Exhibit 99.1
Concord Reports Third Quarter Results;
Company Sees Growth in New Customer Accounts
and an Increase in Large Deals;
Signs New EVP of Sales
MARLBORO, Mass.--(BUSINESS WIRE)--Oct. 21, 2004--Concord
Communications, Inc. (NASDAQ: CCRD), a global provider of Business
Service Management (BSM) software solutions, today announced its
financial results for the third quarter ended September 30, 2004.
Revenue was $26.9 million, up from $26.7 million in the second quarter
of 2004, and up from $26.6 million in the third quarter of 2003. GAAP
earnings per share were $0.01, compared to $0.02 in the prior quarter
and earnings of $0.03 in the third quarter of 2003. Pro forma earnings
per share were $0.02, compared to pro forma earnings per share of
$0.03 in the prior quarter and pro forma earnings of $0.07 in the
third quarter of 2003. (See the table below for reconciliation from
GAAP to pro forma).
"The operational improvements we have made, and continue to make,
are paying off," explained Jack Blaeser, Concord's CEO and president.
"Since the last quarter, we increased cash, more than doubled the
number of new customer accounts, maintained our trend of higher ASP
and signed an exceptional new EVP of sales. We remain steadfast in our
pursuit of operational excellence and increased growth."
Third Quarter Results
New eHealth(R) Suite Customer Account Wins Increase and ASP
Remains High
-- New eHealth Suite customer account wins increased to 30, from
12 in the previous quarter. This increase is a result of
Concord's focus on initiatives, programs, and products that
attract new customers. New customers included The French
Ministry of the Interior and United Healthcare.
-- Revenue from existing eHealth Suite customers was 81%.
-- Average deal size for new eHealth Suite customer accounts was
$167,000.
Number of Large eHealth Suite Deals Increases
-- Number of eHealth Suite deals over $100,000 increased to 40,
from 32 in the previous quarter.
Continued Execution in Key Market Segments
-- BSM - Concord secured validation from Siebel Systems, Inc. for
an integration between eHealth Suite and Siebel 7 and 7.5.
-- VoIP - Customers like the Depository Trust Company purchased
eHealth Suite's VQM solution to monitor their VoIP rollout.
-- Mobile Wireless - New account Cosmote, the #2 wireless carrier
in Greece, selected eHealth Suite to manage its IP core
network.
Balance Sheet Improves
-- Total cash, composed of cash, cash equivalents and marketable
securities, was $163.4 million in Q3. Cash and marketable
securities increased nearly $5 million.
-- Deferred revenue was $28.1 million, up from $27.9 million in
the previous quarter.
-- DSO was 74 days, down 1 day from the prior quarter.
Market Segments Remain Consistent
-- Managed service provider customers accounted for 28% of
revenue, up from 23% in the previous quarter. These customers
include Getronics and Unisys. Telco infrastructure customers
like Rainbow Media accounted for 22% of revenue.
-- Enterprise customers accounted for 50% of revenue, from
customers like the Chicago Board of Trade and Shoprite.
-- International customers accounted for $9.2 million, or 36% of
revenue, up slightly from the previous quarter. Customers
include Vodafone, Telekom Austria and Bayer AG.
-- netViz revenue for Q3 was $1.2 million.
Future Expectations
Fourth quarter 2004 revenue is expected to be approximately $28
million and EPS is expected to be approximately $0.04 on a pro forma
and ($0.11) on a GAAP basis. A reconciliation of GAAP and pro forma
guidance is provided in the attachment.
Conference Call
Concord will hold a conference call today, October 21st, 2004, to
discuss results, product direction and future expectations at 8:30
a.m. ET. The number for the call is 800-370-0740 (domestic) and
973-409-9255 (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 5288656. 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,
Massachusetts, USA, Concord maintains offices around the globe, and
can be found 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.
Forward-looking statements made in this press release, including
forward-looking statements regarding revenue and profit and loss
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, continuation of 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. Accordingly
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 option
tender offer in the fourth quarter of 2004, we have calculated that
our GAAP tax rate has decreased to 14%. We will continue providing pro
forma guidance and results at a 28% tax rate to normalize our results
against historical reported results, and such pro forma guidance and
results 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 for Q4 2004 Pro forma EPS to GAAP
EPS.
