Exhibit 99.1
Concord Reports Fourth Quarter Financial Results;
Company Enjoys Successful Quarter While Broadening Product Portfolio
MARLBORO, Mass.--(BUSINESS WIRE)--Feb. 1, 2005--Concord
Communications, Inc. (NASDAQ: CCRD), a global provider of Business
Service Management (BSM) software solutions, today announced its
financial results for the fourth quarter ended December 31, 2004.
Revenue was $28.7 million, up from $26.9 million in the third quarter
of 2004, and up from $27.8 million in the fourth quarter of 2003. Pro
forma earnings per share were $0.07, compared to pro forma earnings
per share of $0.02 in the prior quarter and pro forma earnings per
share of $0.11 in the fourth quarter of 2003. GAAP loss per share was
$0.03, compared to GAAP earnings per share of $0.01 in the prior
quarter and GAAP diluted earnings per share of $0.27 in the fourth
quarter of 2003. (See the table below for reconciliation between GAAP
and pro forma earnings per share).
"The past several weeks has been an exciting time in our history,"
stated Jack Blaeser, President and CEO of Concord Communications. "Our
two strategic acquisitions - one closed, one pending - are decisive
moves toward executing our corporate growth strategy. While we worked
toward these important deals, we also continued to demonstrate our
ability to drive organic growth by delivering both a solid quarter and
an important new product release - eHealth(R) Suite 5.7. In addition,
I am pleased by the speed with which our new Executive Vice President
of Worldwide Field Operations, Ted Williams, has assumed leadership of
our sales and service organizations."
Fourth Quarter Results
Acquisitions - Closed and Pending - to Expand Product Offering
-- Aprisma Management Technologies - Concord's vision of managing
IT services end-to-end, including networks, systems, and
applications will be broadened with the addition of SPECTRUM's
functionality. Post acquisition, Concord's capabilities will
include patented event correlation, root cause analysis,
technology relationship mapping, topology discovery and
display, and service modeling.
-- Vitel Software - With the acquisition of Vitel Software,
Concord becomes the only software company to proactively
manage the performance of voice networks that are based on
next-generation voice over IP, legacy TDM technology, or both.
Number of Large eHealth(R) Suite Deals Increases, Revenue Grows
-- The number of eHealth(R) Suite deals over $100,000 increased
to 46, from 40 in the previous quarter.
-- The average deal size for new eHealth(R) Suite customer
accounts was $124,000. New customers include Walgreens, the
largest drugstore chain in the U.S.; Meritz Securities, a
securities trading firm based in Korea, and COPEL, a Brazilian
utility company.
-- In addition, in Q4 total revenue grew 7%, while license
revenue grew 14% sequentially from Q3.
Continued Execution in Target Market Segments
-- BSM - Concord's Business Service Console continued to drive
customer interest, including organizations such as
Northwestern Medical Faculty Foundation in Chicago, CheckFree
Corporation in Georgia, Bayer Business Services in Germany,
and SPT, a service provider in Australia.
-- Voice - Vitel attracted new business for its voice network
performance management solution from organizations like the
City of Toronto and saw existing customers, like Glaxo Smith
Kline, purchase more modules to expand management of its
hybrid voice network and voice mail system.
-- Mobile Wireless - Concord continued to see customer traction
from major mobile wireless carriers such as Verizon Wireless
and Alltel.
Market Segments
-- Telco infrastructure customers, like Verizon Wireless and
Alltel, accounted for 33% of revenue.
-- Managed service provider customers, such as GCI, accounted for
27% of revenue.
-- Enterprise customers, such as Government of British Columbia
and Sutter Health, accounted for 40% of revenue.
-- International customers, such as Cegetel in France, Telstra in
Australia, and Fidelity in the UK, accounted for 33% of
revenue.
Balance Sheet and Other Income
-- Total cash, composed of cash, cash equivalents and marketable
securities, was $159.5 million at year-end.
-- Deferred revenue was $27.2 million.
-- DSO was 76 days.
Future Expectations
First quarter 2005 revenue, including revenue generated during the
stub period from our anticipated acquisition of Aprisma, is expected
to be between $31 million and $33 million. GAAP loss per share is
expected to be between $0.10 and $0.15 and pro forma EPS is expected
to be approximately breakeven. A reconciliation of GAAP and pro forma
guidance is provided in the table below.
