Exhibit 99.1
| For Immediate Release | Kronos Contact: | Paul Lacy |
(978) 947-4944
| placy@kronos.com |
KRONOS® REPORTS SECOND-QUARTER FISCAL 2006 RESULTS
Revenue Up 19 Percent Year-Over-Year;
Strong Performance Across Business Segments
CHELMSFORD, Mass., April 26, 2006 — Kronos® Incorporated (Nasdaq: KRON) today reported GAAP total revenue for the second quarter of Fiscal 2006 of $143.5 million compared to $120.6 million for the same period a year ago. GAAP net income for the second quarter of Fiscal 2006 was $9.9 million, or $0.31 per diluted share compared to $11.2 million, or $0.34 per diluted share, for the same period a year ago. Second-quarter Fiscal 2006 earnings include a charge of $0.10 per diluted share for stock-based compensation, which is not reflected in the previous year’s second-quarter earnings. Second-quarter Fiscal 2006 earnings also include a charge for amortization of intangible assets of $0.04 per diluted share. The charge for amortization of intangible assets was $0.02 per diluted share for the same period a year ago.
For the six-month period, GAAP total revenue was $271.5 million as compared to $238.9 million for the first six months of the prior year. For the six-month period, GAAP net income was $16.1 million, or $0.50 per diluted share, as compared to $21.9 million, or $0.67 per diluted share, for the same period last year. Earnings for the first six months of Fiscal 2006 include a charge of $0.18 per diluted share for stock-based compensation, which is not reflected in earnings for the first six months of Fiscal 2005. Earnings for the first six months of Fiscal 2006 also include a charge for amortization of intangible assets of $0.07 per diluted share. The charge for amortization of intangible assets was $0.05 per diluted share for the first six months of Fiscal 2005.
“We are very pleased with our second-quarter financial performance and our overall strength in the workforce management market. Our results speak to the strong fundamentals of the business, including our favorable competitive position in a growing market, the momentum of our new products, and, as always, the ability of our organization to execute,” said Kronos Chief Executive Officer Aron Ain. “Discussions with customers, industry analysts, and our sales team indicate that there is a growing spotlight on workforce management as a critical business process that can be optimized for competitive advantage. This is fueling demand for our market-leading solutions from organizations across a wide range of industries and geographies.”
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Kronos’ second-quarter results mark the company’s 105th consecutive quarter of year-over-year revenue growth and 76th consecutive quarter of profitability, continuing one of the longest records of growth and profitability in the software industry (Note 1).
Total deferred maintenance, professional services, and product revenue on the balance sheet at the end of the second quarter of Fiscal 2006 totaled $149.3 million. In addition to this deferred revenue, Kronos has a backlog of uncommitted professional services engagements of approximately $56.0 million.
Kronos exited the second quarter of Fiscal 2006 with $163.2 million in cash and investments and no debt. Days sales outstanding declined sequentially to 64 days at the end of the second quarter of Fiscal 2006, from 76 days at the end of the first quarter of Fiscal 2006. During the second quarter, Kronos repurchased 197,500 shares of common stock for $7.7 million, and made payments on acquisitions of $6.6 million. For the six-month period, the company has repurchased 339,250 shares of common stock for $14.1 million, and made payments on acquisitions of $8.6 million.
Second-Quarter Highlights
• | Strong performance across business segments — Kronos is experiencing strong demand for its workforce management solutions in all target markets. The company’s mid-market sales organization continued to build momentum, exceeding its plan for the second quarter. Complementing this were outstanding results from the enterprise, national, and international teams. |
• | Exemplary customer satisfaction — Kronos received top honors for exemplary customer satisfaction and was honored as a six-time winner of the NorthFace ScoreBoard Award from Omega Management Group. |
• | HRMS leadership — Leading analyst firm Gartner, Inc. has positioned Kronos in the Leaders quadrant in its “Magic Quadrant for U.S. Mid-market Human Resource Management Systems, 2006” published on Jan. 25, 2006. The report positioned 20 vendors in the U.S. HRMS mid-market. Vendors were evaluated on their ability to execute and success in capitalizing on their vision. According to Gartner, leaders are “vendors that are performing well today, have a clear vision of market direction and are actively building competencies to sustain their leadership position in the market.” |
• | Notable customer wins — Organizations across a wide range of industries continue to choose Kronos solutions to staff, develop, deploy, track, and reward their workforce. Notable wins during the quarter included: |
