Josef Blumenfeld Raymond Ruddy
Director, Public Relations Director, Investor Relations
Concord Communications Concord Communications
(508) 303-4351 (508) 303-4350
jblumenfeld@concord.com rruddy@concord.com
CONCORD EXCEEDS REVENUE AND EARNINGS ESTIMATES
Third quarter in a row, Company reports revenue and profit growth.
MARLBORO, MA, April 15, 2003 -- Concord Communications, Inc. (NASDAQ: CCRD), an
industry leader in optimizing application performance and availability across
networks and systems, today announced its financial results for the first fiscal
quarter ended March 31, 2003. Revenue increased to $24.1 million, over $23.6
million in the fourth quarter of 2002. Pro forma earnings per share was $0.04,
exceeding analyst earnings expectations of $0.03, as reported by Multex. GAAP
earnings per share was $0.05.
"The results demonstrate our ability to execute successfully in a challenging
environment," explained Jack Blaeser, Concord's CEO and President. "Customer
recognition of the eHealth(R) Suite as the standard for large-scale performance
deployments and our continuing investment in training and developing a
market-leading sales force have increased our average deal size. We saw a
significant increase in sales to global service providers this quarter that
allowed us to achieve the growth in revenue and earnings, while increasing
visibility."
DEAL SIZE INCREASED AS CUSTOMERS CHOSE THE EHEALTH(R) SUITE FOR SCALABILITY
- - Average deal size for new customers more than doubled as a growing number
of customers chose the eHealth(R) Suite to manage large IT
infrastructures.
- - Number of deals over $100,000 increased to 36, representing a 20% increase
over the previous quarter.
SALES TO NEW CUSTOMERS INCREASED AND EXISTING CUSTOMERS EXPANDED USE OF THE
EHEALTH(R) SUITE
- - 22% of quarterly revenues came from 43 new customers, up sequentially from
15% of quarterly revenue in the prior quarter. New customers included
Telefonica Spain, The Bank of England and the National Belgium Railway.
- - 78% of quarterly revenues were generated from installed base from
customers like Fraport AG and the County of Sacramento. Of the revenue
from existing customers, 49% was from existing customers expanding
deployment of their existing Concord products across a larger portion of
their IT infrastructure and 51% was from customers expanding toward an
end-to-end solution by purchasing new applications in the eHealth(R)
Suite.
SALES TO THE GLOBAL SERVICE PROVIDER MARKETS GREW
- - 45% of product revenue came from managed service provider customers, an
increase of 17 points over the fourth quarter. These customers include
Unisys Worldwide and BT Ignite.
- - 21% of product revenue came from carrier infrastructure customers, an
increase of 6 points over the fourth quarter. These customers include
Cable & Wireless and Vodafone.
- - 34% of product revenue came from enterprise customers like General
Dynamics and VeriSign. This resulting decrease in enterprise mix from the
previous quarter was primarily due to the increased percentage of global
service provider revenue. The overall mix of enterprise, service provider
and carrier infrastructure revenue is expected to fluctuate in response to
quarterly market demand.
- - International revenue was $12.1 million or 50% of total revenue, a
sequential increase of 11 points from 39% in the previous quarter.
Customers include Cable and Wireless, Audi and Bank International
Indonesia.
CASH AND DEFERRED REVENUE INCREASED
- - Cash grew over $3 million to $76.8 million
- - Deferred revenue increased to $25.7 million, up from $23.3 million in the
prior quarter.
- - Revenue contribution percentages from the product portfolio were
consistent with prior quarters.
- - Gross margin was 81%, net margin was 3%.
- - DSO was 70 days, up slightly from DSO of 66 days in Q4, primarily due to
the increased international mix.
GUIDANCE ESTABLISHED
Concord is establishing guidance for Q2 between $24.5-25.5 million in revenue,
and pro forma earnings per share between $0.05 and $0.06.
CONFERENCE CALL
Concord will hold a conference call on April 16, 2003, to discuss results,
product direction and future expectations at 8:00 a.m. ET. The phone number for
the call is 800-473-6123 (domestic) and 973-582-2710 (international). The call
will be available for approximately two weeks. The number for the replay is
877-519-4471 for U.S./Canada and 973-341-3080 for international callers. The
access code is 3846047. The information in this press release, call replay, and
reconciliation of non-GAAP financials is posted at www.concord.com.
ABOUT CONCORD COMMUNICATIONS
Concord Communications, Inc. (NASDAQ: CCRD) is an industry leader in optimizing
application performance and availability across networks and systems. Concord's
3000 customers worldwide -- including nearly 20% of the Fortune 500 -- use the
eHealth(R) Suite as the software solution to manage their IT infrastructure to
drive profitable business operations, reduce costs, and increase competitive
positioning.
Concord is headquartered in Marlboro, MA. For more information on Concord, call
1-800-851-8725 or visit Concord on the Web at www.concord.com. Concord
Communications, the Concord logo and eHealth are trademarks of Concord
Communications, Inc.
