Exhibit 99.1
Concord Reports Second Quarter Results; Revenue Grows 12% q/q and
Profitability Reestablished
MARLBORO, Mass.--(BUSINESS WIRE)--July 15, 2004--Concord
Communications, Inc. (NASDAQ: CCRD), a global provider of Business
Service Management (BSM) software solutions, today announced its
financial results for the second quarter ended June 30, 2004. Revenue
was $26.7 million, up from $23.8 million in the first quarter of 2004,
and up from $25.6 million in the second quarter of 2003. GAAP earnings
per share were $0.02, compared to a loss of $0.03 in the prior quarter
and earnings of $0.07 in the second quarter of 2003. Pro forma
earnings per share were $0.03, up from a pro forma loss per share of
$0.02 in the prior quarter and pro forma earnings of $0.06 in the same
quarter of 2003. (See the table below for reconciliation from GAAP to
pro forma).
"In Q2, we made progress, while working hard to improve our
marketing and sales execution," explained Jack Blaeser, Concord's CEO
and president. "In Q2 we executed well in our core network management
market, particularly in virtual private network (IP-VPN) management.
While the environment remains difficult, we are committed to our large
market opportunities in Business Service Management, Voice over IP
(VoIP) and wireless."
Second Quarter Results
Total Revenue Grows 12% and License Revenue Grows 22% Sequentially
-- Total revenue was $26.7 million, representing a 12% increase
from $23.8 million in the prior quarter. License revenue was
$12.6 million, a 22% increase over the $10.4 million reported
in the prior quarter.
Number of Large Deals and ASP Remain High
-- Number of deals over $100,000 was 32.
-- Average deal size for new customer accounts was $384,000. This
was substantially higher than previous quarters because of
several large new customer account wins.
New Business and Managed Services Segments Grow
-- In Q2, Concord delivered a major new product - the Business
Service Console (BSC) as part of its ongoing strategy to gain
traction in the BSM market. Companies such as Booz Allen
Hamilton have deployed the BSC to deliver an executive level
view into the status of their entire IT infrastructure.
-- Revenue from new customer accounts grew to 18% from 12% in the
prior quarter. New customers included Daktronics and Rheem
Manufacturing. Revenue from existing customers was 82%.
-- Managed service provider customers accounted for 23% of
revenue. These customers include Vertis and Telefonica Data.
Telco infrastructure customers like Comcast accounted for 37%
of revenue.
-- Enterprise customers accounted for 40% of revenue, from
customers like CalTech and Aristocrat Technologies.
-- International customers accounted for $8.4 million or 31% of
revenue. Customers include the Ministry of Public Service in
Kosovo and Krung Thai Bank.
Balance Sheet
-- Total cash, composed of cash, cash equivalents and marketable
securities, was $158.4 million in Q2. Cash and marketable
securities decreased $5.9 million in large part due to the
mark-to-market effect of rising interest rates on our
marketable securities.
-- Deferred revenue was $27.9 million, down from $29.5 million in
the previous quarter. This decrease is due to the timing of
both renewals and an unusually high increase in deferred
revenue last quarter of $3.0 million.
-- DSO was 75 days, up 1 day from the prior quarter.
Future Expectations
Third quarter 2004 revenue is expected to be approximately the
same as second quarter revenue and EPS is expected to be approximately
breakeven on a pro forma and GAAP basis.
Conference Call
Concord will hold a conference call today, July 15th, 2004, to
discuss results, product direction and future expectations at 8:30
a.m. ET. The number for the call is 800-821-1449 (domestic) and
973-409-9261 (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 4960382. 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) provides an integrated
solution that enables companies to map their IT services to business
needs, measure their actual end-user experience, and manage their
applications, systems, and networks. More than 3,000 companies
worldwide rely on Concord's eHealth(R) Suite, and its components, to
optimize IT services to drive business success. Based in Marlboro,
Mass., Concord maintains offices around the globe, and can be found on
the web at www.concord.com.
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, the slower than expected economic recovery in certain of
our markets; 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 integration of acquired products and technologies; the
ability to attract and retain key employees; issues that impact the
use of our intellectual property; risks associated with our debt
service obligations; market acceptance of, and demand for, our
products; risks associated with competition, including competition in
the business service management market and the network, system, and
application fault and performance markets; 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.
