Kronos® Reports First Quarter Fiscal 2007 Results
Revenue and EPS exceed consensus; workforce management profit
increases more than 35% year-over-year
CHELMSFORD, Mass.--(BUSINESS WIRE)--Jan. 29, 2007--Kronos®
Incorporated (Nasdaq: KRON) today reported the following results for
the first quarter of Fiscal 2007:
-- Total revenue was $148.7 million, compared to $127.9 million
for the same period a year ago, an increase of 16 percent.
-- GAAP net income was $5.7 million, or $0.18 per diluted share,
compared to $6.2 million, or $0.19 per diluted share for the
same period a year ago. GAAP net income for the company's
workforce management business increased to $0.26 per diluted
share from $0.19 per diluted share for the same period a year
ago, representing year-over-year growth of more than 35
percent.
-- Non-cash charges --GAAP net income for the first quarter of
Fiscal 2007 includes the following items:
-- A non-cash charge of $0.10 per diluted share for
stock-based compensation, compared to $0.08 per diluted
share in the first quarter of the prior year; and
-- A non-cash charge of $0.08 per diluted share for
amortization of acquired intangibles, compared to $0.04
per diluted share in the first quarter of the prior
year.
-- In total, these items reduced net income for the first
quarter of Fiscal 2007 by $0.18 per diluted share,
compared to $0.12 per diluted share for the first
quarter of Fiscal 2006.
"We started Fiscal 2007 on a strong note, delivering on our
commitments for both top- and bottom-line performance as customers
across a broad spectrum of industries selected Kronos' solutions to
increase workforce productivity. In Q1, we grew the earnings of our
workforce management business by more than 35 percent while continuing
to make strategic investments to fuel the company's long-term growth,
a testament to Kronos' operational excellence," said Chief Executive
Officer Aron Ain. "During the quarter, we made progress on our global
expansion initiative, further extending our international presence and
partner network. We also saw meaningful synergies from our Unicru
acquisition, with our Talent Management Division closing a record
number of deals in Q1. We believe that the compelling value of our
workforce management and talent management solutions, combined with
our vertical expertise and global capabilities, are powerful
differentiators that will enable us to capitalize on the fast-growing
human capital management market."
Kronos' first quarter Fiscal 2007 results mark the company's 108th
consecutive quarter of year-over-year revenue growth and 79th
consecutive quarter of profitability, continuing one of the longest
records of growth and profitability in the software industry (Note 1).
Deferred maintenance, deferred professional service, and deferred
product revenue on the balance sheet at the end of the first quarter
of Fiscal 2007 totaled $153.3 million. In addition to this deferred
revenue, Kronos has a backlog of professional services engagements of
approximately $64.0 million.
Cash flow from operations was $30.2 million in the first quarter
of Fiscal 2007, compared to $23.0 million for the comparable period
last year. In the first quarter of Fiscal 2007, Kronos repurchased
283,017 shares of its common stock for $10.0 million. The company made
payments on acquisitions of $7.9 million. Kronos exited the quarter
with $95.4 million in cash and investments and a revolving loan
balance of $54.7 million.
First Quarter Highlights
-- Talent management momentum -- Kronos' Talent Management
Division delivered excellent results in its first full quarter
of operation, closing more deals than in any quarter in
Unicru's history. The team continued to have major success in
the enterprise retail segment, Unicru's traditional area of
strength, and with the benefit of Kronos' strength and
experience, also increased its penetration of new markets such
as healthcare and the mid-market.
-- Retail industry leadership -- The company's retail market
momentum continued to build as customers turned to Kronos for
its innovative products, deep domain expertise, and, most
importantly, its successful deployments in complex retail
environments. Kronos for Retail, the only complete, end-to-end
solution for talent management and workforce management, is
being used by retailers around the world to optimize workforce
productivity and the quality of the in-store customer
experience. It is important to note that the company's
best-in-class solutions and customer successes are recognized
by industry thought leaders as well. Most recently, Kronos was
the only vendor to receive the highest possible rating of
"Strong Positive", in the Gartner Marketscope for Retail Time
and Labor Applications, published in December 2006. To
leverage its growing opportunity in this key vertical, Kronos
recently completed a three-fold expansion of its retail sales
team.
-- Notable customer wins across diverse industries -- Notable
wins during the quarter included:
-- Bebe Stores, a leading women's apparel retailer,
purchased Kronos' optimized scheduling, budgeting,
analytics, and talent management solutions to help
optimize the productivity of its workforce across
hundreds of locations. Bebe selected Kronos because of
its proven end-to-end retail solution and the ability
of Workforce Acquisition(TM) to increase the quality of
its hires and reduce the time it takes to bring new
employees into the organization. The deciding factors
in this competitive win were Kronos' retail industry
market leadership and track record of successful
customer deployments.
