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SuccessFactors Announces Record Third Quarter Fiscal 2008 Results
Revenue Grows 77% Year-over-Year, While Improving Cash Flow 63%
-- Revenue grew 77% year-over-year, and 16% sequentially
-- Non-GAAP gross margin improves 200 basis points sequentially
from 65% to 67%
-- Non-GAAP gross margin improves from 53% to 67% in less than 1
year
-- Non-GAAP operating margin improves sequentially 9%, and 48% in
less than a year
-- Cash flow used in operating activities improves 63 percentage
points to ($2.3) million compared to ($6.4) million in Q208
-- Company raises full year fiscal 2008 guidance
-- Company accelerates target to positive cash flow from
operations by at least one full quarter from Q309 to Q209
SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 3, 2008--SuccessFactors, Inc. (NASDAQ:SFSF), the global leader in on-demand performance and talent management solutions, today announced results for its third fiscal quarter of 2008 which ended September 30, 2008.
"SuccessFactors posted another solid quarter, delivering Software-as-a-Service-leading revenue growth of 77%. We spent less proportionally, while improving operating and gross margins by 9% and 2% respectively, and cash by 63%," said Lars Dalgaard, chief executive officer for SuccessFactors. "As budgets tightened around us, we benefited from our plan to build global execution mass, create attractive growth, and drive both large recurring cash and profit contributions long term. We had planned to become cash flow positive by Q3 2009, but because of the strength of our recurring and new business, operating efficiencies, and expense management considering the environment, we can deliver positive cash flow from operations at least 1 quarter ahead of time to Q2 2009 while still maintaining industry leading growth."
"Great companies, as well as those looking to become great, have been transformed by partnering with SuccessFactors in good and bad times. Companies spend the lion's share of operating expenses on their people, and are pressed to improve productivity. Now, in this economy, more than ever, SuccessFactors continues to deliver the best tools for companies anywhere and any size to deliver that productivity improvement. As we continue in these truly uncharted waters, we will remain focused on customer success, product innovation leadership and tightening our fiscal discipline, while still taking advantage of one of the largest market opportunities that we have created and lead."
SuccessFactors' results for the third quarter of fiscal year 2008:
-- Q3 FY08 Revenue: Revenue was $29.7 million, compared to $16.7
million for the same period last year, an increase of 77%, and
an increase of 16% sequentially from Q208.
-- Q3 FY08 Customers: Added approximately 220 new customers
during the quarter. The company had approximately 2,360
customers as of September 30, 2008, an increase of 69% from
1,400 customers as of September 30, 2007, and an increase of
10% from 2,140 customers as of June 30, 2008.
-- Q3 FY08 Margins: Non-GAAP gross margin improved to 67% for the
quarter ended September 30, 2008, up from 65% for the quarter
ended June 30, 2008, and from 62% for the third quarter of
2007. Non-GAAP operating margin improved by 9 full percentage
points to (61%) for the quarter ended September 30, 2008,
compared to (70%) for the quarter ended June 30, 2008 and
(109%) for the third quarter of 2007.
-- Q3 FY08 Expenses: Total non-GAAP operating expenses grew to
10% sequential growth from the second quarter of 2008, versus
growth of 107% over fiscal 2007. For the quarter ended
September 30, 2008, the non-GAAP total operating expenses
excluded approximately $2.2 million in stock-based
compensation expense.
-- Q3 FY08 Cash Flows Used in Operations: For the quarter ended
September 30, 2008, the company used $2.3 million of cash in
operating activities, down from the $6.4 million used in the
quarter ended June 30, 2008. Total cash, cash equivalents and
marketable securities at September 30, 2008 was $101.5
million.
-- Q3 FY08 Net Loss per Share: On a GAAP basis, for the quarter
ended September 30, 2008, the net loss per common share, basic
and diluted, was $0.37. The non-GAAP net loss per common
share, basic and diluted, was $0.33, which excludes
approximately $2.2 million in stock-based compensation
expense, compared to a non-GAAP net loss per share, basic and
diluted, of $0.33 in Q208. GAAP and non-GAAP net loss per
common share calculations are based on 55.4 million weighted
average shares outstanding during the quarter.
Additional Third Quarter Fiscal 2008 Highlights:
-- Continued to demonstrate a tremendous value proposition within
the SMB and enterprise business groups, including some of the
hardest hit industries - construction, financial services,
retail, and real estate - which joined SuccessFactors to help
reduce costs and drive growth.
-- Added new small-sized business customers including Frontier
Financial Advisors, Intacct, Lowry Computer Products,
Westfield Bank, Orion Bank, Tucker Freight Management
Services, Paragon Federal Credit Union, National Bank & Trust
Company, Williams Financial Group, Power Construction Company,
Energy Recovery Inc., Mesa County Library, Master Chemical
Corporation, GrowthWorks Capital, Carlisle Construction, TM
Window & Door, Broadway Mechanical-Contractors, DW
Distribution, and Kiva Microfunds.
