SAN MATEO, California — April 18, 2002 — Keynote Systems (Nasdaq: KEYN), The Internet Performance Authority®, today announced financial results for its fiscal year 2002 second quarter ended March 31, 2002.
Revenues for the second quarter of fiscal 2002 were $9.2 million, which represented a 4% decrease from the previous quarter and a decrease of 23% from the corresponding quarter in fiscal 2001. The GAAP net loss for the quarter was $3.0 million, or $0.11 per share, compared to a net loss of $3.0 million, or $0.11 per share, for the preceding quarter, and a net loss of $3.7 million, or $0.13 per share, for the corresponding quarter a year ago. The pro forma net loss for the second quarter of fiscal 2002 was $2.7 million, or $0.10 per share, compared to a pro forma net loss of $2.7 million, or $0.10 per share, for the preceding quarter, and pro forma net income of $2.1 million, or $0.07 per share, for the corresponding quarter a year ago. The pro forma net loss for these periods excludes acquisition-related charges and the amortization of intangible assets and stock-based compensation of $307,000, $299,000, and $5.8 million, respectively. Second quarter First Call consensus estimates were a $0.14 loss per share.
"While our total revenue decreased slightly from last quarter, I am please that our emerging application performance management and testing service lines continued to show growth and represented 22% of our total second quarter revenue compared to 19% from the previous quarter and 8% for the same quarter last year," said Umang Gupta, chairman and CEO of Keynote. "We continue to transform and expand our business into the enterprise market, offering our customers new services which help them compete in an ever more distributed and complex Web application environment. In this quarter with the launch of Keynote Web Site Perspective™ 6.0, Keynote has fundamentally redefined benchmarking to include robust operational and diagnostic features."
For the March 2002 quarter, 85% of Keynote's total revenue, up from the previous quarter's 84%, was derived from U.S. corporate accounts, international resellers and consulting services. Revenue from the service–provider and dot com sector declined to 15% of total revenue in the March quarter, compared to 16% of total revenue in the December quarter. Service provider revenue includes revenue from content distribution companies, Web hosting companies and bandwidth providers.
As of March 31, 2002, the Company's total worldwide customer base was approximately 2,500 companies. During the quarter, Keynote averaged a 97% monthly customer retention rate with a slight increase from last quarter, and consistent with historical rates of 95% or better. New customers during the quarter included companies such as Abercrombie & Fitch Co. (NYSE: AFN), Adobe Systems Inc. (Nasdaq: ADBE), Armstrong World Industries Inc. (NYSE: ACK), Boise Cascade Corp. (NYSE: BCC), BroadWing Inc. (NYSE: BRW), CitiStreet, Cogent Communication Group Inc. (AMEX: COI), First American Financial (NYSE: FAF), Musicmatch, Inc., Scale Eight, Inc., Skechers U.S.A., Inc. (NYSE: SKX), Sony Pictures Entertainment, Texas Mutual Insurance Company and Thrifty Rent-A-Car.
Keynote currently provides its services to 70% of the Media Metrix top 50 Web sites and 62 of the Fortune 100 companies. As of March 31, 2002, Keynote measured approximately 9,600 URLs, which were down from the prior quarter, primarily as a result of reductions in benchmarking URLs purchased by our customers.
Highlights for the Quarter:
Expectations for the Third Quarter
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 total revenues to be between $8.2 and $8.7 million for the third quarter of fiscal 2002. Keynote currently expects costs of subscriptions to represent approximately 35% to 40% of subscription related revenues for the third quarter of fiscal 2002. Keynote currently expects costs of consulting and support services to represent approximately 130% to 135%of consulting and support services revenue for the third quarter of fiscal 2002. Total operating expenses, excluding costs of subscriptions and consulting and support services, and amortization of intangibles and stock-based compensation, are currently expected to be comparable to the March quarter. We expect amortization of intangible assets and stock based compensation to be approximately $300,000 for the third quarter of fiscal 2002, absent any additional extraordinary transactions. We expect interest income, net, to be approximately $2.6 million for the third quarter absent any transactions and assuming a flat interest rate environment. We would expect weighted average common shares outstanding to increase by approximately one percent in the June quarter, assuming no additional acquisitions using shares of Keynote stock as the consideration, no additional significant transactions involving Keynote's equity securities and/or common stock repurchases. Due to the Company's expected loss, loss carry-forward and tax credits, no tax provision is expected in the coming quarter. We expect capital expenditures to be between $500,000 and $1.0 million in the June quarter, absent any acquisition costs or other extraordinary transactions.
