EXHIBIT 99.01
Keynote Announces Fiscal Second Quarter 2007 Results
-- Total Revenue of $16.7 Million Increased 31% Compared to
Fiscal Second Quarter 2006
-- Achieved GAAP Net Income of $30,000, or $0.00 per Share, and
Non-GAAP Net Income of $1.4 Million, or $0.08 per Share
-- Delivered $6.9 Million in Cash from Operations and $5.5
Million in Free Cash Flow
-- Second Quarter Results Met Company's Previous Revenue and
Earnings Guidance and Exceeded Cash Flow Guidance
SAN MATEO, Calif.--(BUSINESS WIRE)--May 1, 2007--Keynote Systems
(Nasdaq:KEYN), the global leader in Internet and mobile test and
measurement services, today announced financial results for its fiscal
second quarter ended March 31, 2007.
Umang Gupta, chairman and CEO of Keynote, said: "Our team once
again delivered strong financial results with solid execution across
most business units. Our Mobile Test and Measurement (MTM) business
continues to exceed projections; our Internet Test and Measurement
business performed in line with company expectations; and although
Customer Experience Test and Measurement revenue declined, our
stringent cost containments created efficiencies resulting in positive
contribution margins."
Gupta continued, "During the past 12 months, we have achieved
synergies between our existing Keynote mobile business and our
acquired SIGOS software, particularly with customer acquisitions and
technology exchange. Our MTM business, most of which is attributable
to Keynote SIGOS, has grown significantly and now contributes 26
percent of our total revenue. The second quarter MTM GAAP revenue grew
to $4.3 million, an eight fold increase compared to second quarter
2006. Also net deferred revenue reached $19.5 million at March 31,
2007."
Second Quarter 2007 Financial Summary
Revenue for the second quarter of fiscal year 2007 was $16.7
million, an increase of six percent compared to the preceding quarter
and a 31 percent increase compared to the second quarter of fiscal
year 2006. Net income for the second quarter of fiscal year 2007,
which included $1.0 million in stock-based compensation expenses, a
$193,000 income tax benefit, and a $760,000 charge for amortization of
intangible assets required under generally accepted accounting
principles (GAAP), was $30,000, or $0.00 per diluted share. This
compared to net income of $264,000, or $0.01 per diluted share, for
the preceding quarter, and net loss of $154,000, or $0.01 per basic
and diluted share, for the second quarter a year ago.
The non-GAAP net income for the quarter was $1.4 million, or $0.08
per diluted share, compared to non-GAAP net income of $551,000, or
$0.03 per diluted share, for the preceding quarter, and non-GAAP net
income of $1.5 million, or $0.08 per diluted share, for the second
quarter a year ago. The company defines non-GAAP net income or loss as
net income or loss adjusted for provision for income taxes, less cash
tax expense, stock-based compensation expense, and amortization of
purchased intangibles. Non-GAAP net income per share equals non-GAAP
net income divided by the weighted diluted share count as of that
period end.
Cash, Free Cash Flow and Deferred Revenue Summary
Keynote SIGOS' revenue recognition policy under GAAP requires the
amortization of most of Keynote SIGOS' software license revenue over a
12-month to 36-month period depending on the length of a contract. As
such, until Keynote SIGOS' revenue normalizes with quarterly billings,
management believes cash provided by operating activities, free cash
flow and deferred revenue are also important metrics to measure and
manage Keynote's financial performance.
For the quarter, cash provided by operating activities was $6.9
million, compared to $4.7 million in the prior quarter and $2.5
million in the second quarter of 2006. Cash used for purchases of
property, equipment and software totaled $1.4 million for the second
quarter of 2007, compared to $704,000 in the prior quarter and
$640,000 for the same period last year. Keynote generated free cash
flow, defined as cash flow from operations less cash used for
purchases of property, equipment, and software, of $5.5 million for
the quarter, compared to $4.0 million in the prior quarter and $1.9
million for the same period last year.
Keynote's net deferred revenue was $19.5 million at March 31,
2007, up 33 percent compared to $14.7 million at December 31, 2006 and
up 174 percent from $7.1 million at March 31, 2006.
"Strong contributions from Keynote SIGOS drove cash from
operations and free cash flow to an all time high," said Gupta. "Based
on the last six months' performance and third quarter expectations, we
believe fiscal 2007 will be a record year for cash from operations."