-- Brought on board new medium-sized business customers such as
Hallmark Services Corporation, Esurance, Teacher's Credit
Union, City of Arlington, Under Armour, Gamma Holdings,
Kapstone Paper & Packaging Corporation, Cupertino Electric,
South Florida Water Management District, and Fireside Bank.
-- Welcomed enterprise customers including The New York Times
Company, KLA-Tencor Corporation, General Dynamics Corporation,
Lowell General Hospital, Trinity Health, PETCO, Danaher
Corporation, BMC Software, and the US Department of Education.
-- Signed new customers in Europe such as Landmark Hotels in the
UK, Benetton in Italy, TietoEnator in Finland, DZ Bank in
Germany, and Tetra Laval in Switzerland.
-- Gained strong traction in the Middle East with customers wins
including Abu Dhabi Department of Civil Services and Dubai
Maritime City.
-- Added new Asia Pacific customers including Incitec Pivot and
Investa in Australia, Fila Korea, Korea Heat Exchanger, and HK
Bank in Korea, and Citi Telecom and Net Circle in Hong Kong.
-- New partner-driven customers included Kellogg with IBM; US
Department of Education and Users Group with GeoLearning; Glu
Mobile with ADP; Masdar with Productiva; Prime Therapeutics
and Selective Insurance with Ceridian; and Telkom South Africa
with Resilience Group.
-- Delivered a series of significant product innovations:
-- Collaborated with Google on set of five integrations across
the SuccessFactors product suite
-- New release of Professional Edition for small and medium-
sized businesses, built on ULTRA framework
-- New workforce analytics offering - Pixel Perfect Talent Cards
-- Enhancements in succession management and new recruiting
management module for the mid-market
Guidance:
SuccessFactors is initiating guidance for its fourth quarter and is raising its full fiscal year 2008 guidance.
-- Q4 FY08: Revenue for the company's fourth fiscal quarter is
projected to be in the range of approximately $31.0 million to
$31.5 million. Non-GAAP net loss per common share, basic and
diluted, is expected to be in the range of approximately
($0.32) to ($0.34). Non-GAAP net loss per common share
estimates exclude the effects of estimated stock-based
compensation expense and assume an average weighted share
count of approximately 56 million shares.
-- Full Year FY08: The company is raising guidance for full year
revenue for fiscal 2008 from approximately $107 million to
$108 million, to approximately $109.9 million to $110.4
million. The company now expects the non-GAAP net loss per
common share for fiscal 2008 to be in the range of ($1.32) to
($1.34); previous guidance had been in the range of ($1.39) to
($1.43). Non-GAAP net loss per common share estimates exclude
the effects of estimated stock-based compensation expense and
assume an average weighted share count of approximately 54
million shares.
Conference Call
SuccessFactors will host a conference call to discuss its third quarter fiscal 2008 results today at 2:00 p.m. Pacific Standard Time. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations website at http://www.successfactors.com/investor. In addition, an archive of the webcast can be accessed through the same link until November 14, 2008. Participants who choose to call into the conference call can do so by dialing domestically at 866-923-9739 and internationally at 706-634-0915. A domestic replay will be available at 800-642-1687 or 706-645-9291 internationally, passcode 67528816, until November 14, 2008.
Use of Non-GAAP Financial Information
SuccessFactors provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). To help understand SuccessFactors' past financial performance and future results, SuccessFactors has supplemented its financial results that it provides in accordance with GAAP, with non-GAAP financial measures. The method SuccessFactors uses to produce non-GAAP financial results is not computed according to GAAP and may differ from the methods used by other companies. The non-GAAP measures used by SuccessFactors exclude the impact of stock-based compensation expense recorded under SFAS 123(R). SuccessFactors' reference to these non-GAAP financial results should be considered in addition to results that are prepared under current accounting standards but should not be considered as a substitute for, or superior to, the financial results that are presented as consistent with GAAP. SuccessFactors' management uses the supplemental non-GAAP financial measures internally to understand, manage and evaluate SuccessFactors' business and make operating decisions. These non-GAAP financial measures are among the factors SuccessFactors' management uses in planning for and forecasting future periods. Reconciliation to the nearest GAAP financial measures of the non-GAAP financial measures is included in this press release.
About SuccessFactors, Inc.
SuccessFactors is one of the fastest growing public software companies and the leading provider of on-demand employee performance and talent management solutions. The company enables organizations of every size, and across every industry and geography, to achieve high-performing workforces through goal alignment and execution, talent development and planning, and pay-for-performance initiatives. From 92 customers and approximately 282,000 end users in 2003 to more than 2,360 customers and more than 4 million end users today, SuccessFactors' solutions are widely deployed across 60 industries in over 185 countries in 31 languages. Founded in 2001 with offices around the world, the company employs more than 700 people, all passionately focused on revolutionizing the future of work. For more information, visit: http://www.successfactors.com.
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are SuccessFactors' current expectations and beliefs.