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 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 and 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 and
amortization of intangible assets. 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.
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. Due to the release of
our valuation allowance in the fourth quarter of 2003, our GAAP tax
rate has increased to 38%. 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.
Below are the Condensed Consolidated Statements of Operations,
Condensed Consolidated Balance Sheets, Condensed Consolidated
Statements of Cash Flows, Table of Reconciliation from GAAP to Pro
forma and Table of Reconciliation from Q3 2004 Pro forma EPS to GAAP
EPS.
CONCORD COMMUNICATIONS, INC.
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,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues:
License revenues $12,592 $13,154 $22,942 $26,063
Service revenues 14,113 12,461 27,608 23,669
----------- ----------- ----------- -----------
Total revenues 26,705 25,615 50,550 49,732
----------- ----------- ----------- -----------
Costs of Revenues:
Cost of license
revenues 848 683 1,670 1,272
Cost of service
revenues 4,363 4,045 8,312 8,087
----------- ----------- ----------- -----------
Total cost of
revenues 5,211 4,728 9,982 9,359
----------- ----------- ----------- -----------
Gross profit 21,494 20,887 40,568 40,373
----------- ----------- ----------- -----------
Operating Expenses:
Research and
development 5,963 5,437 11,752 10,884
Sales and marketing 12,393 12,579 23,909 23,944
General and
administrative 2,735 2,060 5,378 4,305
Acquired in-process
research and
development 100 -- 100 --
----------- ----------- ----------- -----------
Total operating
expenses 21,191 20,076 41,139 39,133
----------- ----------- ----------- -----------
Operating income
(loss) 303 811 (571) 1,240
----------- ----------- ----------- -----------
Other Income:
Interest income 1,073 709 2,162 1,426
Interest expense (819) -- (1,642) --
Other expense (20) (146) (189) (370)
----------- ----------- ----------- -----------
Total other income,
net 234 563 331 1,056
----------- ----------- ----------- -----------
Income (loss)
before income
taxes 537 1,374 (240) 2,296
Provision for (benefit
from) for income taxes 204 177 (91) 262
----------- ----------- ----------- -----------
Net income (loss) $333 $1,197 $(149) $2,034
=========== =========== =========== ===========
Net income (loss) per
common and potential
common share:
Basic $0.02 $0.07 $(0.01) $0.12
=========== =========== =========== ===========
Diluted $0.02 $0.07 $(0.01) $0.11
=========== =========== =========== ===========
Weighted average common
and potential common
shares outstanding:
Basic 18,258,159 17,372,070 18,208,832 17,313,416
=========== =========== =========== ===========
Diluted 18,563,673 18,022,181 18,208,832 17,767,593
=========== =========== =========== ===========
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
June 30, December 31,
2004 2003
----------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $32,484 $69,436
Marketable securities 125,955 92,455
Restricted cash 65 194
Accounts receivable, net of allowance of
$1,334 and $1,050 at June 30, 2004 and
December 31, 2003, respectively 22,114 22,194
Deferred tax assets 5,059 4,638
Prepaid expenses and other current assets 4,336 4,851
----------- -------------
Total current assets 190,013 193,768
Equipment and improvements, net 6,423 6,697
Goodwill 6,225 6,225
Other intangible assets, net 2,597 3,004
Deferred tax assets 5,394 4,962
Unamortized debt issuance costs and other
long-term assets 3,400 3,770
----------- -------------
Total assets $214,052 $218,426
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $2,339 $5,218
Accrued expenses 9,656 12,627
Deferred revenue 27,895 26,490
----------- -------------
Total current liabilities 39,890 44,335
Convertible senior notes 86,250 86,250
----------- -------------
Total liabilities 126,140 130,585
----------- -------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 18,299,824 and
18,121,211 shares at June 30, 2004 and
