecommunications.
Chordiant orchestrates the unique processes of an organization from the point of customer interaction, through the front and back offices to multiple transactional systems, corporate applications and data stores. Our solutions integrate existing infrastructure to orchestrate the assembly, enhancement and delivery of optimal role based business processes to the appropriate channels. Business value is realized through improved employee productivity, savings in operational costs, and increased business adaptability.
Headquartered in Cupertino, California, Chordiant maintains offices in Boston, MA; Mahwah, NJ; Manchester, NH; New York City; London; Paris; Amsterdam; and Munich.
Safe Harbor Statement
This news release includes "forward-looking statements" that are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements. Forward-looking statements in this release are generally identified by words, such as "believes," "anticipates," "plans," "expects," "will," "would," "guidance," "projects" and similar expressions which are intended to identify forward-looking statements. There are a number of important factors that could cause the results or outcomes discussed herein to differ materially from those indicated by these forward-looking statements, including, among others, market acceptance of our products. Further information on potential factors that could affect Chordiant are included in risks detailed from time to time in Chordiant's Securities and Exchange Commission filings, including, without limitation, Chordiant's Annual Report on Form 10-K for the period of October 1, 2004 to September 30, 2005. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov. Chordiant does not undertake an obligation to update forward-looking or other statements in this release.
Chordiant and the Chordiant logo are registered trademarks of Chordiant Software, Inc. All other trademarks and registered trademarks are the properties of their respective owners.
Chordiant Investor Relations Contact: |
Steve Polcyn |
Chordiant Software, Inc. |
(408) 517-6282 |
steve.polcyn@chordiant.com |
CHORDIANT SOFTWARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended | Twelve Months Ended | |||||||||||||
September 30, 2005 | September 30, 2004 | September 30, 2005 | September 30, 2004 | |||||||||||
Revenues: | ||||||||||||||
License | $ | 6,649 | $ | 8,965 | $ | 31,678 | $ | 32,909 | ||||||
Service | 14,607 | 14,985 | 52,047 | 47,714 | ||||||||||
Total revenues | 21,256 | 23,950 | 83,725 | 80,623 | ||||||||||
Cost of revenues: | ||||||||||||||
License | 377 | 619 | 1,079 | 1,836 | ||||||||||
Service | 7,453 | 8,725 | 29,438 | 27,746 | ||||||||||
Stock-based compensation (benefit) | 224 | (242 | ) | 633 | 601 | |||||||||
Amortization of intangible assets | 303 | 106 | 1,068 | 1,838 | ||||||||||
Total cost of revenues | 8,357 | 9,208 | 32,218 | 32,021 | ||||||||||
Gross profit | 12,899 | 14,742 | 51,507 | 48,602 | ||||||||||
Operating expenses: | ||||||||||||||
Sales and marketing | 7,373 | 6,084 | 28,517 | 23,459 | ||||||||||
Research and development | 4,365 | 4,476 | 19,405 | 17,329 | ||||||||||
General and administrative | 4,504 | 3,144 | 18,008 | 8,008 | ||||||||||
Stock-based compensation (benefit) | 962 | (703 | ) | 2,211 | 2,389 | |||||||||
Amortization of intangible assets | -- | 16 | 117 | 222 | ||||||||||
Restructuring expense | 1,149 | 204 | 1,052 | 1,200 | ||||||||||
Purchased in-process research and development | -- | -- | 1,940 | -- | ||||||||||
Total operating expenses | 18,353 |
| 13,221 | 71,250 | 52,607 | |||||||||
Income (loss) from operations | (5,454 | ) | 1,521 | (19,743 | ) | (4,005 | ) | |||||||
Interest income, net | 216 |
| 144 | 755 | 515 | |||||||||
Other income (expense), net | (58 | ) | (78 | ) | (103 | ) | 9 | |||||||
Net income (loss) before income taxes | (5,296 | ) | 1,587 | (19,091 | ) | (3,481 | ) | |||||||
Provision for income taxes | 156 | 134 | 449 | 899 | ||||||||||
Net income (loss) | $ | (5,452 | ) | $ | 1,453 | $ | (19,540 | ) | $ | (4,380 | ) | |||
Other comprehensive income (loss): | ||||||||||||||
Foreign currency translation gain (loss) | $ | (91 | ) | $ | 272 | $ | (605 | ) | $ | 1,183 | ||||
Comprehensive income (loss) | $ | (5,543 | ) | $ | 1,725 | $ | (20,145 | ) | $ | (3.197 | ) | |||
Net income (loss) per share: | ||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.02 | $ | (0.26 | ) | $ | (0.06 | ) | |||
Diluted | $ | (0.07 | ) | $ | 0.02 | $ | (0.26 | ) | $ | (0.06 | ) | |||
