Keynote Systems (NASDAQ: KEYN) Q1 2010 Results

Total Revenue of $20.7 Million for Q1 2010, Compared to $20.6 Million for the Q1 2009

SAN MATEO, Calif., Jan 26, 2010 -- Keynote Systems (NASDAQ: KEYN), the global leader in on-demand mobile and Internet test & measurement solutions for continuously improving the online experience, reported financial results for its first fiscal quarter ended December 31, 2009.

Umang Gupta, chairman and CEO of Keynote, said: "Heading into the new decade, Keynote customers continue to value the importance of the online and mobile experience. While most of our products generated the revenues we expected during the first quarter, we especially benefited from a seasonal increase in load testing subscriptions and engagements. As a result, we exceeded our revenue and earnings expectations."

First Quarter 2010 Financial Summary

Revenue for the first quarter of fiscal year 2010 was $20.7 million, compared to $20.6 million in the first quarter of fiscal year 2009. Under generally accepted accounting principles (GAAP), net income for the first quarter of fiscal year 2010 was $981,000, or $0.07 per diluted share, compared to net income of $886,000, or $0.06 per diluted share, for the first quarter of fiscal year 2009.

The non-GAAP net income for the first quarter of fiscal year 2010 was $2.5 million, or $0.17 per diluted share, compared to $2.6 million, or $0.18 per diluted share, for the first quarter of fiscal year 2009. The company defines non-GAAP net income as net income adjusted for provision for income taxes, stock-based compensation expense, and amortization of purchased intangibles less cash taxes from on-going operations. Non-GAAP earnings per share equals non-GAAP net income divided by the diluted weighted average shares outstanding for the period.

Cash Flow, EBITDA and Deferred Revenue Summary

Cash used in operating activities for the first quarter of fiscal year 2010 was $96,000, compared to cash provided by operating activities, which was $2.0 million in the first quarter of fiscal year 2009. Cash used for purchase of property, equipment and software totaled $775,000 for the first quarter of fiscal year 2010, compared to $661,000 in the first quarter of fiscal year 2009. Cash used to pay dividends totaled $727,000 for the first quarter of fiscal year 2010, compared to the first quarter of fiscal year 2009 when there was no dividend. Keynote defines free cash flow as cash flow from operations less cash used for purchases of property, equipment, software and acquired technology. The company used free cash flow of $871,000 for the first quarter of fiscal year 2010, compared to generating $1.4 million in the first quarter of fiscal year 2009. At December 31, 2009, Keynote had $55.9 million in total cash, cash equivalents and short-term investments.

Management also believes the non-GAAP figure of earnings before interest, taxes, depreciation and amortization (EBITDA) provides a useful measure of operations. EBITDA for the first quarter of fiscal year 2010 was $3.8 million, or 18% of revenue, compared to $3.6 million, or 17% of revenue, for the first quarter of fiscal year 2009.

Keynote's net deferred revenue was $14.7 million at December 31, 2009, compared to $19.8 million at December 31, 2008 and $18.8 million at September 30, 2009. Keynote's gross deferred revenue, defined as the sum of net deferred revenue and unpaid deferred revenue, was $23.4 million at December 31, 2009, compared to $27.3 million at December 31, 2008 and $22.3 million at September 30, 2009.

The total shares outstanding as at December 31, 2009 was 14.5 million, compared to 14.2 million at December 31, 2008.

Quarterly Cash Dividend

The board of directors approved a quarterly cash dividend of $0.05 per common share, payable March 15, 2010 to common shareholders of record at the close of business on March 1, 2010.

Operational Metrics Summary

As of December 31, 2009, Keynote's total worldwide customer base was approximately 2,800 companies. Keynote currently provides its services to 48% of the comScore Media Metrix's top 50 Web sites and approximately 39% of the Fortune 100 companies. As of December 31, 2009, Keynote measured approximately 19,100 Internet pages, as compared to 15,000 Internet pages in the same quarter a year ago.

Expectations for the Second Quarter of Fiscal Year 2010

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 the following for the second fiscal quarter ending March 31, 2010:

* Total revenue is expected to be between $18.9 million and $19.4 million.
* GAAP earnings (loss) per share are expected to be between $(0.01) and $0.02.
* Non-GAAP earnings per share are expected to be between $0.09 and $0.12.

The above guidance was based on the following assumptions. Foreign exchange rates do not change materially. Total stock-based compensation expense and amortization of intangible assets is expected to be approximately $1.5 million. Depreciation is expected to be approximately $1.2 million. Interest income, net, is expected to be approximately $150,000, assuming no material changes in interest rates and currently planned uses of cash. Cash paid for income taxes from on-going operations is expected to be approximately $100,000. Basic weighted average shares outstanding are expected to be approximately 14.5 million shares and diluted weighted average shares outstanding are expected to be approximately 14.8 million shares, assuming no additional issuances of equity or equity-related securities and significant changes in the company's stock price.

Source: Keynote Systems (NASDAQ: KEYN)