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| • | BJC Healthcare, one of the largest nonprofit healthcare delivery organizations in the U.S., purchased the Workforce Central® suite, including absence management and scheduling, for 30,000 employees. To ensure its ongoing industry leadership, BJC invested in Kronos’ integrated suite of workforce management solutions to help reduce labor costs, increase operating efficiency, enhance employee satisfaction. |
| • | DHL Worldwide Express purchased Kronos’ time and labor and absence management applications for tens of thousands of employees at hundreds of locations, replacing its disparate workforce management systems with a single, centralized solution. After an extensive review, DHL determined that Kronos’ best-of-breed solutions could help optimize the deployment of the current workforce as well as support the continued expansion of the company. |
| • | GameStop, the world’s leading video game retailer with more than 4,500 stores in 15 countries, selected Kronos for Retail for 39,000 employees. Kronos’ market leadership, implementation expertise, and the potential ROI of its solutions were key factors in winning this deal. |
| • | Total Wine & More, the largest independent retailer of fine wine in the U.S, became a new mid-market customer during the quarter. This customer purchased Kronos for Retail and Kronos’ HR and payroll solutions to take its organization from a manual to a fully automated workforce management system that would easily scale as the company grows. |
Outlook
Kronos management offers the following guidance for the third quarter of Fiscal 2006 and Fiscal Year 2006:
Third-Quarter Fiscal 2006
• | Total revenue is expected to be in the range of $145-$149 million. |
• | Net income per diluted share is expected to be in the range of $0.32-0.36. |
• | The charge for stock-based compensation, which is included in the above mentioned range of earnings expectations, is expected to be approximately $0.10 per diluted share. |
• | The charge for amortization of intangible assets, which is included in the above mentioned range of earnings expectations, is expected to be approximately $0.03 per diluted share. |
Fiscal Year 2006
• | Total revenue is expected to be in the range of $577-584 million. |
• | Net income per diluted share is expected to be in the range of $1.35-1.43. |
• | The charge for stock-based compensation, which is included in the above mentioned range of earnings expectations, is expected to be approximately $0.37 per diluted share. |
• | The charge for amortization of intangible assets, which is included in the above mentioned range of earnings expectations, is expected to be approximately $0.14 per diluted share. |
Conference Call Webcast
Kronos senior management plans to review its second-quarter Fiscal 2006 results during a conference call today beginning at 4:30 p.m. Eastern. The conference call will be webcast live at http://www.kronos.com/invest and will be available for replay purposes.
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About Kronos Incorporated
Kronos Incorporated is the most trusted name in workforce management. Kronos helps organizations staff, develop, deploy, track, and reward their workforce, resulting in reduced costs, increased productivity, better decision-making, improved employee satisfaction, and alignment with organizational objectives. More than 20 million people use a Kronos solution every day. Learn more about Kronos’ high-impact enterprise solutions at www.kronos.com.
Safe Harbor Statement
This press release contains statements about the business prospects and estimates of Kronos’ financial results for future periods that are forward-looking statements that involve a number of risks and uncertainties, including the performance estimates and statements relating to earnings and revenue growth and profitability, the ability to close potential product sales transactions, the ability to realize revenues from the sales pipeline and backlog, market acceptance of our new products and enhancements, including those formerly offered by AD OPT Technologies, our ability to monitor and manage discretionary costs, growth in the market for our products and within the economy generally, and potential acquisitions. These statements are based on management’s expectations of future events as of the date of this press release, and Kronos assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management’s expectations. Among the important factors that could cause actual operating results to differ materially from those indicated by such forward-looking statements are delays in product development, including enhancements to existing products, product performance issues, competitive pressures, general economic conditions, possible disruption in commercial activities caused by terrorist activity and armed conflict, such as changes in logistics and security arrangement and the risk factors detailed in the company’s Annual Report on Form 10-K filed with the SEC on December 9, 2005 and its quarterly report on Form 10-Q filed with the SEC on February 9, 2006. The timing of the release of new products or product enhancements will take place if and when available and at the sole discretion of Kronos.
Note 1: Excluding a one-time special charge in the second quarter of Fiscal 2001.
