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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

                   (Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended September 30, 2004

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission File Number 000-29357

Chordiant Software, Inc.  

(Exact name of Registrant as specified in its Charter)

 

Delaware

93-1051328

  (State or Other Jurisdiction of Incorporation or Organization) 

(I.R.S. Employer Identification Number)

20400 Stevens Creek Boulevard, Suite 400
Cupertino, CA    95014
(Address of Principal Executive Offices including Zip Code)

(408) 517-6100
(Registrant's Telephone Number, Including Area Code)

(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES [X]    NO [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).   YES [X]    NO [  ]

The number of shares of the Registrant's common stock outstanding as of November 5, 2004 was 72,560,043

 

 

CHORDIANT SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION 

Page No.
Item 1. Financial Statements

3
  Condensed Consolidated Balance Sheets - September 30, 2004 and December 31, 2003 3
  Condensed Consolidated Statements of Operations and Comprehensive Loss - Three and Nine Months ended September 30, 2004 and 2003 4
  Condensed Consolidated Statements of Cash Flows - Nine Months ended September 30, 2004 and 2003 5
  Notes to Condensed Consolidated Financial Statements   6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 30
Item 4. Controls and Procedures 31
     
PART II. OTHER INFORMATION 33
Item 1. Legal Proceedings 33
Item 6. Exhibits 33
 
SIGNATURES   34

 

 

 

 

 

Table of Contents

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

 CHORDIANT SOFTWARE,  INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
  
September 30, 2004 		  December 31, 2003  
 
  
 
 
ASSETS              
Current assets:
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 59,748   $ 36,218  
Short-term investments and restricted cash     590     581  
  Accounts receivable, net     19,953     11,974  
  Prepaid expenses and other current assets     3,351     2,675  
   
 
 
    Total current assets     83,642     51,448  
Restricted cash     1,500     1,500  
Property and equipment, net     2,784     3,071  
Goodwill     24,874     24,874  
Intangible assets, net 244 1,414
Other assets     1,871     1,504  
   
 
 
    Total assets   $ 114,915   $ 83,811  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
Accounts payable   $ 5,717   $ 3,931  
  Accrued expenses     12,392     13,038  
Deferred revenue     18,459     14,548  
   
 
 
    Total current liabilities     36,568     31,517  
Deferred revenue, long-term

2,122

 3,848
   
 
 
    Total liabilities     38,690     35,365  
   
 
 
Stockholders' equity:              
  Common stock     72     65  
Additional paid-in capital     262,929

  235,911  
  Deferred stock-based compensation     (345 )   (1,665 )
  Accumulated deficit     (189,520 )   (188,906 ) 
  Accumulated other comprehensive income     3,089     3,041  
   
 
 
    Total stockholders' equity     76,225     48,446  
   
 
 
  Total liabilities and stockholders' equity   $ 114,915   $ 83,811  
   
 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

 CHORDIANT SOFTWARE,  INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
(Unaudited)

Three Months Ended

Nine Months Ended

  
       
   
 

September 30, 2004

September 30, 2003

September 30, 2004

September 30, 2003

  

 
 

Revenues:

          

License

$

8,959

$

6,642

$

23,640

$

17,266

  

Service

 14,774

11,124

 37,141

31,400

  
     
   
   
   
 
Total revenues

23,733

17,766

60,781

48,666

  
 

Cost of revenues:

  

License

 615

267

 1,308

847

  

Service

 8,359

6,406

 21,153

18,356

  

Stock-based compensation

(182 )

343

 (15 )

1,121

  
  Amortization of intangible assets   106    

792

     1,044    

2,377

  
     
   
   
   
 

Total cost of revenues

 8,898 7,808 23,490 22,701  
     
   
   
   
 

Gross profit

14,835

9,958

 37,291

25,965

  
     
   
   
   
 

Operating expenses:

  

Sales and marketing

6,270

4,995

17,993

15,728

  

Research and development

 4,365

4,110

 13,025

12,075

  

General and administrative

2,942

    

1,432

    

6,576

    

4,942

  
  Stock-based compensation  

(517

 )  

1,393

    

(96

 )  

3,927

  

Amortization of intangible assets

 16

98

 126

294

  
  Restructuring expense   245    

--

     245    

1,161

  
     
   
   
   
 
Total operating expenses

13,321

12,028

37,869

38,127

  
     
   
   
   
 

Income (loss) from operations

1,514

  

(2,070

 ) (578 )

(12,162

 )
 

Interest income (expense), net

 145  

(37

 ) 501  

(131

 )

Foreign exchange and other expenses, net

 (78 )

--

   (132 )

(80

 )
     
   
   
   
 

Net income (loss) before income taxes

 

1,581

  

 

(2,107

 )   (209 )

 

 

(12,373

 )

Provision for income taxes

154

22

   405  

93

  
     
   
   
   
 

Net income (loss)

$

1,427

  

$

(2,129

 )

$

(614

 )

$

(12,466

 )
     
   
   
   
 

Other comprehensive income (loss):

                      
  Foreign currency translation gain  

272  

   

314

    

48  

   

1,261

  
     
   
   
   
 

Comprehensive income (loss)

$

1,699

  

$

(1,815

 )

$

(566

 )

$

(11,205

 )
     
   
   
   
 

Earnings (loss) per share:

  

Basic

$

0.02

  

$

(0.04

 )

$

(0.01

 )

$

(0.22

 )
     
   
   
   
 
  Diluted

$

 0.02  

$

 (0.04

)

 $ (0.01

)

 $ (0.22 )
     
   
   
   
 

Shares used in computing earnings (loss) per share:

                      
  Basic   71,253     60,037     69,761     57,327  

 
   
   
   
 
  Diluted   75,406     60,037     69,761     57,327  

 
   
   
   
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

 CHORDIANT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
   Nine Months Ended  
   
 
 
   September 30, 2004   September 30, 2003  
   
 
 
Cash flows from operating activities:              
Net loss   $ (614 )  $ (12,466 )
  Adjustments to reconcile net loss to net cash used in operating activities:              
Depreciation and amortization     1,133   2,088  
    Amortization of intangibles     1,170     2,671  
    Non-cash stock-based compensation expense     (437 )   5,048  
    Provision for doubtful accounts     (22 )   21  
    Warrants issued to customers     (4 )   55  
    Loss on disposal of assets     --     88  
    Other non-cash charges     (48 )   --  
    Changes in assets and liabilities:              
      Accounts receivable     (7,874 )   96  
      Prepaid expenses and other current assets     (631 )   66  
      Other assets     (373 )   (520 )
      Accounts payable     1,780     (3,139 )
Accrued expenses     (535 )   (2,537 )
      Deferred revenue     2