Conference Call
Concord will hold a conference call today, February 1, 2005, to
discuss results, product direction and future expectations at 8:30
a.m. ET. The number for the call is 877-780-2271 (domestic) and
973-582-2757 (international). The call will be available for
approximately two weeks. The number for the replay is 877-519-4471
(domestic) and 973-341-3080 (international). The access code is
5610646. 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(R) 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, market information and statements regarding our
acquisitions and the expected benefits therefrom, are made pursuant to
the safe harbor provisions Section 21E of the Securities Exchange Act
of 1934. 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; the
failure to consummate the Aprisma acquisition; 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, considered non-recurring, which consist primarily of non-cash
and cash compensation expenses, in-process-research-and-development
costs, acquisition related costs and amortization of intangible
assets. In the quarter ending March 31, 2005, pro forma net income
also excludes acquisition related expenses related to the acquisitions
of Vitel (closed) and Aprisma (pending); and acquisition-related
compensation charges stemming from Aprisma.
This pro forma calculation also substitutes current period GAAP
tax provisions with a pro forma tax rate of 28%.
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. 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.
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share and share data)
Three Months Ended Twelve Months Ended
----------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
----------------------------------------------
Revenues:
License revenues $14,395 $14,520 $49,973 $54,267
Service revenues 14,346 13,250 56,215 49,796
----------------------------------------------
Total revenues 28,741 27,770 106,188 104,063
----------------------------------------------
Costs of Revenues:
Cost of license revenues 918 1,020 3,490 3,117
Cost of service revenues 4,526 3,954 17,267 16,127
----------------------------------------------
Total cost of revenues 5,444 4,974 20,757 19,244
----------------------------------------------
Gross profit 23,297 22,796 85,431 84,819
----------------------------------------------
Operating Expenses:
Research and development 6,139 6,020 23,881 22,767
Sales and marketing 12,919 11,918 49,435 48,352
General and
administrative 2,148 2,573 10,412 9,035
Stock-based compensation 3,298 12 3,298 60
Acquisition related
charges - - - 40
Acquired in-process
research and
development - - 100 994
----------------------------------------------
Total operating expenses 24,504 20,523 87,126 81,248
----------------------------------------------
Operating (loss) income (1,207) 2,273 (1,695) 3,571
----------------------------------------------
Other Income:
Interest income 1,204 679 4,471 2,808
Interest expense (820) (225) (3,283) (244)
Other expense 83 58 (139) (480)
----------------------------------------------
Total other income, net 467 512 1,049 2,084
----------------------------------------------
(Loss) income before
income taxes (740) 2,785 (646) 5,655
Benefit from income
taxes (125) (2,370) (112) (2,015)
----------------------------------------------
Net (loss) income $(615) $5,155 $(534) $7,670
==============================================
Net (loss) income per common and
potential common share:
Basic ($0.03) $0.29 ($0.03) $0.44
==============================================
Diluted ($0.03) $0.27 ($0.03) $0.42
==============================================
Weighted average common and
potential common shares
outstanding:
Basic 18,397,560 18,000,086 18,280,294 17,533,509
==============================================
Diluted 18,397,560 19,080,522 18,280,294 18,207,541
==============================================
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
Dec. 31, Dec. 31,
2004 2003
------------------
ASSETS
Current Assets:
Cash and cash equivalents $15,816 $69,436
Marketable securities 143,639 92,455
Restricted cash 66 194
Accounts receivable, net of allowance of $423 and
$1,050 at December 31, 2004 and December 31, 2003,
respectively 24,183 22,194
Deferred tax assets 1,763 4,638
Prepaid expenses and other current assets 8,170 4,851
------------------
Total current assets 193,637 193,768
Equipment and improvements, net 6,226 6,697
Goodwill 6,225 6,225
Other intangible assets, net 2,191 3,004
Deferred tax assets 12,211 4,962
Unamortized debt issuance costs and other long-term
assets 3,001 3,770
------------------
Total assets $223,491 $218,426
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $6,334 $5,218
Accrued expenses 12,171 12,627
Deferred revenue 27,207 26,490
------------------
Total current liabilities 45,712 44,335
Convertible senior notes 86,250 86,250
------------------
Total liabilities 131,962 130,585
------------------
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized - 50,000,000 shares; Issued and
outstanding - 18,449,964 and 18,121,211 shares at
December 31, 2004 and December 31, 2003,
respectively 184 181