Weighted average shares used in computing net income (loss) per share: | ||||||||||||||
Basic | $ | 75,851 | $ | 71,253 | $ | 74,449 | $ | 67,522 | ||||||
Diluted | $ | 75,851 | $ | 75,406 | $ | 74,449 | $ | 67,522 | ||||||
Supplemental information [1]: | ||||||||||||||
Non-GAAP financial measures and reconciliation: | ||||||||||||||
Net income (loss) | (5,452 | ) | 1,453 |
| (19,540 | ) | (4,380) | |||||||
Less: Stock-based compensation (benefit) | 1,186 | (945 | ) | 2,844 | 2,990 | |||||||||
Less: Amortization of intangible assets | 303 | 122 | 1,185 | 2,060 | ||||||||||
Less: Purchased in-process research and development | -- | -- | 1,940 | -- | ||||||||||
Less: Restructuring expense (reversal) | 1,149 | 204 | 1,052 | 1,200 | ||||||||||
Pro forma net income (loss): | $ | (2,814 | ) | $ | 834 | $ | (12,519 | ) | $ | 1,870 | ||||
Pro forma net income (loss) per share: | ||||||||||||||
Basic | $ | (0.04 | ) | $ | 0.01 | $ | (0.17 | ) | $ | 0.03 | ||||
Diluted | $ | (0.04 | ) | $ | 0.01 | $ | (0.17 | ) | $ | 0.03 | ||||
Weighted average shares used in computing net income (loss) per share [2]: | ||||||||||||||
Basic | 75,851 | 71,253 | 74,449 | 67,522 | ||||||||||
Diluted | 75,851 | 75,406 | 74,449 | 67,522 | ||||||||||
[1] The accompanying supplemental pro forma financial information represents a non-GAAP financial measure. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the company's financial statements. Non-GAAP financial measures of net income or net loss is used by investors and analysts of Chordiant Software, Inc. (the "Company") as an alternative to GAAP measures when evaluating the Company's performance in comparison to other companies. The Company's management believes that the presentation of a non-GAAP financial measure of net income or net loss, excluding purchased in-process research and development, amortization of deferred stock-based compensation, amortization of intangible assets and restructuring expenses, provide useful information regarding the Company's financial performance and earnings potential by calculating and quantifying the effect of certain charges of net income or net loss per share calculated in accordance with GAAP and gives investors and analysts insight into profitability of the Company's operating business. Management also believes that the presentation of the non-GAAP financial measures is consistent with its past practice, as well as industry practice in general, and will enable investors and analysts to compare current non-GAAP measures with non-GAAP measures presented in prior periods. The above non-GAAP financial information may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
[2] Diluted net loss per share for the three months ended September 30, 2005 and twelve months ended September 30, 2005, is computed excluding total potential outstanding common shares of 8,461 and 8,461 respectively, as their effect is anti-dilutive.
CHORDIANT SOFTWARE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, 2005 | September 30, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 38,546 | $ | 55,748 | |||||
Marketable securities | -- | 4,000 | |||||||
Restricted cash | 1,982 | 279 | |||||||
Accounts receivable, net | 18,979 | 20,161 | |||||||
Prepaid expenses and other current assets | 4,345 | 3,097 | |||||||
Total current assets | 63,852 | 83,285 | |||||||
Restricted cash | 365 | 2,057 | |||||||
Property and equipment, net | 2,479 | 3,237 | |||||||
Goodwill | 31,907 | 24,874 | |||||||
Intangible assets, net | 5,148 | 244 | |||||||
Other assets | 3,499 | 1,643 | |||||||
Total assets | $ | 107,250 | $ | 115,340 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 4,554 | $ | 6,394 | |||||
Accrued expenses | 8,902 | 11,681 | |||||||
Deferred revenue | 26,050 | 18,459 | |||||||
Current portion of capital lease obligations | 213 | 191 | |||||||
Total current liabilities | 39,719 | 36,725 | |||||||
Deferred revenue, long-term | 147 | 2,122 | |||||||
Restructuring costs, net of current portion | 1,731 | -- | |||||||
Long-term portion of capital lease obligations | 96 | 317 | |||||||
Total liabilities | 41,693 | 39,164 | |||||||
Common stock | 78 | 72 | |||||||
Additional paid-in capital | 273,824 | 262,703 | |||||||
Deferred stock-based compensation | (1,940 | ) | (339 | ) | |||||
Accumulated deficit | (208,889 | ) | (189,349 | ) | |||||
Accumulated other comprehensive income | 2,484 | 3,089 | |||||||
Total stockholders' equity |
| 65,557 | 76,176 | ||||||
Total liabilities and stockholders' equity | $ | 107,250 | $ | 115,340 | |||||