Press Room: 2005

Keynote Announces Fourth Quarter and Fiscal Year 2005 Financial Results

• 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

SAN MATEO, Calif., — November 1, 2005 — Keynote Systems, Inc., (Nasdaq: KEYN), The Internet Performance Authority®, 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® 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®, is theworldwide 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® 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. © 2005 Keynote Systems, Inc.

Contacts:

Public Relations:
Dan Berkowitz, Keynote, (650) 403-3305, dberkowitz@keynote.com

Investor Relations:
Jack Andrews, Keynote Systems, Inc.(650) 403-3431, jandrews@keynote.com