Exhibit 99.01
Keynote Announces Fourth Quarter and
Fiscal Year 2005 Financial Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 1, 2005--Keynote Systems,
Inc. (Nasdaq:KEYN)
-- Diluted EPS, excluding one-time tax benefit, of $0.08 and
Revenue of $13.5 Million Consistent with Company's Guidance
-- Diluted EPS, excluding one-time tax benefit, of $0.08 up from
diluted EPS of $0.06 for Same Quarter Last Year
-- Ninth Consecutive Quarter of Profitability and Fifteenth
Consecutive Quarter of Positive Cash Flow from Operations
-- Completed Repurchase of 2.0 Million Shares of Common Stock;
Board Approved a New Plan to Repurchase an Additional 1.0
Million Shares
Keynote Systems, Inc., (Nasdaq:KEYN), The Internet Performance
Authority(R), today announced financial results for its fourth quarter
and fiscal year ended September 30, 2005.
Revenue for the fourth quarter of fiscal year 2005 was $13.5
million, comparable to the preceding quarter and an 11% increase
compared to the fourth quarter of fiscal year 2004. Net income for the
fourth quarter of fiscal year 2005 was $4.3 million, or $0.21 per
diluted share, which included the income tax benefit associated with
the partial recognition of net deferred tax assets, compared to net
income of $1.2 million, or $0.06 per diluted share, for the preceding
quarter, and net income of $1.3 million, or $0.06 per diluted share,
for the fourth quarter a year ago. Net income for the fourth quarter
of fiscal year 2005 would have been $1.7 million, or $0.08 per diluted
share, excluding the $2.7 million of income tax benefit associated
with the partial recognition of net deferred tax assets.
Revenue for fiscal year 2005 was $53.7 million, a 27% increase
compared to revenue of $42.4 million for fiscal year 2004. Net income
for fiscal year 2005 was $7.4 million, or $0.35 per diluted share,
which included the income tax benefit associated with the partial
recognition of net deferred tax assets, compared to net income of $4.6
million, or $0.22 per diluted share, for fiscal year 2004. Net income
for fiscal year 2005 would have been $4.7 million, or $0.23 per
diluted share, excluding the income tax benefit associated with the
partial recognition of net deferred tax assets of $2.7 million.
Keynote recorded earnings before net interest income, income taxes
and amortization of intangible assets of $1.3 million or 10% of
revenue for the fourth quarter of fiscal year 2005, compared to $1.1
million or 8% of revenue for the preceding quarter, and $1.2 million
or 10% of revenue for the fourth quarter a year ago. Keynote generated
cash flow from operations for the fourth quarter of fiscal year 2005
of $3.6 million. Cash flow from operations was $2.8 million for the
preceding quarter and $3.0 million for the fourth quarter of fiscal
year 2004. Cash used for purchases of property, equipment, and
software totaled $1.2 million for the fourth quarter of fiscal year
2005 compared to $1.0 million for the preceding quarter and $2.3
million for the fourth quarter of fiscal year 2004. The Company
generated free cash flow, defined as cash flow from operations less
cash used for purchases of property, equipment, and software, of $2.4
million for the fourth quarter of fiscal year 2005, compared to $1.8
million for the preceding quarter and $682,000 for the fourth quarter
of fiscal year 2004.
Keynote recorded earnings before net interest income, income taxes
and amortization of intangible assets of $4.2 million or 8% of revenue
for fiscal year 2005, compared to $4.0 million or 9% of revenue for
fiscal year 2004. Keynote generated cash flow from operations of $11.0
million for fiscal year 2005 and $15.2 million for fiscal year 2004.
Cash used for purchases of property, equipment, and software totaled
$3.6 million for fiscal year 2005 compared to $4.0 million for fiscal
year 2004. The Company generated free cash flow of $7.3 million for
fiscal year 2005, compared to $11.1 million for fiscal year 2004.
