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Witness Systems Reports Third Quarter Results

Expands customer base with 28 new customers; Continues strong sales of expanded eQuality suite


ATLANTA--(BUSINESS WIRE)--Oct. 21, 2002-- Witness Systems (NASDAQ: WITS - News), a leading global provider of performance optimization software and services, today announced financial results for the third quarter ended September 30, 2002.

Third quarter results were consistent with estimated results announced on October 1, 2002. Revenue for the third quarter was $15.1 million, compared to $15.4 million reported for the same quarter in the prior year. For the nine months ended September 30, 2002, revenue was $50.3 million, compared to $45.2 million for the same period of 2001.

Net loss for the third quarter was ($1.2 million), or ($0.05) per share, compared to net income of $20,000, or $0.00 per share, for the same quarter in the prior year. For the nine months ended September 30, 2002, net income was $100,000, or $0.00 per share, compared to a net loss of ($5.7 million), or ($0.26) per share, for the same period of 2001.

Net loss from core operations for the third quarter was ($706,000), or ($0.03) per share, compared to net income of $118,000, or $0.00 per share, for the same quarter in the prior year. For the nine months ended September 30, 2002, net income from core operations was $378,000, or $0.02 per share, compared to a net loss of ($334,000), or ($0.02) per share, for the same period of 2001. 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.

"With the IT spending environment very challenging, we are focused on continuing to extend our leadership position, managing expenses to ensure investment in key growth areas, such as research and development and customer service, and rolling out our expanded software and services that enable our customers to optimize their workforce performance," said Dave Gould, CEO of Witness Systems. "Although our third quarter financial results were disappointing due to the continued slowdown in technology spending, our results included our strongest quarter yet for new suite-based purchases."

Customers Select eQuality® for Tangible Returns

Witness Systems earned significant new business against its competitors in the third quarter in all product areas and across all global regions. The company added 28 new customers, including Banco Popular, Grainger, Greyhound Lines, Hertz, Pfizer, Reuters, Royal Bank of Canada, TelMex, United HealthCare Services, United Stationers Supply and the U.S. Postal Service.

The company also received significant follow-on orders during the quarter from existing customers, including Advance PCS, AT&T, Capital One, Charter Communications, Chase, First Data Corporation, Florida Power & Light, Navy Federal Credit Union, Pacificare Health Systems and Southern Company.

"Witness Systems remains uniquely positioned in the industry," said Gould. "Our integrated suite of performance optimization applications gives us a competitive advantage as companies around the world continue to focus on acquiring solutions with a clear ROI to help them retain customers by providing a superior customer experience. We are financially strong, with more than $61 million of cash and investments, and we are poised for accelerated success as the tech spending environment improves," he concluded.

Stock Repurchase Program Amended

On October 15, the board of directors amended the company's existing stock repurchase program to authorize up to $10 million in repurchases of the company's stock. The previous authorization was limited to one million shares.

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 8:30 a.m. EDT on Tuesday, October 22, 2002. The on-line replay will be available at approximately 11 a.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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