SAFE HARBOR
Forward-looking statements made in this press release, including forward-looking
statements regarding revenue and profit expectations, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Readers are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results could differ materially from the
forward-looking statements contained herein. Risks and uncertainties include,
without limitation, the magnitude and duration of the current domestic financial
crisis and economic slowdown and specifically their impact on the software,
networking and telecommunications industries; our customers' ability to obtain
funding, specifically in light of the aforementioned financial and economic
climate, and the resulting potential delay of customer purchasing decisions;
risks of continued operating losses; the ability to attract and retain quality
professional employees; uncertainties involving intellectual property rights and
litigation; litigation in general; risks in technology development and
commercialization; risks in product development and market acceptance of and
demand for the Company's products; risks associated with competition and
competitive pricing pressures; risks associated with international sales,
including foreign currency risks; and other risks detailed in the Company's
filings with the Securities and Exchange Commission, including but not limited
to, the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.
Any forward-looking statements should be considered in light of all these
factors. The information contained in this press release is applicable only
today and should thereafter be considered historical and will no longer
constitute the Company's current expectations. The Company undertakes no
obligation to update information contained in this press release.
[CONCORED LOGO] Concord Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share data)
Three Months Ended
------------------------------
March 31, March 31,
2003 2002
------------ ------------
Revenues:
Product $ 12,909 $ 14,060
Services 11,208 10,177
============ ============
Total revenues 24,117 24,237
------------ ------------
Cost of revenues 4,631 4,385
============ ============
Gross profit 19,486 19,852
============ ============
Operating expenses:
Research and development 5,427 5,741
Selling and marketing 11,365 12,134
General and administrative 2,245 2,055
Equity-based compensation expense 20 33
============ ============
Total operating expenses 19,057 19,963
============ ============
Income (loss) from operations 429 (111)
Other income, net 493 747
------------ ------------
Income before income taxes 922 636
------------ ------------
Provision for income taxes 86 147
------------ ------------
Net income $ 836 $ 489
============ ============
Net income per common and potential common share:
Basic $ 0.05 $ 0.03
Diluted $ 0.05 $ 0.03
Fully-taxed pro forma diluted without unusual items** $ 0.04 $ 0.03
** excludes equity-based compensation expense and assumes a 28% pro-forma tax
rate.
Weighted average common shares outstanding 17,254,342 16,931,200
Diluted weighted average common and potential
common shares outstanding 17,448,566 18,025,665
PRO FORMA FINANCIAL RESULTS
We prepare and release quarterly unaudited financial statements prepared in
accordance with generally accepted accounting principles ("GAAP"). We also
disclose and discuss certain pro forma financial information, used to evaluate
our performance, in this and other earnings releases and investor conference
calls. We believe that current shareholders and potential investors in our
company use multiples of pro-forma EPS in making investment decisions about our
company. We use pro-forma EPS to evaluate the results of our ongoing operations.
This measure, and other pro-forma information, should not be considered an
alternative to measurements required by accounting principles generally accepted
in the United States of America ("U.S. GAAP") such as net income and net cash
provided by operations and should not be considered measures of our liquidity.
In addition, our non-GAAP measures may not be comparable to similar measures
reported by other companies. Our key non-GAAP measure is:
PRO-FORMA EPS
Pro-forma EPS is calculated by dividing pro-forma net income by the
diluted number of shares. Pro-forma Net Income excludes certain non-cash and
special charges, consisting primarily of non-cash compensation charges and
transaction costs associated with acquisitions. This proforma calculation also
substitutes GAAP tax provisions with a "pro forma" tax rate. Transaction costs
associated with acquisitions are excluded as management considers these costs
non-recurring in nature. Equity base compensation expenses have been excluded in
past proforma reporting; thus, the exclusion of this non-cash expense provides a
better comparison with historical results.
We have substantial deferred tax assets and have not recorded significant
federal tax provision in many reporting periods. This has caused our GAAP tax
rate to fluctuate; thus, pro-forma tax rate provides a better estimate of our
long term tax rate. The GAAP tax provision relates mostly to state and foreign
taxes only, in many periods.
RECONCILIATION
The table below reconciles Operating Income to Pro-forma Net Income for
the first quarter ended 2003 vs. 2002:
In thousands, except per share data March 31, March 31,
2003 2002
---------- ----------
Reconciliation of GAAP & Proforma Net Income:
Net income $ 836 $ 489
Add: Provision for income taxes 86 147
Equity-based compensation expense 20 33
---------- ----------
Proforma income before income taxes 942 669
---------- ----------
Proforma income taxes (Pro-forma rate: 28%) 264 187
---------- ----------
Proforma net income $ 678 $ 482
========== ==========
Pro forma net income per diluted share: $ 0.04 $ 0.03
Diluted weighted average common and potential
common shares outstanding 17,448,566 18,025,665
[CONCORD LOGO] Concord Communications, Inc.
Condensed Consolidated Balance Sheets
As of
(Unaudited, in thousands)
March 31, December 31,
2003 2002
--------- ------------
Assets
Current assets:
Cash, cash equivalents and marketable securities $ 76,792 $ 73,670
Accounts receivable, net 18,857 17,417
Other current assets 2,501 2,882
-------- --------
Total current assets 98,150 93,969
Equipment and improvements, net 7,428 8,245
Deferred tax and other assets 3,809 3,716
-------- --------
Total Assets $109,387 $105,930
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 13,947 $ 13,646
Deferred revenue 25,722 23,348
-------- --------
Total current liabilities 39,669 36,994
-------- --------
Common stock, deferred compensation, unrealized gain
on marketable securities and additional paid-in 101,359 101,413
capital
Accumulated deficit (31,641) (32,477)
-------- --------
Total stockholders' equity 69,718 68,936
-------- --------
Total Liabilities and Stockholders' Equity $109,387 $105,930
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