EX-99.1 2 a4746281ex991.txt CONCORD COMMUNICATIONS, INC. EXHIBIT 99.1 Exhibit 99.1 Concord Reports Third Quarter Results; Company Sees Growth in New Customer Accounts and an Increase in Large Deals; Signs New EVP of Sales MARLBORO, Mass.--(BUSINESS WIRE)--Oct. 21, 2004--Concord Communications, Inc. (NASDAQ: CCRD), a global provider of Business Service Management (BSM) software solutions, today announced its financial results for the third quarter ended September 30, 2004. Revenue was $26.9 million, up from $26.7 million in the second quarter of 2004, and up from $26.6 million in the third quarter of 2003. GAAP earnings per share were $0.01, compared to $0.02 in the prior quarter and earnings of $0.03 in the third quarter of 2003. Pro forma earnings per share were $0.02, compared to pro forma earnings per share of $0.03 in the prior quarter and pro forma earnings of $0.07 in the third quarter of 2003. (See the table below for reconciliation from GAAP to pro forma). "The operational improvements we have made, and continue to make, are paying off," explained Jack Blaeser, Concord's CEO and president. "Since the last quarter, we increased cash, more than doubled the number of new customer accounts, maintained our trend of higher ASP and signed an exceptional new EVP of sales. We remain steadfast in our pursuit of operational excellence and increased growth." Third Quarter Results New eHealth(R) Suite Customer Account Wins Increase and ASP Remains High -- New eHealth Suite customer account wins increased to 30, from 12 in the previous quarter. This increase is a result of Concord's focus on initiatives, programs, and products that attract new customers. New customers included The French Ministry of the Interior and United Healthcare. -- Revenue from existing eHealth Suite customers was 81%. -- Average deal size for new eHealth Suite customer accounts was $167,000. Number of Large eHealth Suite Deals Increases -- Number of eHealth Suite deals over $100,000 increased to 40, from 32 in the previous quarter. Continued Execution in Key Market Segments -- BSM - Concord secured validation from Siebel Systems, Inc. for an integration between eHealth Suite and Siebel 7 and 7.5. -- VoIP - Customers like the Depository Trust Company purchased eHealth Suite's VQM solution to monitor their VoIP rollout. -- Mobile Wireless - New account Cosmote, the #2 wireless carrier in Greece, selected eHealth Suite to manage its IP core network. Balance Sheet Improves -- Total cash, composed of cash, cash equivalents and marketable securities, was $163.4 million in Q3. Cash and marketable securities increased nearly $5 million. -- Deferred revenue was $28.1 million, up from $27.9 million in the previous quarter. -- DSO was 74 days, down 1 day from the prior quarter. Market Segments Remain Consistent -- Managed service provider customers accounted for 28% of revenue, up from 23% in the previous quarter. These customers include Getronics and Unisys. Telco infrastructure customers like Rainbow Media accounted for 22% of revenue. -- Enterprise customers accounted for 50% of revenue, from customers like the Chicago Board of Trade and Shoprite. -- International customers accounted for $9.2 million, or 36% of revenue, up slightly from the previous quarter. Customers include Vodafone, Telekom Austria and Bayer AG. -- netViz revenue for Q3 was $1.2 million. Future Expectations Fourth quarter 2004 revenue is expected to be approximately $28 million and EPS is expected to be approximately $0.04 on a pro forma and ($0.11) on a GAAP basis. A reconciliation of GAAP and pro forma guidance is provided in the attachment. Conference Call Concord will hold a conference call today, October 21st, 2004, to discuss results, product direction and future expectations at 8:30 a.m. ET. The number for the call is 800-370-0740 (domestic) and 973-409-9255 (international). The call will be available for approximately two weeks. The number for the replay is 877-519-4471 for U.S./Canada and 973-341-3080 for international callers. The access code is 5288656. 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) provides an integrated solution that enables companies to map their IT services to business needs, measure their actual end-user experience, and manage their applications, systems, and networks. More than 3,000 companies worldwide rely on Concord's eHealth(R) Suite, and its components, to optimize IT services to drive business success. Based in Marlboro, Massachusetts, USA, Concord maintains offices around the globe, and can be found 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. Forward-looking statements made in this press release, including forward-looking statements regarding revenue and profit and loss expectations, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements involve risks and uncertainties, and actual results could differ materially from the forward-looking statements contained herein. Risks and uncertainties include, without