The company had $93.2 million in total cash, cash equivalents and
short-term investments as of March 31, 2007. As previously announced,
$10.6 million was paid out in the second fiscal quarter as a
performance earn-out to SIGOS' shareholders under the terms of the
purchase agreement for the acquisition of SIGOS by Keynote.
Operational Metrics Summary
As of March 31, 2007, Keynote's total worldwide customer base was
approximately 2,650 companies, up from approximately 2,400 companies
in the same quarter a year ago. Keynote currently provides its
services to 68 percent of the comScore Media Metrix's top 50 Web sites
and approximately half of the Fortune 100 companies. As of March 31,
2007, Keynote measured approximately 10,500 Internet pages, as
compared to 9,300 Internet pages in the same quarter a year ago.
Expectations for the Third Quarter of Fiscal Year 2007
The following company outlook for the third quarter of fiscal 2007
also includes expectations for Keynote SIGOS. The company consolidated
Keynote SIGOS' financial reporting under U.S. GAAP rules starting
April 3, 2006. U.S. GAAP requires Keynote SIGOS' system license
revenue to be ratably recognized over the initial duration of each
customer contract, which ranges from 12 months to 36 months.
As a result of the aforementioned accounting, Keynote will be able
to recognize as revenue only a fraction of Keynote SIGOS sales during
fiscal 2007. Accordingly, the acquisition will be dilutive to
Keynote's U.S. GAAP net income, although cash flow from operations is
expected to be positive.
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 the following for the third fiscal
quarter ending June 30, 2007:
-- Total revenue is expected to be between $16.7 million and
$17.2 million.
-- Net earnings (loss) per share are expected to be between
$(0.02) and $0.02.
-- Non-GAAP earnings per share are expected to be between $0.05
and $0.08.
-- Cash provided by operating activities is expected to be
between $3.5 million and $4.0 million.
-- Free cash flow is expected to be between $2.0 million and $2.5
million.
The above guidance was based on the following assumptions. Total
stock-based compensation expense and amortization of intangible assets
is currently expected to be approximately $1.8 million. Interest
income, net is expected to be approximately $1.0 million, assuming no
material changes in interest rates and currently planned uses of cash.
Cash paid for income taxes is expected to be approximately $400,000,
assuming no changes in required tax payments. Basic weighted average
shares outstanding are expected to be approximately 17.3 million
shares and diluted weighted average shares outstanding are expected to
be approximately 18.0 million shares, assuming no additional issuances
of equity or equity-related securities.
Conference Call
Keynote will host a conference call and simultaneous webcast at
2:00 pm (PST) today, May 1, 2007. To access the call in the U.S.,
please dial (866) 271-6228; international callers please dial (706)
679-4457, approximately 10 minutes prior to the start of the
conference call. The pass code is #4925751. The webcast 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 in the U.S. and 706-645-9291
internationally; the pass code is #4925751. The webcast is 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 SIGOS,
Keynote's ability to operate SIGOS and manage related costs
successfully, Keynote's ability to retain key employees, including key
employees of SIGOS particularly after the payment of the earn out
payment is made, pricing pressure with respect to Keynote's services,
Keynote's ability to increase sales of its CEM services, and the risk
that its prior organizational changes will not result in improved
results, unforeseen expenses, competition in Keynote's markets,
integration of acquired companies or technologies and costs associated
with any future acquisitions, Keynote's ability to manage expanded
international operations, Keynote's ability to keep pace with changes
in the mobile and 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, 2006, 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
Keynote Systems (Nasdaq:KEYN) is the global leader in test &
measurement solutions that improve mobile communications and online
business performance. As an independent and trusted third-party,
Keynote provides IT and marketing executives with an unbiased view
into their Internet services from around the world. For over a decade,
we have been providing measurement data and testing capabilities that
allow companies to understand and improve their customer's online and
mobile experience. Keynote has four test and measurement businesses:
Web performance, mobile quality, streaming & VoIP, and customer
experience/UX. In addition, our industry analysis group called Keynote
Competitive Research publishes proprietary studies measuring customer
experience and service levels across a wide range of industries.
Known as The Mobile and Internet Performance Authority(TM),
Keynote has a market-leading infrastructure of 2,400 measurement
computers and mobile devices in over 240 geographic locations around
the world. Keynote also maintains one of the most representative
panels of online users consisting of 160,000 consumers. Our on-demand,
hassle-free infrastructure allows businesses to access services they
need, when they need them to pinpoint and fix mobile quality and
Internet problems before they impact customers.