Additional paid-in capital 117,113 111,651
Accumulated other comprehensive income (427) 816
Accumulated deficit (25,341) (24,807)
------------------
Total stockholders' equity 91,529 87,841
------------------
Total liability and stockholders' equity $223,491 $218,426
==================
CONCORD COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Twelve Months
Ended Ended
---------------- ----------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
---------------- ----------------
Cash Flows from Operating Activities:
Net income $(615) $5,155 $(534) $7,670
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,173 1,257 4,528 5,223
Gain on disposal or sale of equipment
and improvements (3) (14) (3) (14)
Stock-based compensation 3,298 12 3,298 60
Amortization of debt issuance costs 170 59 793 59
Deferred income taxes (806) (2,624) (767) (2,624)
Changes in assets and liabilities:
Accounts receivable (2,015) (2,393) (1,989) (4,473)
Prepaid expenses and other current
assets (4,043) (2,559) (3,322) (1,892)
Other assets (13) 26 59 (56)
Accounts payable 3,787 2,121 1,116 1,591
Accrued expenses 161 743 (456) 2,292
Deferred revenue (930) 52 718 2,551
---------------- ----------------
Net cash provided by
operating activities 164 1,835 3,441 10,387
---------------- ----------------
Cash Flows from Investing Activities:
Purchases of equipment and
improvements (874) (768) (3,228) (3,203)
Proceeds from sale of equipment
and improvements 3 - 3 -
Purchases of marketable securities (8,466)(31,803) (86,716)(58,895)
Proceeds from maturities and sale
of marketable securities 4,463 6,319 33,485 27,860
Deposit of restricted cash - - (65) -
Release of restricted cash - 195 194 645
Additions for Capitilized Software (99) - (99) -
Acquisition of business - net of
cash acquired - (13) - (4,981)
---------------- ----------------
Net cash used for investing
activities (4,973)(26,070) (56,426)(38,574)
---------------- ----------------
Cash Flows from Financing Activities:
Procees from convertible senior
notes - 86,250 - 86,250
Cash used to repurchase stock
options (3,298) - (3,298) -
Debt issuance costs - (3,519) - (3,519)
Proceeds from issuance of common
stock 989 2,790 2,663 4,530
---------------- ----------------
Net cash (used in) provided by
financing activities (2,309) 85,521 (635) 87,261
---------------- ----------------
Net (decrease) increase in cash
and cash equivalents (7,118) 61,286 (53,620) 59,074
Cash and cash equivalents, beginning
of period 22,934 8,150 69,436 10,362
---------------- ----------------
Cash and cash equivalents, end of
period $15,816 $69,436 $15,816 $69,436
================ ================
Supplemental Disclosure of Cash Flow
Information:
Cash paid for income taxes $107 $161 $659 $513
Supplemental Disclosure of Noncash
Investing Transactions:
Retirements of fully depreciated
equipment and improvements $- $4,615 $- $4,615
Unrealized loss on available-for-
sale securities $(735) $(966) $(2,048)$(1,592)
Common Stock issued to acquire
business $- $4,968 $- $4,968
CONCORD COMMUNICATIONS, INC.
TABLE OF RECONCILIATION FROM GAAP TO PRO FORMA (Unaudited)
(In thousands, except share data)
Three Months Ended Twelve Months Ended
---------------------- -----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
---------------------- -----------------------
Reconciliation of GAAP
& Pro Forma Net
Income:
Net (loss) income $(615) $5,155 $(534) $7,670
Add:
Provision for income
taxes (125) (2,370) (112) (2,015)
From Cost of revenues
netViz technology
amortization 133 133 532 266
From Operating
expenses
Amortization expenses,
relating to the netViz
acquisition and equity-
based compensation
charges 70 82 280 200
Acquired in-process
research and
development - - 100 994
net Viz acquistion
relates expenses - - - 40
Compensation expenses
related to stock
option tender offer 3,298 - 3,298 -
Change in allowance for
bad debt (907) - (907) -
---------------------- -----------------------
Pro forma income before
income taxes 1,854 3,000 2,657 7,155
---------------------- -----------------------
Pro forma income taxes
(Pro forma rate: 28%) 519 840 744 2,003
---------------------- -----------------------
Pro forma net income $1,335 $2,160 $1,913 $5,152
====================== =======================
Pro forma net income
per diluted share: $0.07 $0.11 $0.10 $0.28
Diluted weighted average
common and potential
common shares
outstanding 18,535,865 19,080,522 18,680,680 $18,207,541
Q1 2005 Guidance
The table below reconciles Q1 2005 Pro-forma EPS guidance to GAAP
EPS (unaudited):
-------------------
Guidance for
Quarter ending
March 31, 2005
-------------------
Estimated Pro-forma EPS guidance ($0.02) to $0.02
-------------------
Estimated:
Income taxes difference $0.04
Transaction expenses related to the acquisitions ($0.10) to ($0.15)
of Vitel and Aprisma
Amortization of intangibles and acquisition- ($0.02) to ($0.06)
related compensation charges
-------------------
Estimated GAAP Loss Per Share ($0.10) to ($0.15)
===================
CONTACT: Concord Communications
Ray Ruddy, 508-303-4350
Investor Relations
rruddy@concord.com
or
Eric Snow, 508-486-4508
Public Relations
esnow@concord.com