The Company believes that earnings before net interest income,
income taxes and amortization of intangible assets, as well as free
cash flow are important measures of its performance as they provide
investors with additional methods for evaluating its operating
performance and liquidity, and measuring the resources available for
the Company to invest in acquisitions or to repurchase stock.
"Our fourth quarter numbers represent Keynote's ninth consecutive
quarter of profitability and fifteenth consecutive quarter of positive
cash flow from operations. We are proud of these results.
Additionally, fiscal year 2005 represents a double milestone in our
corporate history," said Umang Gupta, chairman and CEO of Keynote.
"Our fiscal year 2005 revenue of $53.7 million is our highest annual
revenue ever achieved. This is a 27% increase over fiscal year 2004
revenue of $42.4 million. The second milestone that we are celebrating
is a decade spent improving online business performance. We were
founded in 1995, and since then we've helped thousands of companies
improve their online business performance. As the Internet and new
communications technologies continue to transform our lives and the
business landscape, we're excited about the growth opportunities that
lie ahead."
As of September 30, 2005, Keynote's total worldwide customer base
was approximately 2,300 companies and approximately 13,000 individual
subscribers. During the fourth quarter, Keynote averaged a 99% monthly
customer retention rate.
Keynote currently provides its services to 78% of the comScore
Media Metrix top 50 Web sites and over half of the Fortune 100
companies. As of September 30, 2005, Keynote measured 8,882 URLs
through its Perspective(R) services and 7,165 Internet-connected
devices through its Red Alert services. Currently, Keynote captures
over 69 million Internet performance measurements daily.
In October 2005, Keynote completed the repurchase of 2.0 million
shares of its common stock under the previously announced trading plan
that commenced in March 2005. Additionally, the Keynote Board of
Directors has approved a new trading plan to repurchase an additional
1.0 million shares of Keynote's common stock over a period of twelve
months. This plan is intended to be qualified under Rule 10b5-1 of the
Securities Exchange Act of 1934 and repurchases under this plan will
commence as soon as January 2006.
Expectations for the First Quarter of Fiscal Year 2006
The statements in this section of this press release are forward
looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Keynote currently expects that for the first fiscal quarter ending
December 31, 2005:
-- total revenue will be between $13.3 million and $13.7 million;
-- earnings before net interest income, income taxes, stock-based
compensation expense and amortization of intangible assets
will be between 8.0% and 10.0% as a percentage of total
revenue;
-- total stock-based compensation expense and amortization of
intangible assets will be approximately $1.4 million;
-- interest income, net will be approximately $900,000, absent
any additional acquisition transactions, assuming no material
changes in interest rates, and assuming Keynote continues to
repurchase common stock under its approved plan based on
levels consistent with prior periods;
-- its effective income tax rate will be approximately 40.0%, and
cash paid for income taxes will be approximately 7.0% of
income before income taxes;
-- diluted weighted average shares outstanding will be
approximately 20.0 million shares, assuming no additional
acquisitions using shares of Keynote stock as the
consideration, and no other significant transactions involving
Keynote's equity securities;
-- diluted earnings per share will be between $0.01 to $0.03;
-- cash flow from operations will be between $2.5 million to $3.0
million; and
-- capital expenditures will be approximately $1.0 million,
absent any acquisition costs or other extraordinary
transactions.
Keynote will host a conference call and simultaneous Web cast at
2:00 pm (PDT), today November 1, 2005. The web cast of the call will
be available at the Investor section of our web site at
www.keynote.com. The replay will be available after the call by
telephone by dialing (800) 642-1687, and the pass code is #1323058, or
by Web cast at the Investor section of our web site at
www.keynote.com.
Forward-Looking Statements
This press release contains forward-looking statements that are
not purely historical regarding the Company or management's
intentions, hopes, beliefs, expectations and strategies for the
future. Because such statements deal with future events, they are
subject to various risks and uncertainties, and actual results could
differ materially from the Company's current expectations.