Keynote will host a conference call and simultaneous Web cast at 2:00 pm (PDT), today April 18, 2002. The web cast of the call will be available at the Investor section of our web site at www.keynote.com, and www.vcall.com. The replay will be available after the call by dialing (888) 203-1112, and the pass code is 696591. If you would like to listen to the live call, please contact Maricel Buangan at (650) 403-3314, or mbuangan@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, statements regarding forecasts concerning Keynote's expected revenues, operating expenses, capital expenditures, and introduction of additional services. 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 relatively short operating history with an unproven business model, which makes it difficult to evaluate its current business and future prospects; Keynote's reliance on existing customers renewing their subscriptions and purchasing additional services, particularly enterprise customers; the need to attract new customers; increased competition, which could result in pricing pressure or the adoption of a competitor's Internet performance measurement service as the industry standard for measuring the speed and reliability of websites; improvements to the Internet infrastructure, which could have the effect of reducing demand for Keynote's services; unforeseen changes in expense levels, the effect of any future acquisitions; widespread acceptance and use of the Internet as a means for business communications; Keynote's ability to develop and introduce new services in a timely manner, and customer acceptance of new services; Keynote's ability to keep pace with technological changes; Keynote's ability to successfully conduct international operations; and economic conditions in the technology and electronic commerce industries, as well as general economic conditions. Readers should also refer to the risk 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, 2001, and its quarterly reports on Form 10-Q or any current reports filed during the current 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"), The Internet Performance Authority®, is the worldwide leader in Internet performance services that improve the quality of e-business. Keynote's services enable corporate enterprises to benchmark, diagnose, test and manage their e-business applications both inside and outside the firewall. By improving the quality of their e-business, companies reduce costs, gain operational efficiency, protect and grow revenue and stay ahead of the competition. Approximately 2,500 corporate IT departments, Web hosting companies and Internet service providers around the world rely on the company's easy-to-use and cost-effective services.
Keynote Systems, Inc. was founded in 1995 and is headquartered in San Mateo, California. The company can be reached at www.keynote.com or by phone in the U.S. at 650-403-2400.
© 2002 Keynote Systems. The Internet Performance Authority is a registered trademark of Keynote in the United States and/or other countries.
Public Relations Contacts:
Della Lowe, Keynote Systems, Inc., (650) 403-3233, dlowe@keynote.com
Media Relations Hotline (650) 403-3254
Investor Relations Contact:
Maricel Buangan, Keynote Systems, Inc., (650) 403-3314, mbuangan@keynote.com
Keynote Systems, Inc. STATEMENTS OF OPERATIONS, CONSOLIDATED (In thousands, except Three months ended Six months ended per share data) March 31, March 31, 2002 2001 2002 2001 (Unaudited) (Unaudited) Revenue: Subscription services $ 8,557 $ 11,583 $ 17,353 $ 24,108 Consulting and support services 652 444 1,445 937 -------- -------- -------- -------- Total revenues 9,209 12,027 18,798 25,045 Expenses Cost of subscription services 2,857 3,120 6,249 6,254 Cost of consulting and support services 937 700 1,889 1,484 Research and development 2,101 1,885 4,280 3,825 Sales and Marketing 4,802 5,722 9,725 11,586 Operations 2,046 1,998 4,127 3,707 General and administrative 