We help over 2,600 corporate customers become "the best of the
best" by helping them improve online business performance and mobile
communications quality. Our customers represent top mobile and
Internet companies including American Express, BP, Caterpillar, Dell,
Disney, eBay, ESPN Mobile, E*TRADE, Expedia, FedEx, Microsoft,
SonyEricsson, Sprint, T-Mobile, Verizon and Vodafone.
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 and The Mobile and Internet Performance
Authority is a trademark of Keynote Systems, Inc. Other trademarks are
the property of their respective owners. (C) 2007 Keynote Systems,
Inc.
Keynote Systems, Inc. and Subsidiaries
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
Mar 31 Dec 31 Mar 31 Mar 31 Mar 31
2007 2006 2006 2007 2006
-------- -------- -------- -------- --------
Revenue:
Subscription services $13,936 $12,713 $ 9,947 $26,649 $19,767
Professional services 2,778 3,102 2,792 5,880 6,688
-------- -------- -------- -------- --------
Total revenue 16,714 15,815 12,739 32,529 26,455
Expenses:
Costs of subscription
services 2,840 3,141 1,552 5,981 3,011
Costs of professional
services 2,207 2,123 2,210 4,330 4,655
Research and
development 2,877 2,872 2,091 5,749 4,080
Sales and marketing 5,037 4,629 4,020 9,666 7,389
Operations 1,948 1,842 1,847 3,790 3,494
General and
administrative 2,378 2,379 1,702 4,757 3,911
Excess occupancy income (21) (27) (40) (48) (50)
Amortization of
identifiable
intangible assets 760 759 418 1,519 815
-------- -------- -------- -------- --------
Total expenses 18,026 17,718 13,800 35,744 27,305
-------- -------- -------- -------- --------
Loss from operations (1,312) (1,903) (1,061) (3,215) (850)
Interest income and
other, net 1,149 1,121 1,280 2,270 2,388
-------- -------- -------- -------- --------
(Loss) income before
provision for income
taxes (163) (782) 219 (945) 1,538
(Provision) benefit for
income taxes 193 1,046 (373) 1,239 (1,105)
-------- -------- -------- -------- --------
Net income (loss) $ 30 $ 264 $ (154) $ 294 $ 433
======== ======== ======== ======== ========
Income (loss) per share:
Basic $ 0.00 $ 0.02 $ (0.01) $ 0.02 $ 0.02
Diluted $ 0.00 $ 0.01 $ (0.01) $ 0.02 $ 0.02
Weighted average common
shares outstanding:
Basic 17,284 17,116 18,902 17,199 18,812
Diluted 17,986 17,686 18,902 17,827 19,762
Keynote Systems, Inc. and Subsidiaries
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
March 31, September 30,
2007 2006
------------------------
Assets
Current assets:
Total cash, cash equivalents and short-term
investments $ 93,240 $ 90,751
Accounts receivable, net 6,002 7,122
Inventory 1,157 876
Prepaids, deferred costs and other current
assets 3,487 2,655
Deferred tax assets 1,452 1,389
---------- -------------
Total current assets 105,338 102,793
Deferred costs 970 -
Property and equipment, net 34,444 34,464
Goodwill 60,666 48,676
Identifiable intangible assets, net 8,959 10,105
Deferred tax assets 4,352 3,114
---------- -------------
Total assets $ 214,729 $ 199,152
========== =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 791 $ 1,558
Accrued expenses 10,777 10,748
Current portion of capital lease obligation 22 31
Deferred revenue, net 16,485 9,691
---------- -------------
Total current liabilities 28,075 22,028
Long term portion of capital lease
obligation 40 50
Long term deferred revenue, net 3,057 958
Long term deferred tax liability 2,866 2,727
---------- -------------
Total liabilities 34,038 25,763
---------- -------------
Stockholders' equity:
Common stock 17 19
Treasury stock - (21,150)
Additional paid-in capital 314,467 330,398
Accumulated deficit (137,284) (137,578)
Accumulated other comprehensive income 3,491 1,700
---------- -------------
Total stockholders' equity 180,691 173,389
---------- -------------
Total liabilities and stockholders' equity $ 214,729 $ 199,152
========== =============
Keynote Systems, Inc. and Subsidiaries
