Concord Reports Fourth Quarter Results
Announcement posted by Concord Communications 23 Jan 2004
Concord's Revenue Grows 15% Y/Y and Profitability Accelerates
Concord Communications, Inc. (NASDAQ: CCRD), an industry leader in optimising application performance and availability across networks and systems, today announced its financial results for the fourth quarter ended December 31, 2003. Revenue increased to US $27.8 million, up from US $26.6 million in the third quarter of 2003, and US $23.6 million in the fourth quarter of 2002. GAAP earnings per share were US $.27, compared to US $.03 in the prior quarter and US $.04 in the fourth quarter of the prior year (see "Taxes" below regarding GAAP earnings per share). Pro forma earnings per share were US $.11, up from pro forma earnings per share of US $.07 in the prior quarter and US $.04 in the same quarter of the prior year. Full year 2003 GAAP EPS was US $.42, versus a 2002 GAAP EPS of US $.12. Full year 2003 pro forma EPS was US $.28, more than double the 2002 pro forma EPS of US $.12. (See below for pro forma/GAAP reconciliation).
"Concord accelerated profitability during the fourth quarter for two reasons. The first was that increased sales of our wireless, distributed network and application management solutions pulled through revenue from other product lines," explained Jack Blaeser, Concord's CEO and President. "Secondly, we continued to control expenses and leveraged our operating model to produce a pro forma operating margin of 8.5%, GAAP operating margin was 8.2%. We look forward to increasing top line growth during 2004 by accelerating sales in new products like Concord's Voice over IP solutions."
Fourth Quarter Results
Revenue Grows 5% Sequentially, Operating Margins Expand and Operating Cash Increases US $3.5M
Total revenue of US $27.8 million grew 5% from US $26.6 million in the prior quarter. License revenue of US $14.5 million grew 6% over the US $13.7 million reported in the prior quarter.
Pro forma operating margin was 8.5%, GAAP operating margin was 8.2%.
Cash was US $162M. Excluding US $83M in cash from the previously announced offering of senior convertible notes, cash from operations increased approximately US $3.5M.
Increase in Larger Customer Deals
Number of deals over US $100,000 increased to 51, up nine from the prior quarter.
Average deal size for new customers was US $120,000 as customers chose the eHealth Suite to manage across applications, systems and networks. These included customers like Gansu Telecom and the Norwegian Defense Department.
Market Segment Sales Remain Close to Historical Averages
Enterprise customers accounted for 60% of revenue, from customers like Johns Hopkins University and TRW Automotive.
Managed service provider customers accounted for 20% of revenue. These customers include Telefonica Solutiones and Fidelity Information Services. Telco infrastructure customers like Eurotel accounted for 20% of revenue.
International customers accounted for US $9.7 million or 36% of revenue. Customers include Czech Insurance and Provinzial Dusseldorf.
The installed base revenue was 86% from customers like Telus Mobility and GSK. Of the revenue from existing customers, 40% was from existing customers expanding deployment of their existing Concord products across a larger portion of their IT infrastructure and 60% was from customers expanding toward an end-to-end solution by purchasing new products in the eHealth Suite.
Deferred Revenue & Gross Margins Consistent
Deferred revenue was US $26.5 million, up slightly quarter over quarter.
Gross margin was 82%, consistent with the prior quarter.
DSO was 72 days, up 5 days from the prior quarter.
Taxes
Our expectations of continued profitability make it likely that we will utilise the majority of our deferred tax asset over the next few years. It is, therefore, deemed prudent to reverse the majority of the existing valuation allowance against that asset. This results in a one-time non-cash deferred income tax benefit of US $2.6 million in Q4 2003. Additionally, US $2.7 million was released from the valuation allowance and applied to additional paid-in-capital.
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. These payments amounted to US $.6 million for income earned in 2003. Due to the release of our valuation allowance, our GAAP tax rate is expected to increase to 38% going forward. We will continue providing pro forma guidance and results at a 28% tax rate to normalise our results against historical reported results.
Future Expectations
First quarter 2004 revenue is expected to be slightly over US $28M and EPS is expected to be between US $.06 and US $.08 on a GAAP basis and US $.09 and US $.11 on a pro forma basis (see below for a reconciliation of GAAP and pro forma guidance).
