ATLANTA (October 2, 2006) - Witness Systems (NASDAQ: WITS), a leading global provider of workforce optimization software and services, announced that today it has acquired Demos Solutions Consulting Group Ltd. (also known as Demos Solutions) and Exametric, Inc., the two leaders in supplying enterprise productivity and resource planning solutions to the financial services industry. The acquisitions broaden the revenue opportunity and customer base for Witness Systems, further extending the business value of its workforce optimization (WFO) solutions from contact centers to bank branches and ultimately to other areas in the enterprise.
The aggregate purchase price for both transactions is $29 million in cash plus a potential earn-out of up to $18 million based on the growth of the business over the next few years. The acquisitions will be financed from Witness Systems' existing cash resources. These acquisitions are expected to be accretive (before amortization of intangibles and other acquisition-related costs) and add $13 million to $15 million to the company's revenue in 2007.
"Today we're announcing a pair of innovative, market-changing acquisitions that expand our opportunity by extending workforce optimization into the enterprise," said Dave Gould, CEO of Witness Systems. "This combination creates immediate scale and momentum, with over $10 million of revenue from a blue chip customer base in the financial services industry. We've been probing this market for a while and believe it will emerge as a real growth driver for us over the next 18-24 months. By combining the two leaders, we enter this new market with the deepest talent and strongest offering."
The two companies will be combined and operate as Witness Enterprise Solutions, a group focusing initially on WFO solutions for retail bank branches and operations. Gould added, "Approximately 30 percent of our revenue is derived from financial services, and we have been extending our overall reach through our leadership in providing VoIP solutions. Starting with branch offices allows us to leverage the congruence of WFO and VoIP, and is a natural catalyst for our continued expansion across the broader enterprise."
Banks Focused on Improving the Customer Experience
According to the Bank Administration Institute (BAI), a leading professional organization focused on enhancing employee and organizational performance, 70 percent of customers view their bank as a commodity service provider, and 30 percent desire a hands-on relationship. As a result, BAI contends that it's no longer enough for banks to know what their customers want; they also need to understand the nuances of how their customers feel. Many branch renewal projects are targeting improving staff skills, such as consultative selling, and broadening branch technology infrastructure.
Further, according to TowerGroup, a global research and consulting firm for the financial services industry, a shift to relationship banking is clearly under way in banks of all asset sizes. Banking customers are demanding a consistent customer experience across all touch points. According to Forrester Research, an independent technology and market research company, banking is one of the industries with the most comprehensive multi-channel requirements and sophisticated multi-channel solutions. Enterprise WFO technology from Witness Systems can now address this challenge both in the contact center and retail branch banks.
Demos Solutions and Exametric have both built industry-leading solutions and an impressive customer base committed to optimizing workforce performance. The new Witness Enterprise Solutions group will be led by Darryl Demos, the CEO and founder of Demos Solutions.
"The combined organization will help further enable companies to model and monitor business processes to maximize their return on resource investments and the customer experience," explained Demos. "Creating accurate forecasts and optimizing staff resources is no longer a ‘nice to have' in the competitive landscape for customers. Workforce optimization is the only way to improve margins and drive customer and employee satisfaction, which ultimately creates a more loyal and profitable customer base."
With this combination, current Witness Systems customers will be able to extend their technology investment from the contact center to their branch offices and other areas of the enterprise that impact the customer experience. Similarly, Demos Solutions and Exametric customers will have access to a broader range of WFO solutions, including customer interaction recording, performance management, e-learning and other performance improvement and analytical software, from the established market leader, Witness Systems.
William Evans, CFO of Witness Systems added, "We have an established, proven model in place to ensure the successful integration of products, people and processes following strategic acquisitions, enabling meaningful value creation for our customers and shareholders. We believe this combination will be accretive to earnings in 2007 and will enhance our future value proposition."
Financial Update
Also today, the company provided a preliminary estimate of third quarter 2006 revenue in the range of $50 to $51 million, excluding hardware revenue of approximately $1 million. The company's cash and short term investments exceeded $160 million at September 30, 2006.
Previously, on August 9, 2006, Witness Systems announced that the company has voluntarily formed a special committee of independent directors to review stock option practices and grants. Given the status of the review, which is ongoing, the company does not expect to be in a position to announce further financial results for the third quarter until the option review and audit procedures have been completed, appropriate accounting adjustments and restated financial statements have been finalized, and amended Reports on Forms 10-K and 10-Q have been filed.
Conference Call Information
Witness Systems will conduct a conference call on Tuesday, October 3, 2006 beginning at 8:30 a.m. ET to discuss the details of the acquisitions and respond to appropriate questions. The conference call and replay will be available online at www.witness.com.
About Demos Solutions
Demos Solutions is a leading productivity solution provider for the financial services industry. Demos Solutions applies the Art and Science of Workforce Optimization (SM) to improve the productivity of leading financial services companies through its combination of hands-on consulting and workforce management technologies. Demos Solutions is the workforce optimization partner to four of the five largest banks in Canada, and 33 percent of the top 100 North American bank branches use Demos Solutions' StaffSmart Enterprise® resource planning and scheduling tool.
About Exametric
Exametric Inc. is a leading software solutions company specializing in workforce management and optimization. The Exametric Workforce Management Suite provides precision forecasting, automated scheduling, time and attendance, and strategic planning solutions. The solution helps companies predict service and transaction levels in order to manage labor scheduling, improve customer satisfaction and increase revenue. Exametric's products are in use at more than 12,000 locations worldwide.
About Witness Systems
Witness Systems (NASDAQ: WITS) is the worldwide leader in software and services that help businesses capture customer intelligence and optimize their workforce performance. The company's Impact 360™ solution features quality monitoring, compliance and IP recording, workforce management, performance management and e-learning. Primarily deployed in contact centers - as well as the remote, branch and back offices of global organizations - the workforce optimization solution captures, analyzes and enables users to share and act on cross-functional information across the enterprise. With Impact 360, organizations can improve interactions and the underlying back-office processes that enhance the customer experience and build customer loyalty. For more information, visit us at www.witness.com.
Cautionary Note Regarding Forward-looking Statements:Witness, Impact 360, Improve Everything and the Witness logo are the trademarks (registered or otherwise) of Witness Systems, Inc. protected by laws of the U.S. and other countries. All other trademarks mentioned in this document are the property of their respective owners.