December 31, 2003, respectively 183 181
Additional paid-in capital 113,275 111,651
Accumulated other comprehensive income (590) 816
Accumulated deficit (24,956) (24,807)
----------- -------------
Total stockholders' equity 87,912 87,841
----------- -------------
Total liability and stockholders' equity $214,052 $218,426
=========== =============
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended Six Months Ended
----------------- ------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- ---------
Cash Flows from Operating
Activities:
Net income (loss) $333 $1,197 $(149) $2,034
Adjustments to reconcile net
income (loss) to net cash (used
for) provided by operating
activities:
Depreciation and amortization 1,124 1,209 2,237 2,618
Stock-based compensation -- 14 -- 34
Amortization of debt issuance
costs 176 -- 352 --
Deferred income taxes 335 -- 50 --
Changes in assets and
liabilities:
Accounts receivable (2,494) 281 80 (1,159)
Prepaid expenses and other
current assets 305 360 515 741
Accounts payable (201) 1,276 (2,879) (1,308)
Accrued expenses (971) (2,170) (2,971) 715
Deferred revenue (1,556) 2,028 1,405 4,402
Other assets 31 (12) 18 (105)
-------- -------- -------- ---------
Net cash (used for) provided by
operating activities (2,918) 4,183 (1,342) 7,972
-------- -------- -------- ---------
Cash Flows from Investing
Activities:
Purchases of equipment and
improvements (780) (1,237) (1,556) (1,830)
Purchases of marketable securities (3,544) (11,513) (60,713) (15,988)
Proceeds from maturities and sale
of marketable securities 7,700 3,111 24,904 10,688
(Deposit) release of restricted
cash (65) 150 129 300
-------- -------- -------- ---------
Net cash provided by (used in)
investing activities 3,311 (9,489) (37,236) (6,830)
-------- -------- -------- ---------
Cash Flows from Financing
Activities:
Proceeds from issuance of common
stock 1,029 1,231 1,626 1,270
-------- -------- -------- ---------
Net cash provided by financing
activities 1,029 1,231 1,626 1,270
-------- -------- -------- ---------
Net increase (decrease) in cash
and cash equivalents 1,422 (4,075) (36,952) 2,412
Cash and cash equivalents,
beginning of period 31,062 16,849 69,436 10,362
-------- -------- -------- ---------
Cash and cash equivalents, end of
period $32,484 $12,774 $32,484 $12,774
======== ======== ======== =========
Supplemental Disclosure of Cash
Flow Information:
Cash paid for income taxes $103 $145 $309 $247
Supplemental Disclosure of Noncash
Investing Transactions:
Unrealized loss on available-for-
sale securities $(3,141) $(68) $(2,309) $(181)
CONCORD COMMUNICATIONS, INC.
TABLE OF RECONCILIATION FROM GAAP TO PRO FORMA (Unaudited)
(In thousands, except share data)
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Reconciliation of GAAP
& Pro Forma Net
Income:
Net income (loss) $333 $1,197 $(149) $2,034
Add:
Provision for
(benefit from)
income taxes 204 177 (91) 262
From Cost of revenues
netViz technology
amortization 133 - 266 -
From Operating expenses
Amortization
expenses,
relating to the
netViz
acquisition and
equity-based
compensation
charges 70 14 140 34
Acquired in-
process research
and development 100 100
----------- ----------- ----------- -----------
Pro forma income
before income
taxes 840 1,388 266 2,330
----------- ----------- ----------- -----------
Pro forma income
taxes (Pro forma
rate: 28%) 235 389 74 652
----------- ----------- ----------- -----------
Pro forma net
income $605 $999 $192 $1,678
=========== =========== =========== ===========
Pro forma net
income per diluted
share: $0.03 $0.06 $0.01 $0.09
Diluted weighted
average common and
potential common
shares outstanding 18,563,673 18,022,181 18,704,787 17,767,593
CONCORD COMMUNICATIONS, INC.
TABLE OF RECONCILIATION FROM Q3 2004 PRO FORMA EPS TO GAAP EPS
(Unaudited)
Quarter ending
September 30, 2004
-------------------
Pro forma EPS guidance $0.00
Estimated:
Income taxes 0.00
Estimated amortization of intangible
assets (0.01)
-----------------
Estimated GAAP EPS $(0.01)
=================
CONTACT: Concord Communications
Raymond Ruddy, 508-303-4350
investorrelations@concord.com