About Concord Communications
Concord Communications, Inc. (Nasdaq: CCRD) is an industry leader in optimising application performance and availability across networks and systems. Concord's 3000 eHealth customers worldwide use the eHealth 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
Forward-looking statements made in this press release, including forward-looking statements regarding revenue and profit 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, risks related to our incurrence of senior convertible debt, the impact of the economic slowdown on the telecommunications industry; risks associated with integrating netViz Corp., which we recently acquired; 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 ability to attract and retain quality professional employees; uncertainties involving intellectual property rights and litigation, specifically including our expansion into new markets with different intellectual property protection schemes; litigation in general; risks in technology development and commercialisation; risks in product development and market acceptance of, and demand for, the Company's products, including the development and market acceptance of our VoIP, QoS, wireless, and application performance management products; risks associated with competition specifically including competition in the application performance market; 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.
The information in this press release will be posted at www.concord.com.
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"Concord accelerated profitability during the fourth quarter for two reasons. The first was that increased sales of our wireless, distributed network and application management solutions pulled through revenue from other product lines," explained Jack Blaeser, Concord's CEO and President. "Secondly, we continued to control expenses and leveraged our operating model to produce a pro forma operating margin of 8.5%, GAAP operating margin was 8.2%. We look forward to increasing top line growth during 2004 by accelerating sales in new products like Concord's Voice over IP solutions."
Fourth Quarter Results
Revenue Grows 5% Sequentially, Operating Margins Expand and Operating Cash Increases US $3.5M
Total revenue of US $27.8 million grew 5% from US $26.6 million in the prior quarter. License revenue of US $14.5 million grew 6% over the US $13.7 million reported in the prior quarter.
Pro forma operating margin was 8.5%, GAAP operating margin was 8.2%.
Cash was US $162M. Excluding US $83M in cash from the previously announced offering of senior convertible notes, cash from operations increased approximately US $3.5M.
Increase in Larger Customer Deals
Number of deals over US $100,000 increased to 51, up nine from the prior quarter.
Average deal size for new customers was US $120,000 as customers chose the eHealth Suite to manage across applications, systems and networks. These included customers like Gansu Telecom and the Norwegian Defense Department.
Market Segment Sales Remain Close to Historical Averages
Enterprise customers accounted for 60% of revenue, from customers like Johns Hopkins University and TRW Automotive.
Managed service provider customers accounted for 20% of revenue. These customers include Telefonica Solutiones and Fidelity Information Services. Telco infrastructure customers like Eurotel accounted for 20% of revenue.
International customers accounted for US $9.7 million or 36% of revenue. Customers include Czech Insurance and Provinzial Dusseldorf.
The installed base revenue was 86% from customers like Telus Mobility and GSK. Of the revenue from existing customers, 40% was from existing customers expanding deployment of their existing Concord products across a larger portion of their IT infrastructure and 60% was from customers expanding toward an end-to-end solution by purchasing new products in the eHealth Suite.
Deferred Revenue & Gross Margins Consistent
Deferred revenue was US $26.5 million, up slightly quarter over quarter.
Gross margin was 82%, consistent with the prior quarter.
DSO was 72 days, up 5 days from the prior quarter.
Taxes
Our expectations of continued profitability make it likely that we will utilise the majority of our deferred tax asset over the next few years. It is, therefore, deemed prudent to reverse the majority of the existing valuation allowance against that asset. This results in a one-time non-cash deferred income tax benefit of US $2.6 million in Q4 2003. Additionally, US $2.7 million was released from the valuation allowance and applied to additional paid-in-capital.
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. These payments amounted to US $.6 million for income earned in 2003. Due to the release of our valuation allowance, our GAAP tax rate is expected to increase to 38% going forward. We will continue providing pro forma guidance and results at a 28% tax rate to normalise our results against historical reported results.
Future Expectations
First quarter 2004 revenue is expected to be slightly over US $28M and EPS is expected to be between US $.06 and US $.08 on a GAAP basis and US $.09 and US $.11 on a pro forma basis (see below for a reconciliation of GAAP and pro forma guidance).
About Concord Communications
Concord Communications, Inc. (Nasdaq: CCRD) is an industry leader in optimising application performance and availability across networks and systems. Concord's 3000 eHealth customers worldwide use the eHealth 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
Forward-looking statements made in this press release, including forward-looking statements regarding revenue and profit 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, risks related to our incurrence of senior convertible debt, the impact of the economic slowdown on the telecommunications industry; risks associated with integrating netViz Corp., which we recently acquired; 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 ability to attract and retain quality professional employees; uncertainties involving intellectual property rights and litigation, specifically including our expansion into new markets with different intellectual property protection schemes; litigation in general; risks in technology development and commercialisation; risks in product development and market acceptance of, and demand for, the Company's products, including the development and market acceptance of our VoIP, QoS, wireless, and application performance management products; risks associated with competition specifically including competition in the application performance market; 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.
The information in this press release will be posted at www.concord.com.
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