SOURCE: Chordiant

May 16, 2005 17:31 ET

Chordiant Software Announces Results for the Second Quarter of Fiscal Year 2005 Ended March 31, 2005

CUPERTINO, CA -- (MARKET WIRE) -- May 16, 2005 -- Chordiant Software, Inc. (NASDAQ: CHRD) today announced financial results for the second quarter of fiscal year (FY) 2005 ended March 31, and filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (SEC).

Second Quarter FY 2005 Results

Total revenues for the second quarter of FY 2005 were $19.2 million, which compares to revenues of $20.2 million reported for the three months ended March 31, 2004. For the first six months of FY 2005, revenues were $40.8 million, compared to $39.8 million for the same period of the prior year. License revenues for the second quarter of FY 2005 were approximately $7.0 million, compared to $9.3 million reported for the three months ended March 31, 2004. Not included in license revenue for the second quarter of FY 2005 were transactions with three customers which Chordiant expects will be recognized in subsequent quarters. For the first six months of FY 2005, license revenues were $15.8 million, compared to the $18.6 million reported for the same period of 2004. Service revenues for the second quarter of FY 2005 were $12.2 million, compared to $10.9 million reported for the three months ended March 31, 2004. For the six months ended March 31, 2005, service revenues were $25.0 million, compared to $21.3 million for the same period of 2004. Deferred revenue totaled $18.0 million as of March 31, 2005. Chordiant had $41.7 million in cash and cash equivalents, restricted cash, and short-term investments at March 31, 2005.

Chordiant posted a U.S. GAAP (Generally Accepted Accounting Principles) net loss of $5.6 million, or $0.08 per share loss for the second quarter of FY 2005 ended March 31, 2005, compared to a GAAP net loss of $0.4 million, or $0.01 per share loss for the three months ended March 31, 2004. Chordiant reported a second quarter FY 2005 non-GAAP financial measure loss of $5.0 million (which excludes stock-based compensation, amortization of intangible assets and restructuring expense), or a non-GAAP loss of $0.07 per share, compared to non-GAAP net income (which excludes, stock-based compensation and amortization of intangible assets) of $1.1 million, or $0.01 non-GAAP net income per share for the three months ended March 31, 2004.

Non-GAAP Financial Measurements

Chordiant believes that its non-GAAP financial measure results provide useful information to investors because they reveal results excluding non-recurring expenses that Chordiant believes are not indicative of its on-going operations. The non-GAAP financial measure information is provided as a complement to results provided in accordance with GAAP and should not be considered superior to or as a substitute for GAAP measures.

Operating Expenses

General and administrative expenses increased to $5.0 million for the three months ended March 31, 2005 from $1.9 million for the same period of 2004. The increase in these expenses was mainly attributable to an increase in professional services fees and expenses associated with efforts to comply with the Sarbanes-Oxley Act of 2002 (SOX), integration expenses related to the KiQ acquisition, additional procedures required as a result of material weaknesses that were identified in June and September 2004, as well as additional fees and expenses related to the restatement of the prior year's results, the filing of Chordiant's Form 10-K/T for the period January 1 to September 30, 2004. Personnel costs also increased in conjunction with new hires in the accounting and finance areas.

Sales and marketing expense increased to $6.9 million for the three months ended March 31, 2005 from $6.0 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 increased to $5.0 million for the three months ended March 31, 2005 from $4.5 million for the same period of 2004. This increase is attributable to an increase in consulting expenses and the addition of the employees as a result of the KiQ acquisition completed in late December 2004.

Customer Success

"The second quarter of FY 2005 was a tough quarter for Chordiant. However, I am pleased to announce new customers such as The Boston Globe, Achmea Holdings NV, Cellcom, and Capital One (Europe). The third quarter is off to a good start and in April, our North American momentum continued with a significant transaction with ING Canada Ltd., a leading insurance company in Canada," said Stephen Kelly, Chordiant CEO. "In addition, four customers, The Boston Globe, Time Warner Cable, O2 and Achmea Holdings, selected our Decision Management Suite of products," Kelly added. The Decision Management Suite of products was added to Chordiant's product line through the acquisition of KiQ in December 2004.

"Our customer success came in spite of a challenging period in Company history. Nonetheless, Chordiant maintained forward progress on major customer opportunities. No transactions were unexpectedly lost to competitors in the quarter," Kelly said.

Operational Success

The Company is now current with its SEC related filings, having successfully filed Forms 10-Q for December 31, 2004 and March 31, 2005 in the last two-plus weeks. As a result of efforts during the last several months, the Company has completed an internal assessment of Finance organizational needs for personnel and system enhancements. "We now embark on a path leading to operational excellence," commented George de Urioste, Chief Operating Officer and CFO. "The vision is established for re-architecting our finance function. Implementation will take us to 'A-level' operational performance by the completion of the calendar year."

Teleconference Webcast Tuesday - May 17, 2005 at 2:00 P.M. (Pacific)

Chordiant management has scheduled a teleconference for Tuesday, May 17, 2005, at 2:00 P.M. (Pacific), 5:00 P.M. (Eastern) and 22:00 (London) to discuss financial results and business events for the Company. This teleconference will be webcast live for the public from Chordiant's website at http://www.chordiant.com. The public, industry analysts and media are invited to attend the conference on a listen-only basis. For more information, including this press release and Chordiant's Current Report on Form 8-K, any non-GAAP financial measures that may be discussed on the webcast as well as the most directly comparable GAAP financial measures and a reconciliation of the difference between the GAAP and any non-GAAP financial measures discussed on the webcast (other than non-GAAP financial measures discussed and reconciled in this news release), and any other material financial and other statistical information contained in the webcast, please visit the Investor Relations section of Chordiant's web site at http://www.chordiant.com. From this site, you can listen to the teleconference, assuming that your computer system is configured properly. A phone replay will also be available for seven days after the live call at 303-590-3000, Passcode: 11030675.

