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Keynote Systems, Inc. (KEYN)

F3Q08 (Qtr End 06/30/08) Earnings Call Transcript

July 29, 2008 5:00 pm ET


Kirsten Chapman – IR

Umang Gupta – Chairman and CEO

Drew Hamer – CFO and VP of Finance


Brian Kinstlinger – Sidoti & Co.

Justin Cable – Global Hunter

Ryan Bergen – Craig-Hallum Capital

Derrick Wood – Pacific Growth

Douglas Whitman – Whitman Capital

Kevin Liu – B. Riley & Co.



Good afternoon, everyone, and welcome to Keynote’s conference call for the third quarter fiscal year 2008. Today's conference is being recorded. At this time, I would like to turn the call over to Kirsten Chapman for opening remarks and introduction.

Kirsten Chapman

Thank you, Dory. Good afternoon, everyone, and welcome to Keynote’s conference call for the third quarter fiscal year 2008 ending June 30, 2008. I am here today with Umang Gupta, Chairman and Chief Executive Officer, and Drew Hamer, Chief Financial Officer. Umang and Drew will review our accomplishments for the quarter and then will be available to answer questions.

Hopefully by now you've seen our press release that was distributed over Business Wire and the major wire services. For your convenience, the press release has also been posted at our website at The replay of this call will be available by telephone by dialing 1-800-642-1687. The passcode is 55216017, or by webcast at the Investor Relations section of our website at

I would like to remind you that statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, hopes, beliefs, expectations, and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and the actual results might differ materially from those projected in the forward-looking statements.

Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in today's press release and in the company's annual and quarterly reports filed with the SEC. We have provided detailed guidance in our earnings release today as we have in prior quarters. This guidance assumes no additional acquisitions or other significant or extraordinary transactions other than those described in our earnings release. We will not comment on this guidance during the quarter, but may provide an update to this guidance in the event of material changes during the quarter.

Before the company reviews the financials, I will review definitions for some metrics, which are not in accordance with the generally accepted accounting principles, commonly known as GAAP. The company defines non-GAAP net income or loss as net income or loss adjusted for provision of income taxes, less cash tax expense, stock-based compensation expense, and the amortization of purchased intangibles.

Non-GAAP net income per share equals non-GAAP net income divided by the weighted diluted share count as of that period end. The non-GAAP net loss per share equals non-GAAP net loss divided by the weighted basic share count as of that period end. Net deferred revenue represents deferred revenue balance as recorded on the consolidated balance sheet and gross deferred revenue represents net deferred revenue plus the unpaid deferred revenue that has an associated accounts receivable balance as of the balance sheet date.

Now I would like to introduce Umang Gupta, Chairman and CEO, and Drew Hamer, Chief Financial Officer. Please go ahead, Umang.

Umang Gupta

Thank you, Kirsten. Welcome everyone and thank you for joining us today. We posted a strong quarter, delivering the highest revenue in the company's 13-year history. Third quarter fiscal 2008 revenue reached $20.5 million, exceeding our guidance and rising 17.9% from the $17.4 million reported in the third quarter of 2007. It's been a very exciting quarter across all product lines.

I will review performance by category. First, our mobile test and measurements. For the quarter, mobile revenue was $8.3 million, up 81% compared to the same period last year and 33% sequentially, driven primarily by Keynote SIGOS and supported by solid mobile subscription revenue growth. Keynote SIGOS signed ten more GlobalRoamer and SITE deals, bringing our June 30 customer count up to 139.

The important new deals included Cell-Tel, Wind Hellas, Unitel, Claro Paraguay, Claro Uruguay, Vodafone Germany, Hutchison Hong Kong, Vip mobile in Serbia , Vip Operator in Macedonia, and as announced on the last conference call, T-Mobile here in the United States. Now we serve all of the top three North American GSM operators. And with the Zandan acquisition, we added wireless carriers, Telefonica and Bouygues to our customer base.

Key mobile content service deals in the quarter included ClairMail, MX Telecom, Twitter, Visto and ChaCha Search, all of whom will be using either our Mobile Application Perspective or Mobile Device Perspective services. And as announced last week, SendMe Mobile selected our on-demand Mobile Application Perspective for common short code performance monitoring to ensure that their SMS customers obtain reliable, speedy, and dependable service.

I would like to provide you with a quick refresher regarding our products and services in the mobile arena. With SITE and GlobalRoamer, we test and measure end-to-end service quality of mobile operator networks. With SITE and Mobile Application Perspective, or MAP, we test the quality of mobile content and applications for mobile developers and service providers.

With Mobile Device Perspective or MDP, we provide on-device monitoring of mobile application and services for operators and application owners. In April, we launched a first of its kind MAP service for monitoring SMS common short codes. Short codes enable consumers to buy mobile content, participate in polls, and complete mobile commerce transactions via text messaging. This message is – this market is growing rapidly as hundreds of enterprises begin to better understand how to generate sales through the use of common short codes.

Also in April we acquired Zandan, which secured our exclusive rights to the MAP technology and to their mobile test builder product. We intend to re-label this desktop software product as MITE or Mobile Internet Test Environment, which we expect to deliver shortly. It will follow the same marketing model as KITE, which I will elaborate on in a minute.

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