EX-99 3 a4614685ex991.txt CONCORD COMMUNICATIONS, INC. EXHIBIT 99.1 Exhibit 99.1 Concord Reports First Quarter Results MARLBORO, Mass.--(BUSINESS WIRE)--April 14, 2004--Concord Communications Inc. (Nasdaq: CCRD) today announced revenue and earnings for its first quarter ended March 31, 2004. Total revenue was $23.8 million. GAAP loss per share was $0.03 and pro forma loss per share was $0.02. (See below for pro forma/GAAP reconciliation). "We have had an opportunity to review our performance during the first quarter and we are currently developing and prioritizing the steps necessary to increase revenue growth and return the company to profitability. Our financial goal is to make progress towards our target of 14-16% operating profit. We are confident that our core markets will continue to produce well and that we will see increased growth in our emerging markets such as VoIP, wireless and business service management," said Concord CEO Jack Blaeser. Future Expectations Second quarter 2004 revenue is expected to be between $26.5 million and $27.5 million, within the range of previously set expectations. EPS is expected to be between $0.00 and $0.04 on a GAAP basis and $0.01 and $0.05 on a pro forma basis. (See below for a reconciliation of GAAP and pro forma guidance). Operating expenses are expected to increase approximately $1 million over the first quarter to $21 million. First Quarter Results Cash Increases $2M and Deferred Revenue Increases $3M -- Cash was $164.3 million in Q1-04, up from $162.1 million in Q4-03. -- Deferred revenue was $29.5 million in Q1-04, up from $26.5 million in Q4-03 Average Deal Size Remains High -- Average deal size for new customers was $126,000. -- Number of deals over $100,000 was 35. Market Segment Sales Remain Close to Historical Averages -- Enterprise customers accounted for 64% of revenue. Managed service provider customers accounted for 22% of revenue. Telco infrastructure customers accounted for 14% of revenue. -- International customers accounted for $9.3 million or 41% of revenue. -- The installed base revenue was 88%. Of the revenue from existing customers, 38% was from existing customers expanding deployment of their existing Concord products across a larger portion of their IT infrastructure and 62% was from customers expanding toward an end-to-end solution by purchasing new products in the eHealth(R) Suite. Other Metrics -- Gross margin was 80%. -- DSO was 74 days. Conference Call: April 14th, at 8:30 AM EDT Concord will hold a conference call to discuss results on April 14th at 8:30AM EDT. The phone number for the call is 888-889-5345 (domestic) and 973-339-3086 (international). The call will be available on April 14th and will be available for approximately two weeks thereafter. The number for the replay is 877-519-4471 for U.S./Canada and 973-341-3080 for international callers. The access code is 4686290. The information in this press release, call replay and reconciliation of non-GAAP financials is posted at www.concord.com. About Concord Communications Concord Communications, Inc. (Nasdaq: CCRD) optimizes application performance and availability across networks and systems. Concord's 3000 eHealth(R) customers worldwide use the eHealth(R) Suite as the software solution to manage their IT infrastructure to drive profitable business operations, reduce costs, and increase competitive positioning. Concord is headquartered in Marlboro, Massachusetts. For more information on Concord, call 1-800-851-8725 or visit Concord on the Web at www.concord.com. Concord Communications, Inc., the Concord logo and eHealth are trademarks of Concord Communications, Inc. All other trademarks are the property of their respective owners. Safe Harbor This press release contains forward-looking statements, including statements regarding revenue and profit expectations, revenue growth, goals for profitability, operating profit, market opportunities and business growth. These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Such risks and uncertainties include, without limitation, the magnitude and duration of the current domestic financial crisis and economic slowdown and specifically their impact on the software, networking and telecommunications industries; our customers' ability to obtain funding, specifically in light of the aforementioned financial and economic climate, and the resulting potential delay of customer purchasing decisions; risks of continued operating losses; the ability to attract and retain quality professional employees; uncertainties involving intellectual property rights and litigation; litigation in general; risks in technology development and commercialization; risks in product development and market acceptance of and demand for the Company's products; risks associated with competition and competitive pricing pressures; risks associated with international sales, including foreign currency risks; and other risks detailed in the Company's filings with the Securities and Exchange Commission, including but not limited to, the Company's annual report on Form 10-K for the fiscal year ended December 31, 2003 and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of all these factors. The information contained in this press release is applicable only as of today and should thereafter be considered historical and will no longer constitute the Company's current expectations. The company undertakes no obligation to update information contained in this press release. Concord Communications, Inc. Condensed Consolidated Statement of Operations (Unaudited, in thousands, except share data) Three Months Ended March 31, March 31, 2004 2003 ----------- ----------- Revenues: Licenses $10,350 $12,909 Services 13,495 11,208 ----------- ----------- Total revenues 23,845 24,117 ----------- ----------- Cost of revenues: Cost of license and service revenues 4,638 4,631 netViz technology amortization 133 - ----------- ----------- Total cost of revenues 4,771 4,631 ----------- ----------- Gross profit 19,074 19,486 ----------- ----------- Operating expenses: Research and development 5,765 5,427 Sales and marketing 11,470 11,365 General and administrative 2,643 2,245 Acquisition-related charges, in-process R&D, amortization, and equity-based compensation expense 70 20 ----------- ----------- Total operating expenses 19,948 19,057 ----------- ----------- Operating (loss) income (874) 429 Other income, net 97 493 ----------- ----------- (Loss) income before income taxes (777) 922 ----------- ----------- (Benefit from) provision for income taxes (295) 86 ----------- ----------- Net (loss) income $(482) $836 =========== =========== Net (loss) income per common and potential common share: Basic $(0.03) $0.05 Diluted $(0.03) $0.05 Pro forma diluted $(0.02) $0.04 Weighted average common shares outstanding 18,159,503 17,254,342 Diluted weighted average common and potential common shares outstanding 18,159,503 17,448,566 Pro Forma Financial Results We prepare and release quarterly unaudited financial statements prepared in accordance with generally accepted accounting principles ("GAAP"). We also disclose and discuss certain pro forma financial information, used to evaluate our performance, in this and other earnings releases and investor conference calls. We believe that current shareholders and potential investors in our company use multiples of pro-forma EPS in making investment decisions about our company. We use pro-forma EPS to evaluate the results of our ongoing operations and to assist in historical comparisons. This measure, and other pro-forma information, should not be considered an alternative to measurements required by accounting principles generally accepted in the United States of America such as net income and net cash provided by operations and should not be considered measures of our liquidity. In addition, our non-GAAP measures may not be comparable to similar measures reported by other companies. Our key non-GAAP measure is: Pro-forma EPS Pro-forma EPS is calculated by dividing pro-forma net income by the diluted number of shares. Pro-forma Net Income excludes certain non-cash and special charges, consisting primarily of non-cash compensation charges, in-process-research-and-development costs, amortization of intangible assets and transaction costs associated with acquisitions. This pro forma calculation also substitutes current period GAAP tax provisions with a pro forma tax rate of 28%. Historically, we have had significant deferred tax assets and have not recorded a significant federal tax provision and so the GAAP tax provision related primarily to state and foreign taxes and has been minimal. From a tax return perspective, and thus cash flow perspective, we do not believe Concord will pay significant state or federal income taxes for at least 2 years. We will continue incurring small foreign, federal minimum and state minimum tax payments. Due to the release of our valuation allowance in the fourth quarter of 2003, our GAAP tax rate has increased to 38%. We will continue providing pro forma guidance and results at a 28% tax rate to normalize our results against historical reported results and are provided for comparative purposes only. Reconciliation The table below reconciles Net (Loss) Income to Pro forma Net (Loss) Income for the first quarter ended 2004 vs. 2003: Three Months Ended ----------------------- In thousands, except per share data March 31, March 31, 2004 2003 ----------- ----------- Reconciliation of GAAP & Pro forma Net (Loss) Income: Net (loss) income $(482) $836 Add: (Benefit from) provision for income taxes (295) 86 netViz technology amortization 133 - Acquisition-related charges, in- process R&D, amortization, and equity-based compensation expense 70 20 ----------- ----------- Pro forma (loss) income before income taxes (574) 942 ----------- ----------- Pro forma income taxes (Pro-forma rate: 28%) (161) 264 ----------- ----------- Pro forma net (loss) income $(413) $678 =========== =========== Pro forma net (loss) income per diluted share: $(0.02) $0.04 Diluted weighted average common and potential common shares outstanding 18,159,503 17,448,566 Q2 2004 Guidance The table below reconciles Q2 2004 Pro forma EPS guidance to GAAP EPS: Guidance for Quarter ending June 30, 2004 -------------- Pro forma EPS guidance $0.01 - $0.05 Estimated: Income taxes (0.00) Estimated amortization of intangible assets (0.01) -------------- Estimated GAAP EPS $0.00 - $0.04 ============== Concord Communications, Inc. Condensed Consolidated Balance Sheets As of (Unaudited, in thousands) -------------------------------------- March 31, December 31, 2004 2003 ------------- ------------ Assets Current assets: Cash, cash equivalents and marketable securities $164,314 $162,085 Accounts receivable, net 19,620 22,194 Deferred tax assets 5,351 4,638 Prepaid expenses and other current assets 4,641 4,851 ------------ ------------ Total current assets 193,926 193,768 Equipment and improvements, net 6,564 6,697 Goodwill 6,225 6,225 Other intangible assets, net 2,800 3,004 Long-term deferred tax assets 4,245 4,962 Unamortized debt issuance costs and other long-term assets 3,607 3,770 ------------ ------------ Total assets $217,367 $218,426 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $13,167 $17,845 Deferred revenue 29,451 26,490 ------------ ------------ Total current liabilities 42,618 44,335 Convertible notes 86,250 86,250 ------------ ------------ Common stock, additional paid-in capital, deferred compensation and accumulated other comprehensive income 113,788 112,648 Accumulated deficit (25,289) (24,807) ------------ ------------ Total stockholders' equity 88,499 87,841 ------------ ------------ Total Liabilities and Stockholders' Equity $217,367 $218,426 ============ ============ CONTACT: Concord Communications Inc. Public Relations: Eric Snow, 508-486-4508 pr@concord.com or Investor Relations: Raymond Ruddy, 508-303-4350 investorrelations@concord.com