-- CDF (Coca Cola Bottling Company, Mexico) selected
Kronos' time and labor solution and biometric terminals
to manage the workforce in its corporate office as well
as in its network of plants and distribution centers in
Mexico. Kronos' market leadership, implementation
expertise, and the potential ROI of its solutions were
key factors in winning this deal.
-- U.S. Transportation Security Administration (TSA)
purchased Kronos' biometric terminals which it will
deploy to efficiently capture time and labor data for
approximately 55,000 employees in more than 450
airports. TSA's decision to extend its relationship
with Kronos was influenced by the significant benefits
it has already recognized from its existing Kronos
workforce management implementation. The purchase of
the Kronos 4500 Touch ID(TM) terminals was part of a
contract awarded to immixGroup, a Kronos partner in the
federal government marketplace.
-- Wild Oats Markets, a major nationwide chain of natural
and organic food markets and existing Kronos customer,
extended its strategic partnership with Kronos with the
purchase of Workforce Acquisition. Wild Oats will
utilize Kronos' on-demand talent management solution to
streamline its process for selecting and hiring the
highest quality employees, ultimately reducing
turnover, enhancing workforce productivity, and
maximizing customer satisfaction.
Outlook
Second-Quarter Fiscal 2007:
-- Total revenue is expected to be in the range of $154-$159
million.
-- GAAP net income per diluted share is expected to be in the
range of $0.23-$0.28.
-- Non-cash charges --GAAP net income for the second quarter of
Fiscal 2007 is expected to include the following items:
-- A non-cash charge of $0.10 per diluted share for
stock-based compensation; and
-- A non-cash charge of $0.09 per diluted share for
amortization of acquired intangibles.
-- In total, these items are expected to reduce net income
for the second quarter of Fiscal 2007 by $0.19 per
diluted share.
Fiscal 2007:
-- Total revenue is expected to be in the range of $647-$660
million.
-- GAAP net income per diluted share is expected to be in the
range of $1.15-$1.27.
-- Non-cash charges --GAAP net income for Fiscal 2007 is expected
to include the following items:
-- A non-cash charge of approximately $0.40 per diluted
share for stock-based compensation; and
-- A non-cash charge of approximately $0.35 per diluted
share for amortization of acquired intangibles.
-- In total, these items are expected to reduce net income
for Fiscal 2007 by $0.75 per diluted share.
Conference Call Webcast
Kronos senior management plans to review its first quarter results
during a conference call today beginning at 4:30 p.m. Eastern. The
conference call will be webcast live at http://www.kronos.com/invest
and will be available for replay purposes.
About Kronos Incorporated
Kronos Incorporated empowers organizations around the world to
effectively manage their workforce. At Kronos, we are experts who are
solely focused on delivering software and services that enable
organizations to reduce costs, increase productivity, improve employee
satisfaction, and ultimately enhance the level of service they
provide. Kronos serves customers in more than 50 countries through its
network of offices, subsidiaries, and distributors. Widely recognized
as a market and thought leader in managing the workforce, Kronos has
unrivaled reach with more than 30 million people using a Kronos
solution every day. Learn more about Kronos at www.kronos.com.
Safe Harbor Statement
This press release contains statements about the business
prospects and estimates of Kronos' financial results for future
periods that are forward-looking statements that involve a number of
risks and uncertainties, including the performance estimates and
statements relating to earnings and revenue growth and profitability,
Kronos' ability to realize the anticipated benefits of the Unicru
acquisition, the ability to close potential product sales
transactions, the ability to realize revenues from the sales pipeline
and backlog, market acceptance of our new products and enhancements,
including those formerly offered by Unicru and AD OPT Technologies,
our ability to monitor and manage discretionary costs, growth in the
market for our products and within the economy generally, and
potential acquisitions. These statements are based on management's
expectations of future events as of the date of this press release,
and Kronos assumes no obligation to update any forward-looking
statements as a result of new information or future events or
developments. Actual results could differ materially from management's
expectations. Among the important factors that could cause actual
operating results to differ materially from those indicated by such
forward-looking statements are delays in product development,
including enhancements to existing products, product performance
issues, competitive pressures, general economic conditions, possible
disruption in commercial activities caused by terrorist activity and
armed conflict, such as changes in logistics and security arrangement
and the risk factors detailed in the company's Annual Report on Form
10-K filed with the SEC on December 13, 2006 and its quarterly report
on Form 10-Q filed with the SEC on August 10, 2006. The timing of the
release of new products or product enhancements will take place if and
when available and at the sole discretion of Kronos.
Note 1: Excluding a one-time special charge in the second quarter
of Fiscal 2001.