Forward-looking statements in this release include, but are not
limited to, forecasts concerning Keynote's expected revenue, earnings
per share, cash flow from operations, income tax rate and other future
financial results. It is important to note that actual outcomes and
Keynote's actual results could differ materially from those in such
forward-looking statements. Factors that could cause actual results to
differ materially include risks and uncertainties such as Keynote's
ability to successfully market and sell its current services to new or
existing customers, Keynote's ability to develop and introduce new
services in a timely manner and customer acceptance of new services,
the extent to which demand for Keynote's performance measurement
services fluctuates and the extent to which revenue from other service
lines, including performance management services, can continue to
increase, the extent to which existing customers renew their
subscriptions and purchase additional services, particularly
enterprise customers, Keynote's ability to retain customers of
acquired businesses, Keynote's ability to operate acquired businesses
and manage related costs successfully, Keynote's ability to retain key
employees, pricing pressure with respect to Keynote's services,
unforeseen expenses, competition in Keynote's markets, integration of
acquired companies or technologies and costs associated with any
future acquisitions, Keynote's ability to keep pace with changes in
the Internet infrastructure as well as other technological changes,
and the success of Keynote's international operations. Readers should
also refer to the risks outlined in Keynote's reports filed with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for its fiscal year ended September 30, 2004, and its
quarterly reports on Form 10-Q and any current reports on Form 8-K
filed during the fiscal year.
All forward-looking statements and reasons why results might
differ included in this release are made as of the date of this press
release, based on information available to Keynote as of the date of
this press release, and Keynote assumes no obligation to update any
such forward-looking statement or reasons why results might differ.
About Keynote
Founded in 1995, Keynote Systems (Nasdaq:KEYN), The Internet
Performance Authority(R), is the worldwide leader in e-business
performance management services. Approximately 2,300 corporate IT and
marketing departments and approximately 13,000 individual subscribers
rely on Keynote's growing range of measurement and monitoring, service
level and customer experience management services to improve
e-business performance by reducing costs, improving customer
satisfaction and increasing profitability.
Keynote is viewed as The Internet Performance Authority(R) due to
the company's global infrastructure of over 1,400 measurement
computers in more than 60 cities worldwide that capture and store on a
daily basis over 69 million Internet performance measurements,
frequent media citations quoting Keynote's Web performance data and
analysis, the company's market-leading Web performance indices for
vertical markets and leading customer research that provides critical
business insight into online customer experiences, industry trends and
competitive Web strategies.
Keynote Systems, Inc. is headquartered in San Mateo, California
and can be reached at www.keynote.com or by phone in the U.S. at
650-403-2400.
Keynote, The Internet Performance Authority and Perspective are
registered trademarks of Keynote Systems, Inc. Other trademarks are
the property of their respective owners. (C) 2005 Keynote Systems,
Inc.
Keynote Systems, Inc. and Subsidiaries
- ----------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve
Three months ended months ended
Sept 30 June 30 Sept 30 Sept 30 Sept 30
- ----------------------------------------------------------------------
2005 2005 2004 2005 2004
Revenue:
Subscription services $9,900 $10,043 $10,175 $39,618 $37,574
Professional services 3,574 3,422 1,972 14,074 4,829
------------------------- -----------------
Total revenue 13,474 13,465 12,147 53,692 42,403
Expenses:
Costs of subscription
services 1,372 1,308 1,425 5,340 5,455
Costs of professional
services 2,215 2,088 1,588 9,171 4,023
Research and development 1,750 1,829 1,964 7,615 7,051
Sales and marketing 3,371 3,154 2,975 13,060 10,598
Operations 1,566 1,543 1,424 6,114 5,462
General and
administrative 1,810 2,352 1,431 7,796 5,022
Excess occupancy costs 81 105 156 434 840
Amortization of
identifiable intangible
assets, deferred
compensation and in-
process research and
development 503 591 783 2,435 1,937
------------------------- -----------------
