Published: December 09, 2005
Chordiant Software Files Annual Report on Form 10-K for the Fourth Quarter and Fiscal Year 2005 Ended September 30, 2005
Chordiant Software, Inc. (NASDAQ: CHRD) today
announced final financial results for the fourth quarter and fiscal year
(FY) 2005 ended September 30 and filed its Annual Report on Form 10-K with
the Securities and Exchange Commission (SEC). On December 6, 2005, the
Company announced that it intended to restate its interim financial
statements for the quarters ended December 31, 2004, March 31, 2005, and
June 30, 2005 due to certain accounting errors. All financial information
contained in the Annual Report on Form 10-K filed on December 9, 2005,
gives effect to these restatements.
Fourth Quarter and Fiscal Year 2005 Results
Total revenues for the fourth quarter of FY 2005 were $21.3 million, which
compares to revenues of $24.0 million reported for the three months ended
September 30, 2004. For the Fiscal Year 2005, revenues were $83.7 million,
compared to $80.6 million for the same period of the prior year. License
revenues for the fourth quarter of FY 2005 were $6.7 million, compared to
$9.0 million reported for the three months ended September 30, 2004. For
the Fiscal Year 2005, license revenues were $31.7 million, compared to
$32.9 million reported for the same period of 2004. After the close of the
September 2005 quarter and before filing its FORM 10-K on December 9,
certain significant customers increased the scope of work on their projects
which impacted Chordiant's percent of completion revenue calculation. As a
result, license revenue for the September 2005 quarter was reduced by
approximately $2.5 million and deferred revenue was increased by an equal
amount. Deferred revenue increased to $26.2 million as of September 30,
2005, compared to a balance of $20.6 million as of September 30, 2004.
Service revenues for the fourth quarter of FY 2005 were $14.6 million,
compared to $15.0 million reported for the three months ended September 30,
2004. For the Fiscal Year ended September 30, 2005, service revenues were
$52.0 million, compared to $47.7 million for the same period of 2004.
Backlog of Business
Since an increasingly material portion of Chordiant's revenues has been
derived from large orders, as major customers deploy the Company's
products, Chordiant is now disclosing its backlog. As of September 30,
2005, the Company had approximately $33 million in backlog, which is
defined as non-cancelable contractual commitments by the Company's
customers through purchase orders or contracts. Backlog is comprised of
current software license orders which have not met all of the required
criteria for revenue recognition, deferred revenue from customer support
contracts, and deferred consulting and education orders for services not
yet completed or delivered. The backlog of Chordiant's business is not
necessarily indicative of revenues to be recognized in a specified future
period.
Cash Position
Chordiant increased its cash balances in the fourth quarter and had $40.9
million in cash and cash equivalents, restricted cash, and marketable
securities at September 30, 2005.
GAAP and Non-GAAP Financial Measures
Chordiant posted a U.S. GAAP (Generally Accepted Accounting Principles) net
loss of $5.5 million, or $0.07 per share loss for the fourth quarter of FY
2005 ended September 30, 2005, compared to a GAAP net profit of $1.5
million, or $0.02 per share for the three months ended September 30, 2004.
Chordiant reported a fourth quarter FY 2005 non-GAAP financial measure loss
of $2.8 million (which excludes stock-based compensation, amortization of
intangible assets and restructuring expense), or a non-GAAP loss of $0.04
per share, compared to non-GAAP net income (which excludes stock-based
compensation, amortization of intangible assets and restructuring expense)
of $0.8 million, or non-GAAP income of $0.01 per share for the three months
ended September 30, 2004.
Non-GAAP Financial Measurements
The Company's management believes that the presentation of a non-GAAP
financial measure of net income or net loss, excluding purchased in-process
research and development, amortization of deferred stock-based
compensation, amortization of intangible assets and restructuring expenses,
provides useful information regarding the Company's financial performance
and earnings potential by calculating and quantifying the effect of certain
charges of net income or net loss per share calculated in accordance with
GAAP and gives investors and analysts insight into profitability of the
Company's operating business. Management also believes that the
presentation of the non-GAAP financial measures is consistent with its past
practice, as well as industry practice in general, and will enable
investors and analysts to compare current non-GAAP measures with non-GAAP
measures presented in prior periods. The non-GAAP financial information
may not be comparable to similarly titled measures used by other companies
and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP.
Operating Expenses
General and administrative expenses were $4.5 million for the three months
ended September 30, 2005, compared to $3.1 million for the same period of
2004. The increase in these expenses was mainly attributable to an
increase in consulting and professional services fees and expenses
associated with efforts to comply with the Sarbanes-Oxley Act of 2002 (SOX)
and to fill vacant accounting positions.