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three months ended Six months ended
Mar 31 Dec 31 Mar 31 Mar 31 Mar 31
2007 2006 2006 2007 2006
--------- -------- -------- --------- --------
Cash flows from
operating activities:
Net (loss) income $ 30 $ 264 $ (154) $ 294 $ 433
Adjustments to
reconcile net (loss)
income to net cash
provided by
operating
activities:
Depreciation and
amortization 1,086 1,093 919 2,179 1,824
Stock-based
compensation 1,004 920 908 1,924 1,704
Charges to bad debt
and billing
adjustment
reserves 65 83 33 148 116
Amortization of
intangible assets 760 759 418 1,519 815
Deferred tax assets
and liabilities (1,412) 525 283 (887) 891
(Accretion)
amortization of
debt investment
premium (50) (245) 118 (295) 265
Changes in
operating assets
and liabilities,
net of acquired
assets and
liabilities:
Accounts
receivable, net 1,682 (648) 771 1,034 (4)
Inventories (454) 217 - (237) -
Prepaids and
other assets (712) (1,021) (422) (1,733) 81
Accounts payable
and accrued
expenses 201 (1,108) (1,471) (907) (468)
Deferred revenue 4,675 3,841 1,123 8,516 789
--------- -------- -------- --------- --------
Net cash
provided by
operating
activities 6,875 4,680 2,526 11,555 6,446
--------- -------- -------- --------- --------
Cash flows from
investing activities:
Purchase of property,
equipment and
software (1,383) (704) (640) (2,087) (1,392)
Purchase of
businesses and
assets (28) (307) (142) (335) (2,662)
Payment of earnout
from acquisition (10,587) - (10,587)
Sales (purchases) of
short-term
investments, net (4,967) 1,033 19,720 (3,934) 19,506
--------- -------- -------- --------- --------
Net cash
provided by
(used in)
investing
activities (16,965) 22 18,938 (16,943) 15,452
--------- -------- -------- --------- --------
Cash flows from
financing activities:
Repayment of credit
facility (8) (15) (11) (23) (20)
Repurchase of
outstanding common
stock - - (107) - (1,586)
Proceeds from
issuance of common
stock and exercise
of stock options 2,545 745 1,025 3,290 2,796
--------- -------- -------- --------- --------
Net cash
provided by
financing
activities 2,537 730 907 3,267 1,190
--------- -------- -------- --------- --------
Effect of exchange rate
changes on cash and
cash equivalents 117 83 20 200 20
--------- -------- -------- --------- --------
Net (decrease) increase
in cash and cash
equivalents (7,436) 5,515 22,391 (1,921) 23,108
Cash and cash
equivalents at
beginning of the
period 51,177 45,662 47,651 45,662 46,934
--------- -------- -------- --------- --------
Cash and cash
equivalents at end of
the period (1) $ 43,741 $51,177 $70,042 $ 43,741 $70,042
========= ======== ======== ========= ========
(1) Excludes $49.5 million, $44.4 million, and $67.2 million of short-
term investments at March 31, 2007, December 31, 2006, and March 31,
2006, respectively.
Keynote Systems, Inc. and Subsidiaries
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GAAP TO NON-GAAP RECONCILIATION
(In Thousands, except per share data)
(Unaudited)
Three months ended Six months ended
Mar 31 Dec 31 Mar 31, Mar 31 Mar 31,
2007 2006 2006 2007 2006
-------- -------- -------- -------- --------
Revenue categories:
Internet Subscriptions $ 9,040 $ 8,884 $ 8,876 $17,924 $17,658
Internet Engagements 1,333 1,497 905 2,830 2,032
-------- -------- -------- -------- --------
Subtotal Internet Revenue 10,373 10,381 9,781 20,754 19,690
Mobile Subscriptions 4,316 3,203 488 7,519 1,027
Mobile Engagements - - - - -
-------- -------- -------- -------- --------
Subtotal Mobile Revenue 4,316 3,203 488 7,519 1,027
CEM Subscriptions 580 626 583 1,206 1,082
CEM Engagements 1,445 1,605 1,887 3,050 4,656
-------- -------- -------- -------- --------
Subtotal CEM Revenue 2,025 2,231 2,470 4,256 5,738
-------- -------- -------- -------- --------
Total Revenue $16,714 $15,815 $12,739 $32,529 $26,455
======== ======== ======== ======== ========
Non-GAAP net income and
income per share:
GAAP net income (loss) $ 30 $ 264 $ (154) $ 294 $ 433