1,992 1,722 4,062 3,489 Acquisition-related charges and amortization of goodwill, intangible assets and stock-based compensation 307 5,755 606 13,230 -------- -------- -------- -------- Total expenses 15,042 20,902 30,938 43,575 -------- -------- -------- -------- Loss from operations (5,833) (8,875) (12,140) (18,530) Interest income, net 2,844 5,282 6,148 10,709 -------- -------- -------- -------- Loss before provision for income taxes (2,989) (3,593) (5,992) (7,821) Provision for income taxes -- 100 -- 300 -------- -------- -------- -------- Net loss $ (2,989) $ (3,693) $ (5,992) $ (8,121) ======== ======== ======== ======== Loss per share: Basic and fully diluted $ (0.11) $ (0.13) $ (0.21) $ (0.29) Weighted average common shares outstanding used: Basic and fully diluted 27,965 27,673 27,892 27,630 Keynote Systems, Inc. PRO FORMA STATEMENTS OF OPERATIONS, CONSOLIDATED (In thousands, except Three months ended Six months ended per share data) March 31, March 31, 2002 2001 2002 2001 (Unaudited) (Unaudited) Revenue: Subscription services $ 8,557 $ 11,583 $ 17,353 $ 24,108 Consulting and support services 652 444 1,445 937 -------- -------- -------- -------- Total revenues 9,209 12,027 18,798 25,045 Expenses Cost of subscription services 2,857 3,120 6,249 6,254 Cost of consulting and support services 937 700 1,889 1,484 Research and development 2,101 1,885 4,280 3,825 Sales and Marketing 4,802 5,722 9,725 11,586 Operations 2,046 1,998 4,127 3,707 General and administrative 1,992 1,722 4,062 3,489 -------- -------- -------- -------- Total expenses 14,735 15,147 30,332 30,345 -------- -------- -------- -------- Loss from operations (5,526) (3,120) (11,534) (5,300) Interest income, net 2,844 5,282 6,148 10,709 -------- -------- -------- -------- Pro forma net income (loss) before provision for income taxes (2,682) 2,162 (5,386) 5,409 Provision for income taxes -- 100 -- 300 -------- -------- -------- -------- Pro forma net income (loss) $ (2,682) $ 2,062 $ (5,386) $ 5,109 ======== ======== ======== ======== Pro forma income (loss) per share: Basic $ (0.10) $ 0.07 $ (0.19) $ 0.18 Fully diluted $ (0.10) $ 0.07 $ (0.19) $ 0.18 Weighted average common shares outstanding used: Basic 27,965 27,673 27,892 27,630 Fully diluted 27,965 28,574 27,892 28,735 Note: The above pro forma consolidated unaudited statements of operations exclude amortization of intangible assets and stock-based compensation of $307,000 and $606,000 for the quarter and six months ended March 31, 2002, and acquisition-related charges and amortization of goodwill, intangible assets and stock-based compensation of $5.8 million and $13.2 million for the quarter and six months ended March 31, 2001. Keynote Systems, Inc. BALANCE SHEETS, CONSOLIDATED (In thousands) March 31, Sept. 30, 2002 2001 (Unaudited) Assets Current assets: Cash and short-term investments $ 246,618 $ 251,696 Accounts Receivable, net 5,494 7,862 Prepaid and other current assets 3,945 4,649 --------- --------- Total current assets 256,057 264,207 Restricted cash 85,000 85,000 Property and equipment, net 15,787 17,208 Goodwill and other intangibles 5,084 4,497 Other assets 187 1,752 --------- --------- Total assets $ 362,115 $ 372,664 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Current portion of notes payable and capital lease obligation $ 183 $ 830 Accounts payable 1,402 2,385 Accrued expenses 7,905 10,626 Accrued excess facility costs 9,288 10,303 Deferred revenue 5,625 5,401 --------- --------- Total current liabilities 24,403 29,545 --------- --------- Total liabilities 24,403 29,545 Shareholders' equity: Common stock 28 28 Treasury stock (74) (1,086) Additional paid-in capital 413,986 413,966 Deferred compensation (282) (452) Accumulated deficit (77,797) (71,804) Accumulated other comprehensive loss 1,851 2,467 --------- --------- Total shareholders' equity 337,712 343,119 --------- --------- Total liabilities and shareholders' equity $ 362,115 $ 372,664 ========= =========