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share and share data)
Three Months Ended Nine Months Ended
------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues:
License
revenues $ 12,636 $ 13,683 $ 35,578 $ 39,746
Service
revenues 14,261 12,877 41,869 36,546
----------- ----------- ----------- -----------
Total revenues 26,897 26,560 77,447 76,292
----------- ----------- ----------- -----------
Costs of Revenues:
Cost of license
revenues 902 826 2,572 2,098
Cost of service
revenues 4,429 4,085 12,741 12,172
----------- ----------- ----------- -----------
Total cost of
revenues 5,331 4,911 15,313 14,270
----------- ----------- ----------- -----------
Gross profit 21,566 21,649 62,134 62,022
----------- ----------- ----------- -----------
Operating Expenses:
Research and
development 5,990 5,911 17,742 16,794
Sales and
marketing 12,607 12,490 36,516 36,434
General and
administrative 2,886 2,156 8,264 6,462
Acquisition
related
charges - 40 40
Acquired in-
process research
and development - 994 100 994
----------- ----------- ----------- -----------
Total operating
expenses 21,483 21,591 62,622 60,724
----------- ----------- ----------- -----------
Operating
income (loss) 83 58 (488) 1,298
----------- ----------- ----------- -----------
Other Income:
Interest income 1,105 684 3,267 2,110
Interest
expense (821) - (2,463) -
Other expense (33) (168) (222) (538)
----------- ----------- ----------- -----------
Total other
income, net 251 516 582 1,572
----------- ----------- ----------- -----------
Income before
income taxes 334 574 94 2,870
Provision for
income taxes 104 93 13 355
----------- ----------- ----------- -----------
Net income $ 230 $ 481 $ 81 $ 2,515
=========== =========== =========== ===========
Net income per
common and
potential common
share:
Basic $ 0.01 $ 0.03 $ 0.00 $ 0.14
=========== =========== =========== ===========
Diluted $ 0.01 $ 0.03 $ 0.00 $ 0.14
=========== =========== =========== ===========
Weighted average common and
potential common shares
outstanding:
Basic 18,303,533 17,500,200 18,240,493 17,375,680
=========== =========== =========== ===========
Diluted 18,456,498 18,238,417 18,705,474 17,916,872
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
September 30, December 31,
2004 2003
-------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 22,934 $ 69,436
Marketable securities 140,370 92,455
Restricted cash 65 194
Accounts receivable, net of allowance
of $1,349 and $1,050 at September 30,
2004 and December 31, 2003,
respectively 22,168 22,194
Deferred tax assets 1,456 4,638
Prepaid expenses and other current
assets 4,130 4,851
-------------- ------------
Total current assets 191,123 193,768
Equipment and improvements, net 6,306 6,697
Goodwill 6,225 6,225
Other intangible assets, net 2,394 3,004
Deferred tax assets 8,631 4,962
Unamortized debt issuance costs and
other long-term assets 3,075 3,770
-------------- ------------
Total assets $ 217,754 $ 218,426
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,547 $ 5,218
Accrued expenses 12,010 12,627
Deferred revenue 28,138 26,490
-------------- ------------
Total current liabilities 42,695 44,335
Convertible senior notes 86,250 86,250
-------------- ------------
Total liabilities 128,945 130,585
-------------- ------------
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized - 50,000,000 shares
Issued and outstanding -
18,307,402 and 18,121,211 shares
at September 30, 2004 and December
31, 2003, respectively 183 181
Additional paid-in capital 113,323 111,651
Accumulated other comprehensive
income 29 816
Accumulated deficit (24,726) (24,807)
-------------- ------------
Total stockholders' equity 88,809 87,841
-------------- ------------
Total liability and stockholders'
equity $ 217,754 $ 218,426
============== ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Cash Flows from Operating