Provision (benefit) for
income taxes (193) (1,046) 373 (1,239) 1,105
Stock based
compensation (a) 1,004 920 908 1,924 1,704
Amortization of purchased
intangibles 760 759 418 1,519 815
Non GAAP income before
income tax 1,601 897 1,545 2,498 4,057
Cash tax expense 240 346 80 586 187
-------- -------- -------- -------- --------
Non GAAP net income $ 1,361 $ 551 $ 1,465 $ 1,912 $ 3,870
======== ======== ======== ======== ========
Weighted average common
shares outstanding
(diluted): 17,986 17,686 18,902 17,827 19,762
Non GAAP income per share $ 0.08 $ 0.03 $ 0.08 $ 0.11 $ 0.20
(a) Stock based
compensation by
category:
Costs of subsciption
services $ 40 $ 41 $ - $ 81 $ -
Costs of professional
services 128 136 161 264 282
Research and development 209 210 215 419 401
Sales and marketing 316 280 255 596 501
Operations 144 146 183 290 333
General and
administrative 167 107 94 274 187
-------- -------- -------- -------- --------
$ 1,004 $ 920 $ 908 $ 1,924 $ 1,704
======== ======== ======== ======== ========
Keynote Systems, Inc. and Subsidiaries
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REVENUE DETAIL
(In Thousands)
(Unaudited)
Twelve
months
Three months ended ended
Dec 31 March 31 June 30 Sept 30 Sept 30
-------- -------- -------- -------- --------
FY 2007
Internet Subscriptions $ 8,884 $ 9,040
Internet Engagements 1,497 1,333
-------- -------- -------- -------- --------
Subtotal Internet Revenue 10,381 10,373
Mobile Subscriptions 3,203 4,316
CEM Subscriptions 626 580
CEM Engagements 1,605 1,445
-------- -------- -------- -------- --------
Subtotal CEM Revenue 2,231 2,025
-------- -------- -------- -------- --------
Total Revenue $15,815 $16,714
======== ======== ======== ======== ========
FY 2006
Internet Subscriptions $ 8,782 $ 8,876 $ 8,909 $ 9,096 $35,663
Internet Engagements 1,127 905 714 1,103 3,849
-------- -------- -------- -------- --------
Subtotal Internet Revenue 9,909 9,781 9,623 10,199 39,512
Mobile Subscriptions 539 488 1,949 2,409 5,385
CEM Subscriptions 499 583 590 647 2,319
CEM Engagements 2,769 1,887 1,705 1,931 8,292
-------- -------- -------- -------- --------
Subtotal CEM Revenue 3,268 2,470 2,295 2,578 10,611
-------- -------- -------- -------- --------
Total Revenue $13,716 $12,739 $13,867 $15,186 $55,508
======== ======== ======== ======== ========
FY 2005
Internet Subscriptions $ 8,625 $ 8,783 $ 9,160 $ 8,883 $35,451
Internet Engagements 822 1,082 881 1,026 3,811
-------- -------- -------- -------- --------
Subtotal Internet Revenue 9,447 9,865 10,041 9,909 39,262
Mobile Subscriptions 803 338 442 585 2,168
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
Internet Subscriptions $ 8,364 $ 8,416 $ 8,688 $ 8,957 $34,425
Internet Engagements 812 808 813 1,196 3,629
-------- -------- -------- -------- --------
Subtotal Internet Revenue 9,176 9,224 9,501 10,153 38,054
Mobile Subscriptions 358 414 555 700 2,027
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
======== ======== ======== ======== ========
Keynote Systems, Inc. and Subsidiaries
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DEFERRED REVENUE
(In thousands, except per share data)
(Unaudited)
March 31, December 31, March 31,
2007 2006 2006
---------- ------------- ---------
Deferred revenue, net
Domestic $ 6,639 $ 6,659 $ 6,472
International 12,903 8,050 661
---------- ------------- ---------
Total $ 19,542 $ 14,709 $ 7,133
Add back: unpaid deferred revenue
Domestic $ 4,608 $ 1,820 $ 1,273
International 1,993 7,090 11
---------- ------------- ---------
Total $ 6,601 $ 8,910 $ 1,284
Deferred revenue, gross
Domestic $ 11,247 $ 8,479 $ 7,745
International 14,896 15,140 672
---------- ------------- ---------
Total $ 26,143 $ 23,619 $ 8,417
CONTACT: Keynote Systems, Inc.
Dan Berkowitz, 650-403-3305 (Public Relations)
dberkowitz@keynote.com
Kirsten Chapman, 415-433-3777 (Investor Relations)
Moriah Shilton, 415-433-3777 (Investor Relations)
mshilton@lhai.com