San Mateo, Calif., — August 8, 2005 — Keynote Systems (Nasdaq:KEYN), The Internet Performance Authority®, today announced that it had settled litigation brought by George A. Papazian and Douglas K. van Duyne, two former stockholders of NetRaker Corporation. Plaintiffs initiated the lawsuit with allegations in good faith. The parties have resolved the case on a mutually satisfactory basis. Based on the facts developed through investigation and discovery, plaintiffs have agreed to dismiss all claims, including the fraud allegations. The matter was settled pursuant to a confidential settlement agreement between the parties on July 25, 2005.
As a result of settling this matter subsequent to June 30, 2005 and prior to the filing of Keynote's Quarterly Report on Form 10-Q, in addition to the earnout payment of $1.7 million previously recorded to goodwill, the Company will be required under GAAP to record those costs associated with the settlement in its financial statements for the quarter ended June 30, 2005. Accordingly, the Company's previously announced net income of $1,666,000, or $0.08 per diluted share for the quarter ended June 30, 2005, will be $1,235,000, or $0.06 per diluted share, to reflect these costs associated with the settlement that were not included in goodwill.
In addition, Keynote has agreed in principle with its insurance carrier that the legal fees and costs associated with the lawsuit and the settlement will be partially covered under Keynote's insurance policies and Keynote expects to receive these amounts during the fourth quarter of its current fiscal year. These amounts will be recorded as a credit to General and Administrative expenses on Keynote's financial statements for the fourth quarter of its current fiscal year. As a result, Keynote now expects that diluted earnings per share will be between $0.07 and $0.10 per share for the fourth quarter of the fiscal year ending September 30, 2005, as compared to its previously announced guidance of between $0.06 to $0.08 per share.
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 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, 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, which businesses may be in areas in which Keynote has little experience, Keynote's ability to retain key employees of acquired companies as well as its own key employees, pricing pressure with respect to Keynote's services, unforeseen expenses during the current quarter, the amount and timing of insurance proceeds actually received, competition in Keynote's markets 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®, is the worldwide leader in e-business performance management services. Over 2,100 corporate IT and marketing departments and 14,000 individual subscribers rely on Keynote’s portfolio 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 due to the company’s global infrastructure of over 1,600 measurement computers in more than 50 cities worldwide that capture and store on a daily basis over 60 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. © 2005 Keynote Systems, Inc.
Editorial Contacts:
Della Lowe, Keynote, (650) 403-3233, dlowe@keynote.com
Dan Berkowitz, Keynote, (650) 403-3305, dberkowitz@keynote.com