Exhibit 99.1
Concord Reports Fourth Quarter Results; Revenue Grows 18% y/y and
Profitability Accelerates
MARLBORO, Mass.--(BUSINESS WIRE)--Jan. 20, 2004--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 fourth quarter ended
December 31, 2003. Revenue increased to $27.8 million, up from $26.6
million in the third quarter of 2003, and $23.6 million in the fourth
quarter of 2002. GAAP earnings per share were $.27, compared to $.03
in the prior quarter and $.04 in the fourth quarter of the prior year
(see "Taxes" below regarding GAAP earnings per share). Pro forma
earnings per share were $.11, up from pro forma earnings per share of
$.07 in the prior quarter and $.04 in the same quarter of the prior
year. Full year 2003 GAAP EPS was $.42, versus a 2002 GAAP EPS of
$.12. Full year 2003 pro forma EPS was $.28, more than double the 2002
pro forma EPS of $.12. (See below for pro forma/GAAP reconciliation).
"Concord accelerated profitability during the fourth quarter for
two reasons. The first was that increased sales of our wireless,
distributed network and application management solutions pulled
through revenue from other product lines," explained Jack Blaeser,
Concord's CEO and President. "Secondly, we continued to control
expenses and leveraged our operating model to produce a pro forma
operating margin of 8.5%, GAAP operating margin was 8.2%. We look
forward to increasing top line growth during 2004 by accelerating
sales in new products like Concord's Voice over IP solutions."
Fourth Quarter Results
Revenue Grows 5% Sequentially, Operating Margins Expand and
Operating Cash Increases $3.5M
-- Total revenue of $27.8 million grew 5% from $26.6 million in
the prior quarter. License revenue of $14.5 million grew 6%
over the $13.7 million reported in the prior quarter.
-- Pro forma operating margin was 8.5%, GAAP operating margin was
8.2%.
-- Cash was $162M. Excluding $83M in cash from the previously
announced offering of senior convertible notes, cash from
operations increased approximately $3.5M.
Increase in Larger Customer Deals
-- Number of deals over $100,000 increased to 51, up nine from
the prior quarter.
-- Average deal size for new customers was $120,000 as customers
chose the eHealth(R) Suite to manage across applications,
systems and networks. These included customers like Gansu
Telecom and the Norwegian Defense Department.
Market Segment Sales Remain Close to Historical Averages
-- Enterprise customers accounted for 60% of revenue, from
customers like Johns Hopkins University and TRW Automotive.
-- Managed service provider customers accounted for 20% of
revenue. These customers include Telefonica Solutiones and
Fidelity Information Services. Telco infrastructure customers
like Eurotel accounted for 20% of revenue.
-- International customers accounted for $9.7 million or 36% of
revenue. Customers include Czech Insurance and Provinzial
Dusseldorf.
-- The installed base revenue was 86% from customers like Telus
Mobility and GSK. Of the revenue from existing customers, 40%
was from existing customers expanding deployment of their
existing Concord products across a larger portion of their IT
infrastructure and 60% was from customers expanding toward an
end-to-end solution by purchasing new products in the
eHealth(R) Suite.
Deferred Revenue & Gross Margins Consistent
-- Deferred revenue was $26.5 million, up slightly quarter over
quarter.
-- Gross margin was 82%, consistent with the prior quarter.
-- DSO was 72 days, up 5 days from the prior quarter.
Taxes
Our expectations of continued profitability make it likely that we
will utilize the majority of our deferred tax asset over the next few
years. It is, therefore, deemed prudent to reverse the majority of the
existing valuation allowance against that asset. This results in a
one-time non-cash deferred income tax benefit of $2.6 million in Q4
2003. Additionally, $2.7 million was released from the valuation
allowance and applied to additional paid-in-capital.
From a tax return perspective, and thus cash flow perspective, we
do not believe Concord will pay significant state or federal income
taxes for at least 2 years. We will continue incurring small foreign,
federal minimum and state minimum tax payments. These payments
amounted to $.6 million for income earned in 2003. Due to the release
of our valuation allowance, our GAAP tax rate is expected to increase
to 38% going forward. We will continue providing pro forma guidance
and results at a 28% tax rate to normalize our results against
historical reported results.
Future Expectations
First quarter 2004 revenue is expected to be slightly over $28M
and EPS is expected to be between $.06 and $.08 on a GAAP basis and
$.09 and $.11 on a pro forma basis (see below for a reconciliation of
GAAP and pro forma guidance).
Conference Call
Concord will hold a conference call today, January 20, 2004, to
discuss results, product direction and future expectations at 8:30
a.m. ET. The number for the call is 888-889-5345 (domestic) and
973-339-3086 (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 4419398. 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 eHealth 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, Massachusetts. 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 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, risks related to our incurrence of senior convertible
debt, the impact of the economic slowdown on the telecommunications
industry; risks associated with integrating netViz Corp., which we
recently acquired; our customers' ability to obtain funding,
specifically in light of the aforementioned economic climate, and the
resulting potential delay or cancellation of pending customer
purchases; risks of operating losses including the cost of development
and sale of our products; the ability to attract and retain quality
professional employees; uncertainties involving intellectual property
rights and litigation, specifically including our expansion into new
markets with different intellectual property protection schemes;
litigation in general; risks in technology development and
commercialization; risks in product development and market acceptance
of, and demand for, the Company's products, including the development
and market acceptance of our VoIP, QoS, wireless, and application
performance management products; risks associated with competition
specifically including competition in the application performance
market; risks associated with international sales, including foreign
currency risks and longer payment cycles; 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.
