SOURCE: Chordiant

May 04, 2006 16:10 ET

Chordiant Software Announces Financial Results for the Second Quarter of Fiscal Year 2006 Ended March 31, 2006

Reports Record Revenue of $26.3 Million, Up 37% Year-Over-Year; Achieves Record License Revenue of $13.2 Million, Up 90% Year-Over-Year; Generates Positive Cash Flow From Operations

CUPERTINO, CA -- (MARKET WIRE) -- May 4, 2006 -- Chordiant Software, Inc. (NASDAQ: CHRD), the leading provider of Customer Experience (Cx™) software and services, today announced financial results for the second quarter and first six months of Fiscal Year (FY) 2006, ended March 31, and filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (SEC).

Second Quarter Fiscal Year 2006 Highlights

--  Record revenues increased 37% year-over-year;
--  Record license revenues increased 90% year-over-year;
--  Signed three $1 million plus license transactions, one of which was in
    the $5 million range, with new and existing customers;
--  Total revenues consisted of 73% from North America and 27% from
    International;
--  Deferred revenue was $25.7 million;
--  Backlog was $34.6 million;
--  Generated positive cash flow from operations;
--  Released its 6.0 Foundation Product;
--  Promoted Peter Norman to vice president and chief financial officer;
--  Elected Richard G. Stevens to its Board of Directors. Mr. Stevens was
    also named chair of the Audit Committee; and
--  Appointed Frank Florence as vice president and chief marketing
    officer, effective May 3.
    
Second Quarter Fiscal Year 2006 Results

Total revenues for the second quarter of FY 2006 increased 37% to $26.3 million from the $19.2 million reported for the three months ended March 31, 2005. For the first six months of FY 2006, total revenues increased to $48.8 million, compared to $40.8 million for the same period of the prior year. License revenues for the second quarter of FY 2006 increased 90% to $13.2 million from the $7.0 million reported for the three months ended March 31, 2005. For the first six months of FY 2006, license revenues increased to $22.3 million, compared to the $15.8 million reported for the same period of FY 2005. Service revenues for the second quarter of FY 2006 were $13.1 million, compared to $12.2 million reported for the three months ended March 31, 2005. For the first six months of FY 2006, service revenues were $26.5 million, compared to $25.0 million reported for the same period of FY 2005.

Deferred Revenue

Deferred revenue remained strong at $25.7 million as of March 31, 2006. This compares to $27.5 million as of December 31, 2005, and a balance of $18.0 million as of March 31, 2005. The sequential change in the second quarter deferred revenue was the result of percentage-of-completion projects having been completed and the delivery of Chordiant's Credit Card Version 3.5 product which includes the Fraud Management Resolution functions.

Customer Successes

"We made excellent progress in the second quarter and our momentum continues to be strong," said Steven R. Springsteel, Chordiant's president and chief executive officer. "We are seeing sentiment swing from "build" to "buy" as Chordiant emerges as the leading choice for rapid applications development in credit card, retail consumer finance and other key customer-facing categories. Consequently, we are continuing to win significant license transactions with world-class customers in our core vertical markets of financial services and telecommunications having completed three $1.0 million-plus license transactions, one of which was in the $5 million range, with new and existing customers. Notable customer wins included Citigroup, Inc. which purchased an initial development license; Canadian Tire Financial Services purchased Chordiant's Collections Module; HSBC added Chordiant's Direct Lending Module for their Consumer Lending Division; and ComparisonMarket, Inc. purchased Chordiant's Decision Management and Marketing Director Solutions for its Insurance.com business," Mr. Springsteel stated.

Creating Superior Customer Experiences

"In early March, we announced that we are pioneering a new standard for enterprise software. By providing technology that anticipates customer intentions and individually recommends actions to optimize the customer experience, Chordiant's Cx solutions will help enterprises to deliver the best possible customer experience," Mr. Springsteel said. "We believe our new vision raises the bar to where every business interaction becomes a personal experience. This strategy represents the next level of maturity for Chordiant from our strong leadership in business process management. Chordiant's vision is the beginning of a new era for customer experience solutions."

Backlog of Business

For the second quarter of FY 2006, Chordiant's backlog was $34.6 million, compared to $37.2 million reported for the December FY 2005 quarter. Backlog is comprised of non-cancelable current software license orders, deferred license revenue 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 aggregate by $1.8 million in the second quarter and had $44.1 million in cash and cash equivalents and restricted cash at March 31, 2006.