Sales and marketing expenses were $7.4 million for the three months ended
September 30, 2005, compared to $6.1 million for the same period of 2004.
The increase is attributable to personnel related expenses such as
commissions and travel expenses due to a higher number of sales
representatives.
Research and development expenses were $4.4 million for the three months
ended September 30, 2005, compared to $4.5 million for the same period of
2004.
Customer Success
"From a market perspective momentum remains strong," said Stephen Kelly,
Chordiant CEO. "We completed four $1.0 million-plus license transactions
with new and existing customers. Notable customer wins included Capital
One, HSBC, RSA Data Solutions -- a unit of Fiserv, Inc., and O2. In fiscal
2005, we added 15 new customers, compared to seven new customers in fiscal
2004," Kelly added. "In terms of market perspective, we are continuing to
see strong demand in our target markets of financial services, with
on-going improvements in the wireless areas of telecommunications. The
pipeline remains strong especially in North America."
About Chordiant Software, Inc.
Chordiant solutions automate and manage operational business processes for
leading service-driven global organizations with a focus on retail finance
and telecommunications.
Chordiant orchestrates the unique processes of an organization from the
point of customer interaction, through the front and back offices to
multiple transactional systems, corporate applications and data stores. Our
solutions integrate existing infrastructure to orchestrate the assembly,
enhancement and delivery of optimal role based business processes to the
appropriate channels. Business value is realized through improved employee
productivity, savings in operational costs, and increased business
adaptability.
Headquartered in Cupertino, California, Chordiant maintains offices in
Boston, MA; Mahwah, NJ; Manchester, NH; New York City; London; Paris;
Amsterdam; and Munich.
Safe Harbor Statement
This news release includes "forward-looking statements" that are subject to
risks, uncertainties and other factors that could cause actual results or
outcomes to differ materially from those contemplated by the
forward-looking statements. Forward-looking statements in this release are
generally identified by words, such as "believes," "anticipates," "plans,"
"expects," "will," "would," "guidance," "projects" and similar expressions
which are intended to identify
forward-looking statements. There are a number of important factors that
could cause the results or outcomes discussed herein to differ materially
from those indicated by these forward-looking statements, including, among
others, market acceptance of our products. Further information on
potential factors that could affect Chordiant are included in risks
detailed from time to time in Chordiant's Securities and Exchange
Commission filings, including, without limitation, Chordiant's Annual
Report on Form 10-K for the period of October 1, 2004 to September 30,
2005. These filings are available on a Web site maintained by the
Securities and Exchange Commission at http://www.sec.gov. Chordiant does
not undertake an obligation to update forward-looking or other statements
in this release.
Chordiant and the Chordiant logo are registered trademarks of Chordiant
Software, Inc. All other trademarks and registered trademarks are the
properties of their respective owners.
Chordiant Software, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months ended Twelve Months Ended
September 30, September 30,
2005 2004 2005 2004
---------- --------- ---------- ----------
Revenues:
License $ 6,649 $ 8,965 $ 31,678 $ 32,909
Service 14,607 14,985 52,047 47,714
---------- --------- ---------- ----------
Total revenues 21,256 23,950 83,725 80,623
Cost of revenues:
License 377 619 1,079 1,836
Service 7,453 8,725 29,438 27,746
Stock-based
compensation (benefit) 224 (242) 633 601
Amortization of
intangible assets 303 106 1,068 1,838
---------- --------- ---------- ----------
Total cost of revenues 8,357 9,208 32,218 32,021
---------- --------- ---------- ----------
Gross profit 12,899 14,742 51,507 48,602
---------- --------- ---------- ----------
Operating expenses:
Sales and marketing 7,373 6,084 28,517 23,459
Research and development 4,365 4,476 19,405 17,329
General and administrative 4,504 3,144 18,008 8,008
Stock-based compensation
(benefit) 962 (703) 2,211 2,389
Amortization of intangible
assets - 16 117 222
Restructuring expense 1,149 204 1,052 1,200
Purchased in-process
research and development - - 1,940 -
---------- --------- ---------- ----------
Total operating
expenses 18,353 13,221 71,250 52,607
---------- --------- ---------- ----------
Income (loss) from
operations (5,454) 1,521 (19,743) (4,005)
Interest income, net 216 144 755 515
Other income (expense), net (58) (78) (103) 9
---------- --------- ---------- ----------
Net income (loss) before
income taxes (5,296) 1,587 (19,091) (3,481)
Provision for income taxes 156 134 449 899
---------- --------- ---------- ----------
Net income (loss) $ (5,452) $ 1,453 $ (19,540) $ (4,380)
========== ========= ========== ==========
Other comprehensive
