Raymond Ruddy
Director, Investor Relations
Concord Communications
(508) 303-4350
rruddy@concord.com
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CONCORD'S SECOND QUARTER REVENUE AND EARNINGS INCREASE
Acquisition of netViz and license of Tavve source code to enrich
eHealth(R) Suite
MARLBORO, MA, JULY 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 second
quarter ended June 30, 2003. Revenue increased to $25.6 million, up from $24.1
million in the first quarter of 2003. Pro forma earnings per share were $0.06,
up 2 cents from pro forma earnings per share of $.04 in the first quarter of
2003. GAAP earnings per share were $0.07.
In addition to reporting positive earnings growth, Concord also signed an
agreement to acquire netViz Corporation, a profitable software provider. netViz
software enables users to visualize business processes and allows them to map
relationships within the supporting technology infrastructure through
data-driven icons.
Concord also announced that it has licensed source-code from Tavve Software.
This technology will provide eHealth(R) Suite users with discovery of Layer 2
and 3 network topology, root cause analysis and downstream alarm suppression.
"In addition to executing strongly last quarter, we are acquiring powerful and
unique technologies," explained Jack Blaeser, Concord's CEO and president. "We
will combine netViz's data-driven visualization and advanced root cause
technology with Concord's rich integrated IT management solution to enable
application service optimization. Customers will be able to visualize and take
action on the dependencies between business processes, application services and
network and system infrastructures, allowing them to Measure IT, Map IT and
Manage IT."
More detail on these transactions is available in a simultaneous press release.
CASH, DSO AND OTHER METRICS CONTINUED TO IMPROVE
o Cash grew $4 million to $80.9 million.
o Deferred revenue increased to $27.7 million, up from $25.7 million in
the prior quarter.
o Gross margin was 81.5%, net margin was 4.7%.
o DSO was 65 days, down from 70 days in Q1.
o Average deal size for new customers increased to $130,000 from
$124,000 in Q1 as these customers chose the eHealth(R)Suite to manage
larger IT infrastructures.
o Number of deals over $100,000 stayed consistent at 36.
MARKET SEGMENT MIX RETURNED TO HISTORICAL AVERAGES
o 52% of revenue came from enterprise customers like Commerce Insurance
and Royal Bank Financial Group. This mix was up 18 points from the
previous quarter.
o 32% of revenue came from managed service provider customers. These
customers included Telecom Italia and Radianz. 16% of revenue came
from carrier infrastructure customers including Echostar and Comcast.
Combined, these two groups provided 48% of revenue.
o International was 44% of revenue. Customers include UAE Air Force, GE
Finance and Siemens Power Generation.
EXISTING CUSTOMERS EXPANDED USE OF THE EHEALTH(R) SUITE
o 81% of quarterly revenues were generated from installed base from
customers like BT Global Services and Verizon Wireless. Of the revenue
from existing customers, 42% was from existing customers expanding
deployment of their existing Concord products across a larger portion
of their IT infrastructure and 58% was from customers expanding toward
an end-to-end solution by purchasing new applications in the
eHealth(R) Suite.
o 19% of quarterly revenues came from 38 new customers. New customers
included DHL, The United States Joint Chiefs of Staff and Neustar.
GUIDANCE ESTABLISHED
Concord is establishing guidance for Q3 between $26.5 -- $27.0 million in
revenue, and pro forma earnings per share between $0.06 and $0.07.
CONFERENCE CALL
Concord will hold a conference call today, July 15, 2003, to discuss results,
product direction and future expectations at 8:30 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 4035473. 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
almost 3000 customers worldwide 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, Mass. For more information on Concord,
call 1-800-851-8725 or visit Concord on the Web at www.concord.com. Concord
Communications, Inc., the Concord logo and eHealth are trademarks of Concord
Communications, Inc. All other trademarks are the property of their respective
owners.
SAFE HARBOR
Forward-looking statements made in this press release, including forward-looking
statements regarding the incorporation of acquired technology and 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.
The information in this press release will be posted at www.concord.com.
Concord Cummunications, Inc.
