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January 31, 2006
PRESS RELEASE
Keynote Announces Fiscal First Quarter Results- Diluted EPS of $.03 and Revenue of $13.7 Million at High End of Company Guidance
- 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
SAN MATEO, Calif., - January 31, 2006 - Keynote Systems, Inc., (Nasdaq: KEYN), The Internet Performance Authority®, 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® 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®, 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.
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
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