GAAP and Non-GAAP Financial Measures

On October 1, 2005, Chordiant was required to adopt Statement of Financial Accounting Standard No.123 (Revised) "Share-Based Payment," (SFAS 123®), which requires the measurement and recognition of compensation expense for all share-based payment awards granted, modified, cancelled, repurchased, as well as the expense associated with the unvested portion of prior awards issued to the Company's employees and directors. Total U. S. GAAP (Generally Accepted Accounting Principles) operating expenses for the second quarter of 2006 were $19.8 million, compared to $17.7 million in GAAP operating expenses for the same period of the previous year. Excluding $2.0 million in GAAP operating expenses which relate to stock-based compensation and certain other costs that are non-cash or unusual in nature, non-GAAP operating expenses for the second quarter of FY 2006 were $17.9 million. This compares to non-GAAP operating expenses of $16.9 million (excluding stock-based compensation expense, amortization of intangible assets, a restructuring benefit and purchased in-process research and development costs) for the same period of the previous year.

Chordiant posted a GAAP net loss of $2.1 million, or $0.03 per share loss for the second quarter of FY 2006 ended March 31, compared to a GAAP net loss of $6.4 million, or $0.09 per share loss for the three months ended March 31, 2005. Chordiant reported a second quarter FY 2006 non-GAAP net profit of $0.2 million (which excludes stock-based compensation expense of $1.1 million, amortization of intangible assets of approximately $0.3 million, non-recurring severance accruals for officers of $0.6 million and lease termination costs of $0.3 million) or a non-GAAP profit of $0.00 per share, compared to non-GAAP net loss (which excludes stock-based compensation benefit, amortization of intangible assets and a restructuring charge) of $5.0 million, or a non-GAAP loss of $0.07 per share for the three months ended March 31, 2005.

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, share-based compensation expense measured in accordance with SFAS 123®, amortization of intangible assets, non-recurring severance accruals for officers, lease termination costs and restructuring expenses, provides useful information regarding the Company's financial performance and earnings potential by calculating and quantifying the effect of certain charges on net income or net loss per share calculated in accordance with GAAP and gives investors and analysts insight into the profitability of the Company's on-going 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 non-GAAP measures of the current period 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.

About Chordiant Software, Inc.

Chordiant solutions and services help major enterprises around the world deliver the best possible customer experience. Unlike traditional business applications, Chordiant Customer Experience (Cx) solutions blend insight with agile business strategies and decisions to uniquely understand the customer's behavior. This deeper understanding develops a lasting, one-to-one relationship that aligns the most appropriate value proposition to each consumer. With Chordiant Cx solutions, customer loyalty, operational productivity and profitability reach unprecedented levels of return.

Chordiant is headquartered in Cupertino, California.

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, and Chordiant's most recent quarterly report on Form 10-Q. 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         Three Months ended
                            March 31, 2006             March 31, 2005
                      --------------------------  ------------------------
                                         non-                      non-
Revenues:               GAAP    Adj.[2]  GAAP[1]    GAAP   Adj.[2] GAAP[1]
   License            $ 13,206          $ 13,206  $  6,959        $  6,959
   Service              13,067            13,067    12,212          12,212
                      --------          --------  --------        --------
        Total
         revenues       26,273            26,273    19,171          19,171

Cost of revenues:
   License                 518               518       198             198
   Service               7,864     (56)    7,808     7,601  (253)    7,348
   Amortization of
    intangible assets      303    (303)        -       331  (331)        -
                      --------          --------  --------        --------
        Total cost of
         revenues        8,685             8,326     8,130           7,546
Gross profit            17,588            17,947    11,041          11,625
                      --------          --------  --------        --------

Operating expenses:
   Sales and
    marketing            8,732    (593)    8,139     7,155  (277)    6,878
   Research and
    development          5,859     (67)    5,792     5,286  (305)    4,981
   General and
    administrative       5,225  (1,303)    3,922     5,184  (154)    5,030
   Amortization of
    intangible assets        -                 -        93   (93)        -
   Purchased
    in-process
    research and
    development              -                 -         -               -
   Restructuring
    (benefit)                -                 -        26   (26)        -
                      --------          --------  --------        --------
        Total
         operating
         expenses       19,816            17,853    17,744          16,889
                      --------          --------  --------        --------

