Exhibit 99.1
Keynote Announces Fiscal First Quarter
Results; Diluted EPS of $.03 and Revenue of $13.7 Million at High End
of Company Guidance
SAN MATEO, Calif.--(BUSINESS WIRE)--Jan. 31, 2006--Keynote
Systems, Inc., (Nasdaq:KEYN)
-- Record Earnings Before Interest, Income Taxes and Amortization
(EBITA) of $1.4 Million at High End of Company's Guidance
-- Customer Experience Management (CEM) Revenue Up 10% From Prior
Quarter
-- Tenth Consecutive Quarter of Profitability
-- Cash Flow From Operations of $3.7 Million Exceeds the
Company's Guidance and Represents Sixteenth Consecutive
Quarter of Positive Cash Flow From Operations
Keynote Systems, Inc., (Nasdaq:KEYN), The Internet Performance
Authority(R), today announced financial results for its first quarter
of fiscal year 2006, which ended December 31, 2005.
Revenue for the first quarter of fiscal year 2006 was $13.7
million, a 2% increase compared to the preceding quarter and a 1%
increase compared to the first quarter of fiscal year 2005. Net income
for the first quarter of fiscal year 2006 was $587,000, or $0.03 per
diluted share, which included stock option amortization expense of
$796,000, compared to net income of $4.3 million, or $0.21 per diluted
share, for the preceding quarter, and net income of $791,000, or $0.04
per diluted share, for the first quarter a year ago. Net income for
the fourth quarter of fiscal year 2005 included $2.7 million of income
tax benefit associated with the partial recognition of net deferred
tax assets.
Keynote recorded earnings before net interest income, income taxes
and amortization of intangible assets of $1.4 million or 10% of
revenue for the first quarter of fiscal year 2006, compared to $1.3
million or 10% of revenue for the preceding quarter, and $806,000 or
6% of revenue for the first quarter a year ago. Keynote generated cash
flow from operations for the first quarter of fiscal year 2006 of $3.7
million. Cash flow from operations was $3.6 million for the preceding
quarter and $2.8 million for the first quarter of fiscal year 2005.
Cash used for purchases of property, equipment, and software totaled
$549,000 for the first quarter of fiscal year 2006 compared to $1.2
million for the preceding quarter and $712,000 for the first quarter
of fiscal year 2005. The Company generated free cash flow, defined as
cash flow from operations less cash used for purchases of property,
equipment, and software, of $3.2 million for the first quarter of
fiscal year 2006, compared to $2.4 million for the preceding quarter
and $2.1 million for the first quarter of fiscal year 2005.
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 first quarter results represent Keynote's tenth consecutive
quarter of profitability and sixteenth consecutive quarter of positive
cash flow from operations. We are proud of these results. We are
especially pleased with the sequential growth in our top line revenues
coupled with another strong quarter of EBITA and free cash-flow," said
Umang Gupta, chairman and CEO of Keynote. "Also gratifying is the
growth in our international revenues which now represent more than 10%
of our total revenues, up from 6% in the comparable quarter a year
ago".
As of December 31, 2005, Keynote's total worldwide customer base
was approximately 2,300 companies and approximately 11,000 individual
subscribers. During the first quarter, Keynote averaged a 99% monthly
customer retention rate.
Keynote currently provides its services to 74% of the comScore
Media Metrix top 50 Web sites and over half of the Fortune 100
companies. As of December 31, 2005, Keynote measured 9,576 URLs
through its Perspective(R) services and 6,745 Internet-connected
devices through its Red Alert services. Currently, Keynote captures
over 69 million Internet performance measurements daily.