Activities:
Net income $ 230 $ 481 $ 81 $ 2,515
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 1,118 1,348 3,355 3,966
Stock-based compensation - 14 - 48
Amortization of debt
issuance costs 271 - 623 -
Deferred income taxes (11) - 39 -
Changes in assets and
liabilities:
Accounts receivable (54) (921) 26 (2,080)
Prepaid expenses and
other current assets 206 (74) 721 667
Other assets 54 23 72 (82)
Accounts payable 208 778 (2,671) (530)
Accrued expenses 2,354 834 (617) 1,549
Deferred revenue 243 (1,903) 1,648 2,499
-------- -------- -------- --------
Net cash provided
by operating
activities 4,619 580 3,277 8,552
-------- -------- -------- --------
Cash Flows from Investing
Activities:
Purchases of equipment and
improvements (798) (605) (2,354) (2,435)
Purchases of marketable
securities (17,537) (11,104) (78,250) (27,092)
Proceeds from maturities
and sale of marketable
securities 4,118 10,853 29,022 21,541
Deposit of restricted cash - - (65) -
Release of restricted cash (1) 150 194 450
Acquisition of business -
net of cash acquired - (4,968) - (4,968)
-------- -------- -------- --------
Net cash used for
investing
activities (14,217) (5,674) (51,453) (12,504)
-------- -------- -------- --------
Cash Flows from Financing
Activities:
Proceeds from issuance of
common stock 48 470 1,674 1,740
-------- -------- -------- --------
Net cash provided by
financing activities 48 470 1,674 1,740
-------- -------- -------- --------
Net decrease in cash and cash
equivalents (9,550) (4,624) (46,502) (2,212)
Cash and cash equivalents,
beginning of period 32,484 12,774 69,436 10,362
-------- -------- -------- --------
Cash and cash equivalents, end
of period $ 22,934 $ 8,150 $ 22,934 $ 8,150
======== ======== ======== ========
Supplemental Disclosure of
Cash Flow Information:
Cash paid for income taxes $ 243 $ 105 $ 552 $ 352
Supplemental Disclosure of Noncash
Investing Transactions:
Unrealized loss on
available-for-sale
securities $ 996 $ (445) $ (1,313) $ (626)
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONCORD COMMUNICATIONS, INC.
TABLE OF RECONCILIATION FROM GAAP TO PRO FORMA (Unaudited)
(In thousands, except share data)
Three Months Ended Nine Months Ended
------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Reconciliation of
GAAP & Pro Forma
Net Income:
Net income $ 230 $ 481 $ 81 $ 2,515
Add:
Provision for
income taxes 104 93 13 355
From Cost of
revenues
netViz
technology
amortization 133 133 399 133
net Viz deal
charges - 40 - 40
From Operating
expenses
Amortization
expenses,
relating to
the netViz
acquisition
and equity-
based
compensation
charges 70 84 210 118
Acquired in-
process
research and
development - 994 100 994
----------- ----------- ----------- -----------
Pro forma income
before income
taxes 537 1,825 803 4,155
----------- ----------- ----------- -----------
Pro forma income
taxes (Pro
forma rate:
28%) 150 511 225 1,163
----------- ----------- ----------- -----------
Pro forma net
income $ 387 $ 1,314 $ 578 $ 2,992
=========== =========== =========== ===========
Pro forma net
income per
diluted share: $ 0.02 $ 0.07 $ 0.03 $ 0.17
Diluted weighted
average common
and potential
common shares
outstanding 18,456,498 18,238,417 18,705,474 17,916,872
CONCORD COMMUNICATIONS, INC.
TABLE OF RECONCILIATION FROM Q4 2004 PRO FORMA EPS TO GAAP EPS
(unaudited)
Guidance for Quarter
ending December 31,
2004
---------------------
Proforma EPS guidance $ 0.04
Estimated:
Income taxes 0.03
Estimated cost of stock option buy-back (0.17)
Amortization of intangibles (0.01)
--------------------
Estimated GAAP EPS $ (0.11)
====================
CONTACT: Concord Communications
Public Relations
Eric Snow, 508-486-4508
pr@concord.com
or
Investor Relations
Raymond Ruddy, 508-303-4350
investorrelations@concord.com