Income (loss) from
 operations             (2,228)               94    (6,703)         (5,264)
Interest income, net       281               281       182             182
Other income
 (expense), net            (31)              (31)      166             166
                      --------          --------  --------        --------
Net income (loss)
 before income taxes    (1,978)              344    (6,355)         (4,916)
Provision for income
 taxes                     170               170        75              75

                      --------          --------  --------        --------
Net income (loss)     $ (2,148)         $    174  $ (6,430)       $ (4,991)
                      ========          ========  ========        ========
Other comprehensive
 income (loss):
   Foreign currency
    translation gain
    (loss)                 226               226      (564)           (564)
                      --------          --------  --------        --------
Comprehensive income
 (loss)               $ (1,922)         $    400  $ (6,994)       $ (5,555)
                      ========          ========  ========        ========
Net loss per share:
   Basic              $  (0.03)         $   0.00  $  (0.09)       $  (0.07)
                      ========          ========  ========        ========
   Diluted                 N/A          $   0.00       N/A             N/A
                                        ========

Shares used in
 computing net income
 (loss) per share:
   Basic                77,228            77,228    74,745          74,745
                      ========          ========  ========        ========
   Diluted [3]             N/A            83,388       N/A             N/A
                                        ========

[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, share-based compensation expense measured in
    accordance with SFAS 123R, amortization of intangible assets,
    non-recurring severance costs, lease buyout costs 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
    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 a 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] Adjustments include stock-based compensation (expense) / benefit,
    amortization of intangible assets, a restructuring benefit,
    non-recurring severance costs, lease buyout costs and purchased
    in-process research and development.

    A reconciliation of the Non-GAAP adjustments recorded in general and
    administrative expense is as follows (in thousands):


                                      Three Months ended Six Months ended
                                          March 31,          March 31,
    Description                         2006     2005      2006     2005
                                      ------------------ ------------------

    Stock-based compensation          $    383  $    154 $    665  $    142
    Non-recurring severance costs          604         -      604         -
    Non-recurring lease costs              316         -      316         -
                                      --------  -------- --------  --------
        Total non-GAAP general and
         administrative adjustments   $  1,303  $    154 $  1,585  $    142
                                      --------  -------- --------  --------

[3] Diluted net loss per share for the three months ended March 31, 2005
    and the six months ended March 31, 2006 and 2005, is computed excluding
    total potential outstanding common shares of 13,446, 13,464 and 13,446,
    respectively, as their effect is anti-dilutive.



                         Chordiant Software, Inc.
        Unaudited Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)

                        Six Months ended             Six Months ended
                         March 31, 2006              March 31, 2005
                   --------------------------  ---------------------------
                                       non-                         non-
Revenues:            GAAP    Adj.[2]   GAAP[1]   GAAP     Adj.[2]   GAAP[1]
   License         $ 22,332          $ 22,332  $  15,801          $ 15,801
   Service           26,499            26,499     25,047            25,047
                   --------          --------  ---------          --------
        Total
         revenues    48,831            48,831     40,848            40,848

Cost of revenues:
   License              961               961        364               364
   Service           14,248     (81)   14,167     15,093    (242)   14,851
   Amortization of
    intangible
    assets              606    (606)        -        462    (462)        -
                   --------          --------  ---------          --------
        Total cost
         of
         revenues    15,815            15,128     15,919            15,215
Gross profit         33,016            33,703     24,929            25,633
                   --------          --------  ---------          --------

Operating
 expenses:
   Sales and
    marketing        16,836  (1,286)   15,550     14,364    (272)   14,092
   Research and
    development      10,373    (124)   10,249     10,149    (302)    9,847
   General and
    administrative    9,929  (1,585)    8,344      9,084    (142)    8,942
   Amortization of
    intangible
    assets                -                 -        117    (117)        -
   Purchased
    in-process
    research and
    development           -                 -      1,940  (1,940)        -
   Restructuring
    (benefit)             -                 -        (97)     97         -
                   --------          --------  ---------          --------
        Total
         operating
         expenses    37,138            34,143     35,557            32,881
                   --------          --------  ---------          --------