(C) 2007 Kronos Incorporated. Kronos and the Kronos logo are
registered trademarks, and Kronos 4500 Touch ID and Workforce
Acquisition are trademarks of Kronos Incorporated or a related
company. All other product and company names mentioned are used for
identification purposes only and may be trademarks of their respective
owners. The MarketScope is copyrighted 12/07/06 by Gartner, Inc. and
is reused with permission. The MarketScope is an evaluation of a
marketplace at and for a specific time period. It depicts Gartner's
analysis of how certain vendors measure against criteria for that
marketplace, as defined by Gartner. Gartner does not endorse any
vendor, product or service depicted in the MarketScope, and does not
advise technology users to select only those vendors with the highest
rating. Gartner disclaims all warranties, express or implied, with
respect to this research, including any warranties of merchantability
or fitness for a particular purpose.
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
UNAUDITED
Three Months Ended
-------------------------
December 30, December 31,
2006 2005
------------ ------------
Net revenues:
Product $52,187 $47,987
Maintenance 52,148 46,246
Professional services 33,802 33,710
Subscription 10,589 -
------------ ------------
148,726 127,943
Cost of sales:
Costs of product 11,927 10,586
Costs of maintenance 12,928 14,021
Costs of professional services 30,863 29,924
Costs of subscription 5,861 -
------------ ------------
61,579 54,531
------------ ------------
Gross profit 87,147 73,412
Operating expenses and other income:
Sales and marketing 44,924 38,772
Engineering, research and development 17,924 13,013
General and administrative 13,959 11,977
Amortization of intangible assets 2,773 1,542
Other income, net (1,063) (1,508)
------------ ------------
78,517 63,796
Income before income taxes 8,630 9,616
Provision for income taxes 2,935 3,392
------------ ------------
Net income $5,695 $6,224
============ ============
Net income per common share:
Basic $0.18 $0.20
============ ============
Diluted $0.18 $0.19
============ ============
Weighted-average common shares outstanding:
Basic 31,753,703 31,789,546
============ ============
Diluted 31,962,633 32,271,154
============ ============
Stock-based compensation expense:
Costs of product $95 $82
Costs of maintenance 595 474
Costs of professional services 385 345
Costs of subscription 7 -
Sales and marketing 1,499 1,256
Engineering, research and development 717 783
General and administrative 1,278 974
------------ ------------
$4,576 $3,914
============ ============
Amortization of intangible assets:
Costs of product $330 $199
Costs of subscription 1,091 -
Amortization of intangible assets 2,773 1,542
------------ ------------
$4,194 $1,741
============ ============
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
December 30, September 30,
2006 2006
------------ -------------
ASSETS
Current assets:
Cash and equivalents $37,490 $40,680
Marketable securities 53,003 62,770
Accounts receivable, less allowances of
$8,477 at December 30, 2006 and $9,248 at
September 30, 2006 106,240 123,537
Deferred income taxes 9,024 8,871
Other current assets 29,001 28,962
------------ -------------
Total current assets 234,758 264,820
Marketable securities 4,881 13,192
Property, plant and equipment, net 71,511 69,867
Customer related intangible assets 73,317 72,853
Other intangible assets 43,300 43,568
Goodwill 248,665 241,654
Capitalized software, net 23,297 22,946
Other assets 18,283 18,852
------------ -------------
Total assets $718,012 $747,752
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $13,194 $11,025
Accrued compensation 46,530 48,768
Accrued expenses and other current
liabilities 28,116 31,983
Deferred product revenues 4,581 2,950
Deferred professional service revenues 21,046 21,139
Deferred maintenance revenues 119,632 124,485
------------ -------------
Total current liabilities 233,099 240,350
Deferred maintenance revenues 8,003 7,990
Deferred income taxes 22,786 22,605
Notes payable, long-term 54,696 80,820
Other liabilities 8,763 7,855
Shareholders' equity:
Preferred Stock, par value $1.00 per share:
authorized 1,000,000 shares, no shares
issued and outstanding - -
Common Stock, par value $.01 per share:
authorized 50,000,000 shares, 31,715,448
and 31,846,620 shares issued at December
30, 2006 and September 30, 2006,
respectively 317 318
Additional paid-in capital 63,240 65,473
Retained earnings 325,129 319,434
Accumulated other comprehensive income:
Foreign currency translation 2,123 3,086
Net unrealized (loss) on available-for-
sale investments (144) (179)
------------ -------------
1,979 2,907
Total shareholders' equity 390,665 388,132
------------ -------------
Total liabilities and shareholders'
equity $718,012 $747,752
============ =============
CONTACT: Kronos
Mark Julien, 978-947-4770
mjulien@kronos.com
SOURCE: Kronos Incorporated
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