Expectations for the Second 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 second fiscal quarter ending
March 31, 2006:
-- total revenue will be between $13.5 million and $14.0 million;
-- earnings before net interest income, income taxes, stock-based
compensation expense and amortization of intangible assets
will be between 6.0% and 9.0% as a percentage of total
revenue;
-- total stock-based compensation expense and amortization of
intangible assets will be approximately $1.2 million;
-- interest income, net will be approximately $1.0 million 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 55.5%, and
cash paid for income taxes will constitute approximately 7.0%
of income before provision for 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 January 31, 2006. 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 #3989664, 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 various services fluctuates
and the extent to which revenue from other service lines, 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, 2005, 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") is the worldwide
leader in services that improve online business performance and
communications technologies. Keynote helps approximately 2,300
corporate customers and 11,000 individual subscribers become "the best
of the best" online. The business premise supporting Keynote's mission
is: "Online businesses can't manage what they don't measure." As an
independent and trusted third-party, Keynote provides IT and marketing
executives with unbiased benchmarking data, competitive analysis and
operational metrics from the customer perspective. This data measures
service levels and customer experience of Web sites, broadband
services and mobile communications.
Known as The Internet Performance Authority(R), Keynote manages a
market-leading infrastructure of 1,200+ measurement computers and
mobile devices in over 114 locations and 66+ metropolitan areas
worldwide that assess service levels and a panel of over 160,000
consumers who participate in interactive Web site tests that assess
user experience. These online user experience tests capture customer
attitude and behavior to answer the critical "why" behind the "what."
Keynote's geographically distributed measurement services, on-site
monitoring appliances, competitive intelligence and custom studies
ensure that its customers outpace their competitors in online service
levels and overall user experience.
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) 2006 Keynote Systems,
Inc.
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended
Dec 31 Sept 30 Dec 31
2005 2005 2004
Revenue:
Subscription services $9,820 $9,900 $10,023
Professional services 3,896 3,574 3,565
--------------------------
Total revenue 13,716 13,474 13,588
Expenses:
Costs of subscription services 1,459 1,372 1,351
Costs of professional services 2,445 2,215 2,428
Research and development 1,989 1,750 1,962
Sales and marketing 3,369 3,371 3,548
Operations 1,647 1,566 1,565
General and administrative 2,209 1,810 1,793
Excess occupancy costs (10) 81 134
Amortization of identifiable intangible
assets 397 503 664
--------------------------
Total expenses 13,505 12,668 13,445
Income from operations 211 806 143
Interest income and other, net 1,108 1,010 703
--------------------------
Income before provision for income
taxes 1,319 1,816 846
--------------------------
Benefit (provision) for income taxes (732) 2,526 (55)
--------------------------
Net income $587 $4,342 $791
==========================
Income per share:
Basic $0.03 $0.23 $0.04
Diluted $0.03 $0.21 $0.04
Weighted average common shares outstanding
used:
Basic 18,724 19,041 19,866
Diluted 19,593 20,305 21,357
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
Dec. 31, Sept. 30,
2005 2005
Assets
Current assets:
Total cash, cash equivalents and short-term
investments $134,667 $133,803
Accounts receivable, net 7,087 6,387
Prepaid and other current assets 2,145 2,623
Deferred tax assets - 405
----------- ----------
Total current assets 143,899 143,218
Property and equipment, net 34,313 34,669
Goodwill, net 23,567 21,186
Identifiable intangible assets, net 3,843 3,760
Deferred tax assets 6,792 6,995
----------- ----------
Total assets $212,414 $209,828
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,464 $538
Accrued expenses 9,291 9,088
Current portion of capital lease obligation 39 40
Deferred revenue 6,035 6,217
----------- ----------