income (loss):
Foreign currency
translation
gain (loss) (91) 272 (605) 1,183
Comprehensive ---------- --------- ---------- ----------
income (loss) $ (5,543) $ 1,725 $ (20,145) $ (3,197)
Net income (loss) per ========== ========= ========== ==========
share:
Basic $ (0.07) $ 0.02 $ (0.26) $ (0.06)
========== ========= ========== ==========
Diluted $ (0.07) $ 0.02 $ (0.26) $ (0.06)
========== ========= ========== ==========
Weighted average shares
used in computing net
income (loss) per share:
Basic 75,851 71,253 74,449 67,522
========== ========= ========== ==========
Diluted 75,851 75,406 74,449 67,522
========== ========= ========== ==========
Supplemental information[1]:
Non-GAAP financial measures
and reconciliation:
Net income (loss) $ (5,452) $ 1,453 $ (19,540) $ (4,380)
Less: Stock-based
compensation (benefit) 1,186 (945) 2,844 2,990
Less: Amortization
of intangible assets 303 122 1,185 2,060
Less: Restructuring
expense 1,149 204 1,052 1,200
Less: Purchased
in-process research
and development 0 0 1,940 0
Pro forma net income ---------- --------- ---------- ----------
(loss): $ (2,814) $ 834 $ (12,519) $ 1,870
========== ========= ========== ==========
Basic pro forma net
income (loss) per
share: $ (0.04) $ 0.01 $ (0.17) $ 0.03
Diluted pro forma ========== ========= ========== ==========
net income (loss)
per share: $ (0.04) $ 0.01 $ (0.17) $ 0.03
========== ========= ========== ==========
Weighted average shares
used in computing net
income (loss)
per share [2]:
Basic 75,851 71,253 74,449 67,522
========== ========= ========== ==========
Diluted 75,851 75,406 74,449 67,522
========== ========= ========== ==========
[1] The accompanying supplemental pro forma financial information
represents a non-GAAP financial measure. A "non-GAAP financial
measure" is defined as a numerical measure of a company's financial
performance, financial position or cash flows that excludes (or
includes) amounts that are included in (or excluded from) the most
directly comparable measure calculated and presented in accordance
with GAAP in the company's financial statements. Non-GAAP financial
measures of net income or net loss is used by investors and analysts
of Chordiant Software Inc. (the "Company") as an alternative to GAAP
measures when evaluating the Company's performance in comparison to
other companies. The Company's management believes that the
presentation of a non-GAAP financial measure of net income or net
loss, excluding purchased in-process research and development,
amortization of deferred stock-based compensation, amortization of
intangible assets and restructuring expenses, provide useful
information regarding the Company's financial performance and earnings
potential by calculating and quantifying the effect of certain charges
of net income or net loss per share calculated in accordance with GAAP
and gives investors and analysts insight into profitability of
the Company's operating business. Management also believes that the
presentation of the non-GAAP financial measures is consistent with its
past practice, as well as industry practice in general, and will
enable investors and analysts to compare current non-GAAP measures
with non-GAAP measures presented in prior periods. The above non-GAAP
financial information may not be comparable to similarly titled
measures used by other companies and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with GAAP.
[2] Diluted net loss per share for the three months ended
September 30, 2005 and twelve months ended September 30, 2005, is
computed excluding total potential outstanding common shares of
June 30, 2005, is computed excluding total potential outstanding
common shares of 8,461 and 8,461 respectively, as their effect
is anti-dilutive.
Chordiant Software, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
September 30, September 30,
2005 2004
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 38,546 $ 55,748
Marketable securities 0 4,000
Restricted cash 1,982 279
Accounts receivable, net 18,979 20,161
Prepaid expenses and other
current assets 4,345 3,097
--------- ---------
Total current assets 63,852 83,285
Restricted cash 365 2,057
Property and equipment, net 2,479 3,237
Goodwill 31,907 24,874
Intangible assets, net 5,148 244
Other assets 3,499 1,643
--------- ---------
Total assets $ 107,250 $ 115,340
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,554 $ 6,394
Accrued expenses 8,902 11,681
Deferred revenue 26,050 18,459
Current portion of capital
lease obligations 213 191
--------- ---------
Total current liabilities 39,719 36,725
Deferred revenue, long-term 147 2,122
Restructuring costs, net of
current portion 1,731 -
Long term portion of capital
lease obligations 96 317
--------- ---------
Total liabilities 41,693 39,164
--------- ---------
Common stock 78 72
Additional paid-in capital 273,824 262,703
Deferred stock-based compensation (1,940) (339)
Accumulated deficit (208,889) (189,349)
Accumulated other comprehensive
income 2,484 3,089
--------- ---------
Total stockholders' equity 65,557 76,176
--------- ---------
Total liabilities and
stockholders' equity $ 107,250 $ 115,340
========= =========
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