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© 2006 Kronos Incorporated. Kronos, the Kronos logo, and Workforce Central are registered trademarks of Kronos Incorporated or a related company. All other product and company names mentioned in this press release are used for identification purposes only and may be trademarks of their respective owners. The Magic Quadrant is copyrighted 1/25/06 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
UNAUDITED
Three Months Ended | Six Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
April 1, 2006 | April 2, 2005 | April 1, 2006 | April 2, 2005 | |||||||||||
Net revenues: | ||||||||||||||
Product | $ | 59,038 | $ | 46,317 | $ | 107,025 | $ | 99,583 | ||||||
Maintenance | 47,233 | 42,451 | 93,479 | 81,119 | ||||||||||
Professional services | 37,252 | 31,853 | 70,962 | 58,195 | ||||||||||
143,523 | 120,621 | 271,466 | 238,897 | |||||||||||
Cost of sales: | ||||||||||||||
Costs of product | 14,883 | 11,651 | 25,469 | 23,024 | ||||||||||
Costs of maintenance and professional services | 45,331 | 37,102 | 89,276 | 71,794 | ||||||||||
60,214 | 48,753 | 114,745 | 94,818 | |||||||||||
Gross profit | 83,309 | 71,868 | 156,721 | 144,079 | ||||||||||
Operating expenses and other income: | ||||||||||||||
Sales and marketing | 42,395 | 34,616 | 81,167 | 70,478 | ||||||||||
Engineering, research and development | 13,910 | 12,027 | 26,923 | 24,816 | ||||||||||
General and administrative | 12,105 | 8,546 | 24,082 | 16,992 | ||||||||||
Amortization of intangible assets | 1,665 | 1,194 | 3,207 | 2,290 | ||||||||||
Other income, net | (1,857 | ) | (1,611 | ) | (3,365 | ) | (3,313 | ) | ||||||
68,218 | 54,772 | 132,014 | 111,263 | |||||||||||
Income before income taxes | 15,091 | 17,096 | 24,707 | 32,816 | ||||||||||
Provision for income taxes | 5,237 | 5,873 | 8,629 | 10,935 | ||||||||||
Net income | $ | 9,854 | $ | 11,223 | $ | 16,078 | $ | 21,881 | ||||||
Net income per common share: | ||||||||||||||
Basic | $ | 0.31 | $ | 0.35 | $ | 0.50 | $ | 0.69 | ||||||
Diluted | $ | 0.31 | $ | 0.34 | $ | 0.50 | $ | 0.67 | ||||||
Weighted-average common shares outstanding: | ||||||||||||||
Basic | 31,919,542 | 31,910,961 | 31,854,544 | 31,741,255 | ||||||||||
Diluted | 32,251,370 | 32,835,874 | 32,261,262 | 32,716,724 | ||||||||||
Stock-based compensation expense: | ||||||||||||||
Costs of product | $ | 97 | $ | -- | $ | 179 | $ | -- | ||||||
Costs of maintenance and professional services | 966 | -- | 1,785 | -- | ||||||||||
Sales and marketing | 1,400 | -- | 2,656 | -- | ||||||||||
Engineering, research and development | 887 | -- | 1,670 | -- | ||||||||||
General and administrative | 1,175 | -- | 2,149 | -- | ||||||||||
Tax benefit | (1,365 | ) | -- | (2,617 | ) | -- | ||||||||
$ | 3,160 | $ | -- | $ | 5,822 | $ | -- | |||||||
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
April 1, 2006 | September 30, 2005 | |||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 62,978 | $ | 43,492 | ||||
Marketable securities | 51,812 | 37,078 | ||||||
Accounts receivable, less allowances of $10,584 | ||||||||
at April 1, 2006 and $11,156 at September 30, 2005 | 110,650 | 120,746 | ||||||
Deferred income taxes | 8,267 | 10,937 | ||||||
Other current assets | 20,343 | 20,142 | ||||||
Total current assets | 254,050 | 232,395 | ||||||
Marketable securities | 48,366 | 59,865 | ||||||
Property, plant and equipment, net | 57,973 | 56,158 | ||||||
Customer related intangible assets | 30,826 | 31,085 | ||||||
Other intangible assets | 15,270 | 15,818 | ||||||
Goodwill | 150,691 | 142,665 | ||||||
Capitalized software, net | 22,862 | 23,092 | ||||||
Other assets | 22,399 | 18,348 | ||||||
Total assets | $ | 602,437 | $ | 579,426 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 8,995 | $ | 9,013 | ||||
Accrued compensation | 41,002 | 43,379 | ||||||
Accrued expenses and other current liabilities | 24,648 | 27,877 | ||||||
Deferred product revenues | 2,722 | 3,938 | ||||||
Deferred professional service revenues | 26,661 | 36,530 | ||||||
Deferred maintenance revenues | 112,218 | 102,038 | ||||||
Total current liabilities | 216,246 | 222,775 | ||||||
Deferred maintenance revenues | 7,744 | 4,921 | ||||||
Deferred income taxes | 12,102 | 15,261 | ||||||
Other liabilities | 4,715 | 4,435 | ||||||
Shareholders' equity: | ||||||||
Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares, | ||||||||
no shares issued and outstanding | -- | -- | ||||||
Common Stock, par value $.01 per share: authorized 50,000,000 shares, 32,079,145 and | ||||||||
31,724,460 shares issued at April 1, 2006 and September 30, 2005, respectively | 321 | 317 | ||||||
Additional paid-in capital | 66,456 | 52,802 | ||||||
Retained earnings | 294,073 | 277,995 | ||||||
Accumulated other comprehensive income: | ||||||||
Foreign currency translation | 1,204 | 1,307 | ||||||
Net unrealized (loss) on available-for-sale investments | (424 | ) | (387 | ) | ||||
780 | 920 | |||||||
Total shareholders' equity | 361,630 | 332,034 | ||||||
Total liabilities and shareholders' equity | $ | 602,437 | $ | 579,426 | ||||