Total current liabilities 16,829 15,883
Long term portion of capital lease obligation 19 27
----------- ----------
Total liabilities 16,848 15,910
----------- ----------
Stockholders' equity:
Common stock 20 20
Treasury stock (12,619) (11,037)
Additional paid-in capital 337,913 335,350
Accumulated deficit (129,457) (130,044)
Accumulated other comprehensive loss (291) (371)
----------- ----------
Total stockholders' equity 195,566 193,918
----------- ----------
Total liabilities and stockholders' equity $212,414 $209,828
=========== ==========
Keynote Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three months ended
Dec 31 Sept 30 Dec 31
2005 2005 2004
Cash flows from operating activities:
Net income $587 $4,342 $791
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 905 951 793
Stock-based compensation 796 - -
Charges to bad debt and billing
adjustment reserves 83 59 164
Amortization of intangible assets 397 503 664
Amortization of debt investment
premium 147 452 794
Deferred tax assets 608 (2,663) -
Changes in operating assets and
liabilities, net of acquired assets
and liabilities:
Accounts receivable, net (775) 1,547 62
Prepaids and other assets 396 (230) (120)
Accounts payable and accrued
expenses 907 (695) 122
Deferred revenue (334) (704) (497)
-------------------------
Net cash provided by
operating activities 3,717 3,562 2,773
-------------------------
Cash flows from investing activities:
Purchase of property, equipment and
software (549) (1,179) (712)
Purchase of businesses and assets (2,520) (2,063) (385)
Sales / (Purchases) of short-term
investments, net (214) 16,916 5,930
-------------------------
Net cash provided by (used in)
investing activities (3,283) 13,674 4,833
-------------------------
Cash flows from financing activities:
Repayment of credit facility (9) (15) (8)
Repurchase of outstanding common stock (1,479)(11,170) -
Proceeds from issuance of common stock and
exercise of stock options 1,771 1,937 1,299
Final payment associated with prior year
tender offers - - (400)
-------------------------
Net cash provided by (used in)
financing activities 283 (9,248) 891
-------------------------
Net increase in cash and cash equivalents 717 7,988 8,497
Cash and cash equivalents at beginning of
the period 46,934 38,946 9,932
-------------------------
Cash and cash equivalents at end of the
period (1) $47,651 $46,934 $18,429
=========================
(1) Excludes $87.0 million, $86.9 million, and $131.3 million of
short-term investments at December 31, 2005, September 30, 2005,
and December 31, 2004, respectively.
Keynote Systems, Inc. and Subsidiaries
(In Thousands)
(Unaudited)
Three months ended
Dec 31, Sept 30, Dec 31,
2005 2005 2004
-------- -------- --------
Revenue categories:
Service Level Management Subscriptions $9,321 $9,468 $9,428
Service Level Management Engagements 1,127 1,026 822
-------- -------- --------
Subotal SLM Revenue 10,448 10,494 10,250
Customer Experience Management
Subscriptions 499 432 595
Customer Experience Management
Engagements 2,769 2,548 2,743
-------- -------- --------
Subtotal CEM Revenue 3,268 2,980 3,338
-------- -------- --------
Total Revenue $13,716 $13,474 $13,588
======== ======== ========
Earnings Before Net Interest Income, Income Taxes
and Amortization (EBITA):
Net income $587 $4,342 $791
(Benefit) provision for income
taxes 732 (2,526) 55
Interest income and other, net (1,108) (1,010) (703)
Stock based compensation(a) 796 - -
Amortization of Intangible Assets 397 503 664
-------- -------- --------
Earnings Before Net Interest Income,
Income Taxes
and Amortization (EBITA) $1,404 $1,309 $807
======== ======== ========
(a)Stock based compensation by category:
Costs of professional services $121 - -
Research and development 186 - -
Sales and marketing 246 - -
Operations 150 - -
General and administrative 93 - -
-------- -------- --------
$796 - -
======== ======== ========
Keynote Systems, Inc. and Subsidiaries
(In Thousands)
(Unaudited)
Three months ended Twelve
months
ended
Dec 31 March 31 June 30 Sept 30 Sept 30
-------- -------- -------- -------- --------
FY 2006
SLM Subscriptions $9,321
SLM Engagements 1,127
-------- -------- -------- -------- --------
Subotal SLM Revenue 10,448
CEM Subscriptions 499
CEM Engagements 2,769
-------- -------- -------- -------- --------
Subtotal CEM Revenue 3,268
-------- -------- -------- -------- --------
Total Revenue $13,716
======== ======== ======== ======== ========
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