Concord Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share data)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003 2002
Revenues:
Product 14,520 12,711 $54,267 $51,230
Services 13,250 10,890 49,796 42,614
Total revenues 27,770 23,601 104,063 93,844
Cost of revenues:
Cost of product and
service revenues 4,841 4,219 18,978 16,970
netViz technology
amortization 133 - 266 -
Total cost of revenues 4,974 4,219 19,244 16,970
Gross profit 22,796 19,382 84,819 76,874
Operating expenses:
Research and development 5,984 5,421 22,696 21,867
Selling and marketing 11,884 11,540 48,283 47,382
General and administrative 2,573 2,096 9,035 7,665
Acquistion-related charges,
in-process R&D, amortization,
and equity-based
compensation expense 82 21 1,234 106
Total operating expenses 20,523 19,078 81,248 77,020
Income (loss) from
operations 2,273 304 3,571 (147)
Other income, net 512 640 2,084 2,916
Income before income taxes 2,785 944 5,655 2,769
Provision (refund) for
income taxes (2,370) 192 (2,015) 568
Net income 5,155 752 $7,670 $2,201
Net income per common and
potential common share:
Basic $0.29 $0.04 $0.44 $0.13
Diluted $0.27 $0.04 $0.42 $0.12
Fully-taxed pro forma
diluted without unusual
items(a) $0.11 $0.04 $0.28 $0.12
(a) excludes equity-based compensation expense, acquisition-related
charges, in-process R&D, intangible asset amortization and
technology amortization. Assumes a 28% tax rate.
Weighted average common
shares outstanding 18,000,086 17,175,916 17,533,509 17,057,188
Diluted weighted average
common and potential
common shares
outstanding 19,080,522 17,351,328 18,207,541 17,627,122
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 and to assist in historical comparisons. 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, in-process-research-and-development costs,
amortization of intangible assets and transaction costs associated
with acquisitions. This pro forma calculation also substitutes current
period GAAP tax provisions with a pro forma tax rate of 28%.
Historically, we have had significant deferred tax assets and have not
recorded a significant federal tax provision and so the GAAP tax
provision related primarily to state and foreign taxes and has been
minimal.
As stated above, our expectations of continued profitability make
it likely that we will utilize the majority of our deferred tax asset
over the next few years. It is, therefore, deemed prudent to reverse
the majority of the existing valuation allowance against that asset.
This results in a one-time non-cash deferred income tax benefit of
$2.6 million in Q4 2003. Additionally, $2.7 million was released from
the valuation allowance and applied to additional paid-in-capital.
From a tax return perspective, and thus cash flow perspective, we
do not believe Concord will pay significant state or federal income
taxes for at least 2 years. We will continue incurring small foreign,
federal minimum and state minimum tax payments. These payments
amounted to $.6 million for income earned in 2003. Due to the release
of our valuation allowance, our GAAP tax rate is expected to increase
to 38% going forward. We will continue providing pro forma guidance
and results at a 28% tax rate to normalize our results against
historical reported results and are provided for comparative purposes
only.
Reconciliation
The table below reconciles Operating Income to Pro forma Net
Income for the fourth quarter ended 2003 vs. 2002 and for the twelve
months ended 2003 vs. 2002:
Three Months Ended Twelve Months Ended
In thousands, except per Dec. 31, Dec. 31, Dec. 31, Dec. 31,
share data 2003 2002 2003 2002
Reconciliation of GAAP &
Proforma Net Income:
Net income $5,155 $752 $7,670 $2,201
Add: Provision for
income taxes (2,370) 192 (2,015) 568
netViz technology
amortization 133 - 266 -
Acquisition-related
charges, in-process R&D,
amortization, and
equity-based
compensation exp. 82 21 1,234 106
Proforma income before
income taxes 3,000 965 7,155 2,875
Proforma income taxes
(Pro-forma rate: 28%) 840 270 2,003 805
Proforma net income $2,160 $695 $5,152 $2,070
Pro forma net income per
diluted share: $0.11 $0.04 $0.28 $0.12
Diluted weighted average
common and potential
common shares
outstanding 19,080,522 17,351,328 18,207,541 17,627,122
Q1 2004 Guidance
The table below reconciles Q1 2004 Pro-forma EPS guidance
to GAAP EPS:
Guidance for Quarter
ending March 31, 2004
Proforma EPS guidance $0.09 - 0.11
Estimated:
Income taxes (0.01)
Estimated amortization of
intangible assets (0.01)
Estimated final in-process
R&D of Tavve technology (0.01)
Estimated GAAP EPS $0.06 - $0.08
Concord Communications, Inc.
Condensed Consolidated Balance Sheets
As of
(Audited, in thousands)
December 31, December 31,
2003 2002
Assets
Current assets:
Cash, cash equivalents and
marketable securities $162,389 $73,670
Accounts receivable, net 22,194 17,417
Deferred tax asset 4,637 -
Other current assets 4,862 2,882
Total current assets 194,082 93,969
Equipment and improvements, net 6,697 8,245
Goodwill 6,225 -
Other intangible assets, net 3,003 -
Deferred tax and other assets 8,732 3,716
Total Assets $218,739 $105,930
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and
accrued expenses $18,158 $13,646
Deferred revenue 26,490 23,348
Total current liabilities 44,648 36,994
Long term liabilities
Convertible notes 86,250 -
Common stock, deferred compensation,
unrealized gain on marketable securities
and additional paid-in capital 112,648 101,413
Accumulated deficit (24,807) (32,477)
Total stockholders' equity 87,841 68,936
Total Liabilities and Stockholders'
Equity $218,739 $105,930
CONTACT: Concord Communications, Inc.
Raymond Ruddy, 508-303-4350
rruddy@concord.com