Witness Systems Reports Third Quarter Results (email this article)

ATLANTA--(BUSINESS WIRE)--Oct. 26, 2005--Witness Systems (Company Profile, Past Stories, Case Studies) (NASDAQ: WITS - News), a leading global provider of workforce optimization software and services, today announced financial results for the third quarter of 2005. Under generally accepted accounting principles (GAAP), third quarter revenue was a record $47.1 million and net income was $0.02 per share. Software license revenue, excluding hardware, was a record $17.5 million in the quarter, an increase of 38 percent from $12.7 million in the third quarter of 2004 and an increase of three percent from $17.0 million reported in the second quarter of 2005.

Year-to-date, GAAP revenue was $134.5 million, compared to $102.6 million in the first nine months of 2004. In 2005, year-to-date earnings per share were a loss of $0.30 per share compared to net income of $0.19 per share in the first nine months of 2004. The GAAP loss in 2005 is attributable to the acquisition of Blue Pumpkin Software, which was completed during the first quarter. In accounting for this acquisition, the company recorded a charge of $9.0 million for in-process research and development and incurred substantial increases in merger costs and amortization expense.

"The third quarter marked another strong performance for Witness Systems," said Dave Gould, CEO. "We achieved record revenue, aided by strong software license performance in a seasonally soft quarter. Furthermore, we continued to move forward in delivering on our workforce optimization roadmap. Our Impact 360 framework is a significant milestone for the company and the industry. We're the only company delivering a packaged solution, allowing customers to solve bigger business problems more effectively and efficiently than any combination of point systems in the market today."

Gould continued: "We are encouraged by the customer reaction to our new Impact 360 framework, and Witness Systems is well positioned as the contact center industry moves to its next generation of quality monitoring, workforce management and other performance improvement solutions. Our customers are leveraging Witness Systems' high-value software and services to transform their businesses."

Adjusted Results of Operations
Total adjusted revenue, which excludes hardware revenue, was a record $47.3 million in the third quarter, a 39 percent increase from 2004. Adjusted earnings per share were a record $0.18 per share, up from $0.16 per share in the second quarter and $0.11 per share in the same quarter one year ago. Year-to-date, adjusted revenue grew 38 percent to $134.0 million from $97.1 million in the first nine months of 2004. Year-to-date, adjusted earnings per share were $0.47 per share compared to $0.26 per share during the same period in 2004.

The company's internal reporting and performance measurement programs are established on a basis that excludes certain non-cash (such as amortization of intangibles) and acquisition-related charges included in GAAP earnings. Hardware sales, which are considered incidental to the company's core business, are excluded from adjusted revenue. In addition, the company measures revenue from maintenance contracts acquired in business combinations based on their contract, not fair value, and accrues a pro-forma tax expense of 36 percent on pre-tax income. The company believes these adjusted (non-GAAP) results provide more meaningful information regarding those aspects of current operating performance that can be effectively managed and consequently, has developed its internal reporting and compensation systems using these measures. The reporting of these non-GAAP financial measures facilitates investors' understanding of the company's historical operating trends, provides a basis for more relevant comparisons to other companies in the industry and enables investors to evaluate the company's operating performance in a manner consistent with the company's internal basis of measurement.