Total expenses 12,668 12,970 11,746 51,965 40,388
Income from operations 806 495 401 1,727 2,015
Interest income and other,
net 1,010 833 685 3,329 2,691
------------------------- -----------------
Income before
provision for income
taxes 1,816 1,328 1,086 5,056 4,706
------------------------- -----------------
Provision for income taxes 2,526 (93) 231 2,309 (59)
------------------------- -----------------
Net income $4,342 $1,235 $1,317 $7,365 $4,647
========================= =================
Income per share:
Basic $0.23 $0.06 $0.07 $0.37 $0.24
Diluted $0.21 $0.06 $0.06 $0.35 $0.22
Weighted average common
shares outstanding used:
Basic 19,041 19,718 19,697 19,677 19,397
Diluted 20,305 20,616 21,267 20,860 20,886
Keynote Systems, Inc. and Subsidiaries
- ----------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
September September
30, 2005 30, 2004
- ----------------------------------------------------------------------
Assets
Current assets:
Total cash, cash equivalents and short-term
investments $133,803 $148,117
Accounts receivable, net 6,387 6,138
Prepaid and other current assets 2,623 2,329
Deferred tax assets 405 -
--------- ---------
Total current assets 143,218 156,584
Property and equipment, net 34,669 34,573
Goodwill, net 21,186 24,442
Identifiable intangible assets, net 3,760 6,131
Deferred tax assets 6,995 -
--------- ---------
Total assets $209,828 $221,730
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $538 $1,692
Accrued expenses 9,088 10,188
Current portion of capital lease obligation 40 80
Deferred revenue 6,217 7,741
--------- ---------
Total current liabilities 15,883 19,701
Long term portion of capital lease obligation 27 35
--------- ---------
Total liabilities 15,910 19,736
--------- ---------
Stockholders' equity:
Common stock 20 19
Treasury stock (11,037) (29)
Additional paid-in capital 335,350 339,734
Accumulated deficit (130,044) (137,409)
Accumulated other comprehensive loss (371) (321)
--------- ---------
Total stockholders' equity 193,918 201,994
--------- ---------
Total liabilities and stockholders' equity $209,828 $221,730
========= =========
Keynote Systems, Inc. and Subsidiaries
- ----------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Twelve
Three months ended months ended
Sept 30 June 30 Sept 30 Sept 30 Sept 30
- ----------------------------------------------------------------------
2005 2005 2004 2005 2004
Cash flows from operating
activities:
Net income $4,342 $1,235 $1,317 $7,365 $4,647
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 951 861 802 3,406 3,580
In-process research
and development - - 241 - 241
Amortization of
intangible assets 503 591 542 2,435 1,696
Amortization of debt
investment premium 452 598 1,132 2,843 3,904
Changes in operating
assets and
liabilities, net of
acquired assets and
liabilities:
Accounts
receivable, net 1,606 (247) (686) (128) (802)
Prepaids and other
assets (230) 36 (591) 39 (125)
Deferred tax assets (2,663) - - (2,663) -
Accounts payable
and accrued
expenses (695) 5 635 (989) 1,066
Deferred revenue (704) (291) (376) (1,347) 956
----------------- -------- -----------------
Net cash provided
by operating
activities 3,562 2,788 3,016 10,961 15,163
----------------- -------- -----------------
Cash flows from investing
activities:
Purchase of property,
equipment and software (1,179) (1,019) (2,334) (3,634) (4,015)
Purchase of businesses
and assets (2,063) (58) (22,026) (2,802) (25,685)
Sales / (Purchases) of
short-term
investments, net 16,916 20,292 15,677 48,423 (2,272)
----------------- -------- -----------------
Net cash provided
by (used in)
investing
activities 13,674 19,215 (8,683) 41,987 (31,972)
----------------- -------- -----------------
Cash flows from financing
activities:
Repayment of credit
facility (15) (13) (658) (48) (723)
Repurchase of
outstanding common
stock (11,170) (9,369) - (23,260) -
Proceeds from issuance
of common stock and
exercise of stock
options 1,937 1,805 1,553 7,362 7,822
----------------- -------- -----------------
Net cash provided
by (used in)
financing
activities (9,248) (7,577) 895 (15,946) 7,099
----------------- -------- -----------------
Net increase (decrease)
in cash and cash
equivalents 7,988 14,426 (4,772) 37,002 (9,710)
Cash and cash equivalents
at beginning of the
period 38,946 24,520 14,704 9,932 19,642
----------------- -------- -----------------
Cash and cash equivalents
at end of the period (1) $46,934 $38,946 $9,932 $46,934 $9,932
================= ======== =================
(1) Excludes $86.9 million, $104.2 million, and $138.1 million of
short-term investments at September 30, 2005, June 30, 2005, and
September 30, 2004, respectively.