limitation, continuation of the slower than expected economic recovery in certain of our markets; our customers' ability to obtain funding, specifically in light of the aforementioned economic climate, and the resulting potential delay or cancellation of pending customer purchases; risks of operating losses including the cost of development and sale of our products; the integration of acquired products and technologies; the ability to attract and retain key employees; issues that impact the use of our intellectual property; risks associated with our debt service obligations; market acceptance of, and demand for, our products; risks associated with competition, including competition in the business service management market and the network, system, and application fault and performance markets; risks associated with international sales, including foreign currency risks and longer payment cycles; 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 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 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. 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 and 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 and amortization of intangible assets. 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. Accordingly 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 option tender offer in the fourth quarter of 2004, we have calculated that our GAAP tax rate has decreased to 14%. We will continue providing pro forma guidance and results at a 28% tax rate to normalize our results against historical reported results, and such pro forma guidance and results are provided for comparative purposes only. Below are the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Table of Reconciliation from GAAP to Pro forma and Table of Reconciliation for Q4 2004 Pro forma EPS to GAAP EPS. CONCORD COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share and share data) Three Months Ended Nine Months Ended ------------------------- ------------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Revenues: License revenues $ 12,636 $ 13,683 $ 35,578 $ 39,746 Service revenues 14,261 12,877 41,869 36,546 ----------- ----------- ----------- ----------- Total revenues 26,897 26,560 77,447 76,292 ----------- ----------- ----------- ----------- Costs of Revenues: Cost of license revenues 902 826 2,572 2,098 Cost of service revenues 4,429 4,085 12,741 12,172 ----------- ----------- ----------- ----------- Total cost of revenues 5,331 4,911 15,313 14,270 ----------- ----------- ----------- ----------- Gross profit 21,566 21,649 62,134 62,022 ----------- ----------- ----------- ----------- Operating Expenses: Research and development 5,990 5,911 17,742 16,794 Sales and marketing 12,607 12,490 36,516 36,434 General and administrative 2,886 2,156 8,264 6,462 Acquisition related charges - 40 40 Acquired in- process research and development - 994 100 994 ----------- ----------- ----------- ----------- Total operating expenses 21,483 21,591 62,622 60,724 ----------- ----------- ----------- ----------- Operating income (loss) 83 58 (488) 1,298 ----------- ----------- ----------- ----------- Other Income: Interest income 1,105 684 3,267 2,110 Interest expense (821) - (2,463) - Other expense (33) (168) (222) (538) ----------- ----------- ----------- ----------- Total other income, net 251 516 582 1,572 ----------- ----------- ----------- ----------- Income before income taxes 334 574 94 2,870 Provision for income taxes 104 93 13 355 ----------- ----------- ----------- ----------- Net income $ 230 $ 481 $ 81 $ 2,515 =========== =========== =========== =========== Net income per common and potential common share: Basic $ 0.01 $ 0.03 $ 0.00 $ 0.14 =========== =========== =========== =========== Diluted $ 0.01 $ 0.03 $ 0.00 $ 0.14 =========== =========== =========== =========== Weighted average common and potential common shares outstanding: Basic 18,303,533 17,500,200 18,240,493 17,375,680 =========== =========== =========== =========== Diluted 18,456,498 18,238,417 18,705,474 17,916,872 =========== =========== =========== =========== The accompanying notes are an integral part of these condensed consolidated financial statements. CONCORD COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) September 30, December 31, 2004 2003 -------------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 22,934 $ 69,436 Marketable securities 140,370 92,455 Restricted cash 65 194 Accounts receivable, net of allowance of $1,349 and $1,050 at September 30, 2004 and December 31, 2003, respectively 22,168 22,194 Deferred tax assets 1,456 4,638 Prepaid expenses and other current assets 4,130 4,851 -------------- ------------ Total current assets 191,123 193,768 Equipment and improvements, net 6,306 6,697 Goodwill 6,225 6,225 Other intangible assets, net 2,394 3,004 Deferred tax assets 8,631 4,962 Unamortized debt issuance costs and other long-term assets 3,075 3,770 -------------- ------------ Total assets $ 217,754 $ 218,426 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 2,547 $ 5,218 Accrued expenses 12,010 12,627 Deferred revenue 28,138 26,490 -------------- ------------ Total current liabilities 42,695 44,335 Convertible senior notes 86,250 86,250 -------------- ------------ Total liabilities 128,945 130,585 -------------- ------------ Stockholders' Equity: Common stock, $0.01 par value: Authorized - 50,000,000 shares Issued and outstanding - 18,307,402 and 18,121,211 shares at September 30, 2004 and December 31, 2003, respectively 183 181 Additional paid-in capital 113,323 111,651 Accumulated other comprehensive income 29 816 Accumulated deficit (24,726) (24,807) -------------- ------------ Total stockholders' equity 88,809 87,841 -------------- ------------ Total liability and stockholders' equity $ 217,754 $ 218,426 ============== ============ The accompanying notes are an integral part of these condensed consolidated financial statements. CONCORD COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended Nine Months Ended ------------------- ------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 --------- --------- --------- --------- Cash Flows from Operating Activities: Net income $ 230 $ 481 $ 81 $ 2,515 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,118 1,348 3,355 3,966 Stock-based compensation - 14 - 48 Amortization of debt issuance costs 271 - 623 - Deferred income taxes (11) - 39 - Changes in assets and liabilities: Accounts receivable (54) (921) 26 (2,080) Prepaid expenses and other current assets 206 (74) 721 667 Other assets 54 23 72 (82) Accounts payable 208 778 (2,671) (530) Accrued expenses 2,354 834 (617) 1,549 Deferred revenue 243 (1,903) 1,648 2,499 -------- -------- -------- -------- Net cash provided by operating activities 4,619 580 3,277 8,552 -------- -------- -------- -------- Cash Flows from Investing Activities: Purchases of equipment and improvements (798) (605) (2,354) (2,435) Purchases of marketable securities (17,537) (11,104) (78,250) (27,092) Proceeds from maturities and sale of marketable securities 4,118 10,853 29,022 21,541 Deposit of restricted cash - - (65) - Release of restricted cash (1) 150 194 450 Acquisition of business - net of cash acquired - (4,968) - (4,968) -------- -------- -------- -------- Net cash used for investing activities (14,217) (5,674) (51,453) (12,504) -------- -------- -------- -------- Cash Flows from Financing Activities: Proceeds from issuance of common stock 48 470 1,674 1,740 -------- -------- -------- -------- Net cash provided by financing activities 48 470 1,674 1,740 -------- -------- -------- -------- Net decrease in cash and cash equivalents (9,550) (4,624) (46,502) (2,212) Cash and cash equivalents, beginning of period 32,484 12,774 69,436 10,362 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 22,934 $ 8,150 $ 22,934 $ 8,150 ======== ======== ======== ======== Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 243 $ 105 $ 552 $ 352 Supplemental Disclosure of Noncash Investing Transactions: Unrealized loss on available-for-sale securities $ 996 $ (445) $ (1,313) $ (626) The accompanying notes are an integral part of these condensed consolidated financial statements. CONCORD COMMUNICATIONS, INC. TABLE OF RECONCILIATION FROM GAAP TO PRO FORMA (Unaudited) (In thousands, except share data) Three Months Ended Nine Months Ended ------------------------- ------------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Reconciliation of GAAP & Pro Forma Net Income: Net income $ 230 $ 481 $ 81 $ 2,515 Add: Provision for income taxes 104 93 13 355 From Cost of revenues netViz technology amortization 133 133 399 133 net Viz deal charges - 40 - 40 From Operating expenses Amortization expenses, relating to the netViz acquisition and equity- based compensation charges 70 84 210 118 Acquired in- process research and development - 994 100 994 ----------- ----------- ----------- ----------- Pro forma income before income taxes 537 1,825 803 4,155 ----------- ----------- ----------- ----------- Pro forma income taxes (Pro forma rate: 28%) 150 511 225 1,163 ----------- ----------- ----------- ----------- Pro forma net income $ 387 $ 1,314 $ 578 $ 2,992 =========== =========== =========== =========== Pro forma net income per diluted share: $ 0.02 $ 0.07 $ 0.03 $ 0.17 Diluted weighted average common and potential common shares outstanding 18,456,498 18,238,417 18,705,474 17,916,872 CONCORD COMMUNICATIONS, INC. TABLE OF RECONCILIATION FROM Q4 2004 PRO FORMA EPS TO GAAP EPS (unaudited) Guidance for Quarter ending December 31, 2004 --------------------- Proforma EPS guidance $ 0.04 Estimated: Income taxes 0.03 Estimated cost of stock option buy-back (0.17) Amortization of intangibles (0.01) -------------------- Estimated GAAP EPS $ (0.11) ==================== CONTACT: Concord Communications Public Relations Eric Snow, 508-486-4508 pr@concord.com or Investor Relations Raymond Ruddy, 508-303-4350 investorrelations@concord.com