[CONCORD LOGO] Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share data)
-------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------------- -------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues:
Product $ 13,153 $ 12,258 $ 26,063 $ 26,319
Services 12,462 10,693 23,670 20,870
----------- ----------- ----------- -----------
Total revenues 25,615 22,951 49,733 47,189
----------- ----------- ----------- -----------
Cost of revenues 4,728 4,116 9,359 8,501
----------- ----------- ----------- -----------
Gross profit 20,887 18,835 40,374 38,688
----------- ----------- ----------- -----------
Operating expenses:
Research and development 5,423 5,445 10,850 11,187
Selling and marketing 12,579 11,890 23,944 24,024
General and administrative 2,060 1,772 4,305 3,827
Equity-based compensation expense 14 27 34 60
----------- ----------- ----------- -----------
Total operating expenses 20,076 19,134 39,133 39,098
----------- ----------- ----------- -----------
Income (loss) from operations 811 (299) 1,241 (410)
Other income, net 563 786 1,056 1,534
----------- ----------- ----------- -----------
Income before income taxes 1,374 487 2,297 1,124
----------- ----------- ----------- -----------
Provision for income taxes 177 92 263 240
----------- ----------- ----------- -----------
Net income $ 1,197 $ 395 $ 2,034 $ 884
=========== =========== =========== ===========
Net income per common and potential common share:
Basic $ 0.07 $ 0.02 $ 0.12 $ 0.05
Diluted $ 0.07 $ 0.02 $ 0.11 $ 0.05
Fully-taxed pro forma diluted without unusual items** $ 0.06 $ 0.02 $ 0.09 $ 0.05
** excludes equity-based compensation expense and assumes a 28% pro-forma tax rate.
Weighted average common shares outstanding 17,372,070 17,017,410 17,313,416 16,974,305
Diluted weighted average common and potential
common shares outstanding 18,022,181 17,861,027 17,767,593 17,969,848
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
current period GAAP tax provisions with a "pro forma" tax rate. We have
significant deferred tax assets and have not recorded significant federal tax
provision. The tax provision relates mostly to state and foreign taxes only.
RECONCILIATION
The table below reconciles Operating Income to Pro-forma Net Income for the
first quarter ended 2003 vs. 2002:
Three Months Ended Six Months Ended
----------------------------- -----------------------------
In thousands, except per share data June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Reconciliation of GAAP & Proforma Net Income:
Net income $ 1,197 $ 395 $ 2,034 $ 884
Add: Provision for income taxes 177 92 263 240
Equity-based compensation expense 14 27 34 60
----------- ----------- ----------- -----------
Proforma income before income taxes 1,388 514 2,331 1,184
----------- ----------- ----------- -----------
Proforma income taxes (Pro-forma rate: 28%) 389 144 653 332
----------- ----------- ----------- -----------
Proforma net income $ 999 $ 370 $ 1,678 $ 852
=========== =========== =========== ===========
Pro forma net income per diluted share: $ 0.06 $ 0.02 $ 0.09 $ 0.05
Diluted weighted average common and potential
common shares outstanding 18,022,181 17,861,027 17,767,593 17,969,848
Q3 2003 GUIDANCE
The table below reconciles Pro-forma EPS guidance to estimated GAAP EPS for
Q3 2003:
Guidance for
Quarter ended
September 30,
2003
--------------
Proforma EPS guidance $0.06 - $0.07
Estimated:
Income taxes 0.02
Equity-based compensation expense (0.00)
Estimated charges for netViz acquisition (0.03)
Estimated costs of Tavve technology (0.05)
-------------
Estimated GAAP EPS $0.00 - 0.01
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Concord Communications, Inc.
[CONCORD LOGO] Condensed Consolidated Balance Sheets
As of
(Unaudited, in thousands)
-------------------------------------
June 30, December 31,
2003 2002
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Assets
Current assets:
Cash, cash equivalents and marketable securities $ 80,901 $ 73,670
Accounts receivable, net 18,576 17,417
Other current assets 2,141 2,882
-------- --------
Total current assets 101,618 93,969
Equipment and improvements, net 7,457 8,245
Deferred tax and other assets 3,821 3,716
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Total Assets $112,896 $105,930
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 13,053 $ 13,646
Deferred revenue 27,750 23,348
-------- --------
Total current liabilities 40,803 36,994
Common stock, deferred compensation, unrealized gain
on marketable securities and additional paid-in capital 102,536 101,413
Accumulated deficit (30,443) (32,477)
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Total stockholders' equity 72,093 68,936
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Total Liabilities and Stockholders' Equity $112,896 $105,930
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