Loss from
 operations          (4,122)             (440)   (10,628)           (7,248)
Interest income,
 net                    480               480        392               392
Other income
 (expense), net          87                87       (231)             (231)
                   --------          --------  ---------          --------
Net income (loss)
 before income
 taxes               (3,555)              127    (10,467)           (7,087)
Provision for
 income taxes           291               291        155               155

                   --------          --------  ---------          --------
Net loss           $ (3,846)         $   (164) $ (10,622)         $ (7,242)
                   ========          ========  =========          ========
Other
 comprehensive
 income (loss):
   Foreign
    currency
    translation
    gain (loss)         (67)              (67)        74                74
                   --------          --------  ---------          --------
Comprehensive loss $ (3,913)         $   (231) $ (10,548)         $ (7,168)
                   ========          ========  =========          ========
Net loss per
 share:
   Basic           $  (0.05)         $  (0.00) $   (0.14)         $  (0.10)
                   ========          ========  =========          ========

Shares used in
 computing net
 income (loss) per
 share:
   Basic and
    diluted          77,026            77,026     73,464            73,464
                   ========          ========  =========          ========

[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, share-based compensation expense measured in
    accordance with SFAS 123R, amortization of intangible assets,
    non-recurring severance costs, lease buyout costs 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
    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 a 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] Adjustments include stock-based compensation (expense) / benefit,
    amortization of intangible assets, a restructuring benefit,
    non-recurring severance costs, lease buyout costs and purchased
    in-process research and development.

    A reconciliation of the Non-GAAP adjustments recorded in general and
    administrative expense is as follows (in thousands):


                                      Three Months ended Six Months ended
                                          March 31,          March 31,
    Description                         2006     2005      2006     2005
                                      ------------------ ------------------

    Stock-based compensation          $    383  $    154 $    665  $    142
    Non-recurring severance costs          604         -      604         -
    Non-recurring lease costs              316         -      316         -
                                      --------  -------- --------  --------
        Total non-GAAP general and
         administrative adjustments   $  1,303  $    154 $  1,585  $    142
                                      --------  -------- --------  --------

[3] Diluted net loss per share for the three months ended March 31, 2005
    and the six months ended March 31, 2006 and 2005, is computed excluding
    total potential outstanding common shares of 13,446, 13,464 and 13,446,
    respectively, as their effect is anti-dilutive.



                         Chordiant Software, Inc.
                  Condensed Consolidated Balance Sheets
                              (in thousands)

                                                   March 31,     Sept. 30,
                                                      2006         2005
                                                  -----------  -----------
ASSETS                                            (unaudited)
Current Assets:
  Cash and cash equivalents                       $    43,287  $    38,546
  Restricted cash                                         461        1,982
  Accounts receivable, net                             16,464       18,979
  Prepaid expenses and other current assets             4,788        4,345
                                                  -----------  -----------
   Total current assets                                65,000       63,852

Restricted cash                                           394          365
Property and equipment, net                             2,446        2,479
Goodwill                                               31,907       31,907
Intangible assets, net                                  4,542        5,148
Other assets                                            3,039        3,499
                                                  -----------  -----------
   Total assets                                   $   107,328  $   107,250
                                                  ===========  ===========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                                $     4,567  $     4,554
  Accrued expenses                                     10,765        8,902
  Deferred revenue                                     22,743       26,050
  Current portion of capital lease obligations            204          213
                                                  -----------  -----------
   Total current liabilities                           38,279       39,719

Deferred revenue, long-term                             2,985          147
Restructuring costs, net of current portion             1,428        1,731
Other long-term liabilities                               121           96
                                                  -----------  -----------
   Total liabilities                                   42,813       41,693
                                                  -----------  -----------

Stockholders' Equity:
  Common stock                                             79           78
  Additional paid-in capital and deferred
   compensation                                       274,754      271,884
  Accumulated deficit                                (212,735)    (208,889)
  Accumulated other comprehensive income                2,417        2,484
                                                  -----------  -----------
       Total stockholders' equity                      64,515       65,557
                                                  -----------  -----------
   Total liabilities and stockholders' equity     $   107,328  $   107,250
                                                  ===========  ===========

Contact Information

  • Chordiant Investor Relations Contact:
    Steve Polcyn
    Chordiant Software, Inc.
    (408) 517-6282
    Email Contact