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, interpretations of accounting principles which may impact the amount of revenues which may be recognized by Chordiant in the periods reported, difficulties in the implementation of our new financial information system, and difficulties in hiring and retaining staff for our finance department. 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/T for the transition period of January 1, 2004, to September, 30, 2004, and our Quarterly Reports filed 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   Six Months Ended
                                          March 31,           March 31,
                                       2005      2004      2005      2004
                                     -------   -------   -------   -------
Revenues:
  License                            $ 6,959   $ 9,305   $15,801   $18,553
  Service                             12,212    10,944    25,047    21,296
                                     -------   -------   -------   -------
   Total revenues                     19,171    20,249    40,848    39,849

Cost of revenues:
  License                                198       342       364       916
  Service                              7,348     6,285    14,851    12,522
  Stock-based compensation                48       209        (8)      885
  Amortization of intangible assets      331       686       462     1,480
                                     -------   -------   -------   -------
   Total cost of revenues              7,925     7,522    15,669    15,803

Gross profit                          11,246    12,727    25,179    24,046
                                     -------   -------   -------   -------

Operating expenses:
  Sales and marketing                  6,878     6,014    14,093    11,709
  Research and development             4,981     4,455     9,846     8,631
  General and administrative           5,030     1,878     8,942     3,169
  Stock-based compensation               140       500        35     3,171
  Amortization of intangible assets       93        94       117       190
  Purchased in-process research
   and development                         -         -     1,940         -
  Restructuring expense                   26       (32)      (97)      996
                                     -------   -------   -------   -------
   Total operating expenses           17,148    12,909    34,876    27,866
                                     -------   -------   -------   -------

Loss from operations                  (5,902)     (182)   (9,697)   (3,820)
Interest income, net                     182       210       392       227
Other income (expense), net              166      (174)     (231)      (33)
                                     -------   -------   -------   -------
Net loss before income taxes          (5,554)     (146)   (9,536)   (3,626)

Provision for income taxes                75       208       155       665
                                     -------   -------   -------   -------

Net loss                             $(5,629)  $  (354)  $(9,691)  $(4,291)
                                     =======   =======   =======   =======

Other comprehensive income:
  Foreign currency translation gain     (564)      (23)       74     1,112
                                     -------   -------   -------   -------
Comprehensive loss                   $(6,193)  $  (377)  $(9,617)  $(3,179)
                                     =======   =======   =======   =======
Net loss per share:
  Basic and diluted                  $ (0.08)  $ (0.01)   $(0.13)   $(0.07)
                                     =======   =======   =======   =======
  Shares used in per share
   calculation:                       74,745    67,655    73,464    64,303
                                     =======   =======   =======   =======

Supplemental information[1]:

Non-GAAP financial measures
 and reconciliation:
  Net loss                           $(5,629)  $  (354)  $(9,691)  $(4,291)
  Less: Stock-based compensation         188       709        27     4,056
  Less: Amortization of
   intangible assets                     424       780       579     1,670
  Less: Purchased in-process
   research and development                0         0     1,940         0
  Less: Restructuring expense             26       (32)      (97)      996
                                     -------   -------   -------   -------
Pro forma net income (loss):         $(4,991)  $ 1,103   $(7,242)  $ 2,431
                                     =======   =======   =======   =======

Basic and diluted pro forma net
 income (loss) per share:            $ (0.07)    $0.01   $ (0.10)    $0.03
                                     =======   =======   =======   =======
   Shares used in per share
    calculation:[2]         Basic     74,745    67,655    73,464    64,303
                                     =======   =======   =======   =======
                            Diluted   74,745    75,002    73,464    72,649
                                     =======   =======   =======   =======

[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 and six months ended March
    31, 2005, is computed excluding total potential outstanding common
    shares of 13,466 and 13,466, respectively, as their effect is
    anti-dilutive.


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

                                    March 31, 2005      September 30, 2004
                                    --------------      ------------------
ASSETS
Current Assets:
   Cash and cash equivalents          $    35,325           $    55,748
   Marketable securities                    4,000                 4,000
   Restricted cash                          1,782                   279
   Accounts receivable, net                15,849                20,161
   Prepaid expenses and other
    current assets                          3,578                 3,097
                                      -----------           -----------
      Total current assets                 60,534                83,285

Restricted cash                               558                 2,057
Property and equipment, net                 2,867                 3,237
Goodwill                                   32,028                24,874
Intangible assets, net                      5,754                   244
Other assets                                3,093                 1,643
                                      -----------           -----------
      Total assets                    $   104,834           $   115,340
                                      ===========           ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                   $     4,899           $     6,394
   Accrued expenses                         9,656                11,681
   Deferred revenue                        17,040                18,459
   Current portion of capital
    lease obligations                         205                   191
                                      -----------           -----------
      Total current liabilities            31,800                36,725

Deferred revenue, long-term                   947                 2,122
Long-term portion of capital
 lease obligations                            204                   317
                                      -----------           -----------
      Total liabilities                    32,951                39,164
                                      -----------           -----------

   Common stock                                77                    72
   Additional paid-in capital             271,587               262,703
   Deferred stock-based compensation       (3,904)                 (339)
   Accumulated deficit                   (199,040)             (189,349)
   Accumulated other comprehensive
    income                                  3,163                 3,089
                                      -----------           -----------
      Total stockholders' equity           71,883                76,176
                                      -----------           -----------
    Total liabilities and
     stockholders' equity             $   104,834           $   115,340
                                      ===========           ===========

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