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Witness Systems Reports Second Quarter Results

Quarterly revenue up 17 percent EPS of $0.02 in line with company guidance

ATLANTA--(BUSINESS WIRE)--July 29, 2002-- Witness Systems (NASDAQ: WITS - News), a leading global provider of performance optimization software and services, today announced revenue of $17 million for the quarter ended June 30, 2002, a 17 percent increase over the $14.5 million reported for the same quarter last year.

Revenue for the first six months of 2002 was $35.2 million, an increase of $5.5 million or 18 percent for the same period of 2001.

Net income for the quarter was $472,000, or $0.02 per share, compared to a loss of ($2.1 million) or ($0.09) per share for the same quarter a year ago. For the first six months of 2002, net income was $1.3 million, or $0.05 per share, compared to a net loss of ($5.7 million) or ($0.26) per share for the same period of 2001.

Net income from core operations for the second quarter was $445,000, also $0.02 per share, compared to a loss of ($885,000), or ($0.04) per share, in the second quarter of 2001. For the first half of 2002, net income from core operations was $1.1 million, or $0.05 per share, compared to a loss of ($452,000) or ($0.02) per share for the same period a year ago. Net income from core operations excludes acquired in-process research and development charges, amortization of intangible assets and assumes a pro forma tax rate of 36 percent.

"Solid customer demand for our expanded eQuality® software suite, continued growth from international operations and leading channel partners enabled us to deliver strong operating results this quarter," said Dave Gould, chairman and chief executive officer at Witness Systems. "We're continuing to extend our market leadership with investments that position us for success in the current year and beyond."

During the quarter, the company generated positive cash flow from operations of nearly $1.2 million and had $62.6 million of cash and liquid investments at June 30, 2002. Days sales outstanding (DSO) decreased to 63 days in the second quarter and deferred revenue, which measures revenues collected but not yet recognized, increased by $1.1 million since the beginning of the year. "The company continues to strengthen its balance sheet and deliver sound financial results, even in a difficult market," said Bill Evans, executive vice president and chief financial officer for Witness Systems.

Customers Find Substantial Results

During the second quarter Witness Systems added 16 new customers, including BMW Financial Services, Eli Lily & Company, GE Consumer Finance Japan, HFC Bank, John Fairfax Holdings, Nissan Motor Acceptance Corporation and the Texas Office of the Attorney General.

The company also received significant follow-on orders during the quarter from existing customers, including American Express, AT&T, Bell Canada, Best Buy, Charter Communications, Comcast, Grupo Technico, Hinduja, Household International, John Deere Credit, Verizon Communications, Washington Mutual and Wells Fargo.

"We now have more than 1,000 contact center sites achieving real results using the eQuality software," said Gould. "Our customers continue to recognize our superior browser-based architecture and implementation methodology, which simplifies integration and dramatically reduces total cost of ownership, especially as our existing customers extend their deployments to include our newer performance analysis and e-learning management solutions."

Earnings Announcement Conference Call Details

Witness Systems will conduct a live broadcast of the company's quarterly conference call that will be available on-line at www.streetevents.com or www.witness.com beginning at 5 p.m. EDT on Monday, July 29, 2002. The on-line replay will be available at approximately 7 p.m. EDT.

About Witness Systems

Witness Systems (NASDAQ: WITS - News) provides the contact center industry's first integrated performance optimization software suite to help global enterprises capture customer intelligence and optimize workforce performance. Comprised of business-driven multimedia recording, performance analysis and e-learning management applications, the browser-based eQuality® solution is designed to enhance the quality of customer interactions across multiple communications media, including the telephone, e-mail and Web. The closed-loop suite enables companies to record, evaluate and analyze customer contacts, and then launch e-learning to develop staff, generate additional revenue, and achieve greater customer retention and loyalty. An integrated business consulting, implementation and training methodology provides services to support an effective, rapid deployment of eQuality that enables organizations to maximize their return on investment. For additional information about Witness Systems and its eQuality software suite, visit www.witness.com, or call 1.888.3.WITNESS.

Cautionary Note Regarding Forward-looking Statements Under the Private Securities Litigation Reform Act of 1995: Information in this release that involves Witness Systems' expectations, beliefs, hopes, plans, intentions or strategies regarding the future are forward-looking statements that involve risks and uncertainties. These statements include statements about Witness Systems' strategies in the marketplace, its market position and its relationship with customers. All forward-looking statements included in this release are based upon information available to Witness Systems as of the date of the release, and the company assumes no obligation to update any such forward-looking statement. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. The factors that could cause actual future results to differ materially from current expectations include, but are not limited to, fluctuations in customer demand and the timing of orders; the company's ability to manage its growth; the risk of new product introductions and customer acceptance of new products; the rapid technological change which characterizes the company's markets; the risks associated with competition; the risks associated with international sales as the company expands its markets; and the ability of the company to compete successfully in the future, as well as other risks identified under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and any other reports filed from time to time with the Securities and Exchange Commission.

Witness, eQuality and the Witness logo are United States registered trademarks of Witness Systems, Inc., protected by laws of the U.S. and other countries. All other trademarks mentioned in this document are the property of their respective owners.





 
Editorial Contact:
Shana Peterson
Porter Novelli
404.995.4505
shana.peterson@pnicg.com
 
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