Keynote Systems, Inc. and Subsidiaries
(In Thousands)
(Unaudited)
Twelve
Three months ended months ended
Sept 30 June 30 Sept 30 Sept 30 Sept 30
2005 2005 2004 2005 2004
-------- ----------------- -----------------
Performance Measurement
Services $7,293 $7,392 $7,199 $29,007 $28,159
Performance Management
Solutions 6,181 6,073 4,948 24,685 14,244
-------- -------- -------- -------- --------
Total Revenue $13,474 $13,465 $12,147 $53,692 $42,403
Earnings Before Net Interest Income, Income Taxes and Amortization of
Intangible Assets Reconciliation:
Net income $4,342 $1,235 $1,317 $7,365 $4,647
Provision for income
taxes (2,526) 93 (231) (2,309) 59
Interest income and
other, net (1,010) (833) (685) (3,329) (2,691)
Amortization of
Intangible Assets 503 591 783 2,435 1,937
-------- -------- -------- -------- --------
Earnings Before Net
Interest Income, Income
Taxes and Amortization
of Intangible Assets $1,309 $1,086 $1,184 $4,162 $3,952
======== ======== ======== ======== ========
Keynote Systems, Inc. and Subsidiaries
(In Thousands)
(Unaudited)
Twelve
months
Three months ended ended
Dec 31 March 31 June 30 Sept 30 Sept 30
-------- -------- -------- -------- --------
FY 2005
SLM Subscriptions $9,428 $9,121 $9,602 $9,468 $37,619
SLM Engagements 822 1,082 881 1,026 3,811
-------- -------- -------- -------- --------
Subotal SLM Revenue 10,250 10,203 10,483 10,494 41,430
CEM Subscriptions 595 531 441 432 1,999
CEM Engagements 2,743 2,431 2,541 2,548 10,263
-------- -------- -------- -------- --------
Subtotal CEM Revenue 3,338 2,962 2,982 2,980 12,262
-------- -------- -------- -------- --------
Total Revenue $13,588 $13,165 $13,465 $13,474 $53,692
======== ======== ======== ======== ========
FY 2004
SLM Subscriptions $8,722 $8,830 $9,243 $9,657 $36,452
SLM Engagements 812 808 813 1,196 3,629
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,534 9,638 10,056 10,853 40,081
CEM Subscriptions 73 111 420 518 1,122
CEM Engagements 116 70 238 776 1,200
-------- -------- -------- -------- --------
Subtotal CEM Revenue 189 181 658 1,294 2,322
-------- -------- -------- -------- --------
Total Revenue $9,723 $9,819 $10,714 $12,147 $42,403
======== ======== ======== ======== ========
FY 2003
SLM Subscriptions $8,956 $8,706 $8,835 $8,514 $35,011
SLM Engagements 676 662 388 873 2,599
-------- -------- -------- -------- --------
Subotal SLM Revenue 9,632 9,368 9,223 9,387 37,610
CEM Subscriptions 46 52 46 61 205
CEM Engagements 80 138 163 66 447
-------- -------- -------- -------- --------
Subtotal CEM Revenue 126 190 209 127 652
-------- -------- -------- -------- --------
Total Revenue $9,758 $9,558 $9,432 $9,514 $38,262
======== ======== ======== ======== ========
CONTACT: Keynote Systems, Inc.
Dan Berkowitz, 650-403-3305 (Public Relations)
dberkowitz@keynote.com
Jack Andrews, 650-403-3431 (Investor Relations)
jandrews@keynote.com