These forward-looking statements include statements about expected revenue and non-GAAP loss per share for the fourth fiscal quarter of 2008, the full fiscal year 2008, future cash flow, growth and related items. Factors that could cause actual results to differ materially include: our ability to continue to experience high customer renewal rates; whether customers renew their agreements for additional modules or users; levels of new customers; pricing pressures; the uncertain impact of the overall global economic slowdown; the fact that our market is at an early stage of development, and it may not develop as rapidly as we anticipate; competitive factors; outages or security breaches; our ability to develop, and market acceptance of, new services; our ability to manage our growth; our ability to improve our internal controls; our ability to successfully expand our sales force and its effectiveness; our ability to continue to manage expenses; the impact of unforeseen expenses; and general economic conditions worldwide. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
Further information on these and other factors that could affect our financial results is included in the section entitled "Risk Factors" in our Annual Report on Form 10-K, and as amended on Form 10-K/A, for 2007 and in the reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission from time to time.
These documents are or will be available on the SEC Filings section of the Investor Relations section of our website at www.successfactors.com/investor.
SuccessFactors, Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
"SuccessFactors" is a trademark of SuccessFactors, Inc., San Mateo, California. Other names used may be trademarks of their respective owners.
SuccessFactors, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
As of As of
September December
30, 31,
2008 2007
------------- ------------
(unaudited) (1)
Assets:
Current assets:
Cash and cash equivalents $ 41,492 $ 82,274
Marketable securities 60,051 8,513
Accounts receivable, net of allowance
for doubtful accounts 40,579 42,072
Deferred commissions 5,095 4,199
Prepaid expenses and other current
assets 4,234 2,347
------------- ------------
Total current assets 151,451 139,405
Restricted cash 1,424 964
Property and equipment, net 8,118 6,532
Deferred commissions, net of current
portion 6,549 7,343
Other assets 279 300
------------- ------------
Total assets $ 167,821 $ 154,544
============= ============
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 4,386 $ 3,595
Accrued expenses and other current
liabilities 10,168 7,016
Accrued employee compensation 17,261 18,265
Deferred revenue 115,626 84,624
Current portion of capital lease
obligations 36 34
------------- ------------
Total current liabilities 147,477 113,534
Capital lease obligations, net of current
portion 29 56
Deferred revenue, net of current portion 20,431 16,386
Other long-term liabilities 2,814 4,625
------------- ------------
Total liabilities 170,751 134,601
Stockholders' equity:
Common stock 56 51
Additional paid-in capital 197,356 161,150
Accumulated other comprehensive income (56) 55
Accumulated deficit (200,286) (141,313)
------------- ------------
Total stockholders' equity (2,930) 19,943
------------- ------------
Total liabilities and stockholders'
equity $ 167,821 $ 154,544
============= ============
_____________
(1) The condensed consolidated balance sheet as of December 31, 2007
has been derived from audited financial statements.
SuccessFactors, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $ 29,712 $ 16,744 $ 78,887 $ 44,139
Cost of revenue (1) 10,187 6,476 28,767 17,213
--------- --------- --------- ---------
Gross profit 19,525 10,268 50,120 26,926
--------- --------- --------- ---------
Operating expenses: (1)
Sales and marketing 25,251 20,119 70,121 49,427
Research and development 6,516 4,192 17,975 11,413
General and administrative 8,146 5,759 22,066 13,063
--------- --------- --------- ---------
Total operating
expenses 39,913 30,070 110,162 73,903
--------- --------- --------- ---------
Loss from operations (20,388) (19,802) (60,042) (46,977)
Interest income (expense) and
other, net 256 (318) 1,625 (2,066)
--------- --------- --------- ---------
Loss before provision for
income taxes (20,132) (20,120) (58,417) (49,043)
Provision for income taxes (256) (61) (556) (120)
--------- --------- --------- ---------
Net loss $(20,388) $(20,181) $(58,973) $(49,163)
========= ========= ========= =========
Net loss per common share,
basic and diluted $ (0.37) $ (3.30) $ (1.11) $ (12.00)
========= ========= ========= =========
Shares used in computing net
loss per common share, basic
and diluted 55,433 6,120 53,135 4,098
========= ========= ========= =========
_____________
(1) Amounts include stock-based compensation
expenses as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Cost of revenue $ 283 $ 138 $ 692 $ 259
Sales and marketing 1,021 910 2,707 1,390
Research and development 311 174 790 304
General and administrative 543 391 1,718 688
SuccessFactors, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flow from operating
activities:
Net loss $(20,388) $(20,181) $(58,973) $(49,163)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 1,181 544 2,613 1,377
Gain on sale of asset (64) - - -
Amortization of deferred
commissions 1,746 1,016 4,913 2,610
Stock-based compensation
expense 2,158 1,613 5,907 2,641
Amortization of debt
issuance costs - 103 - 300
Adjustment to fair value
of convertible
preferred stock
warrants - 46 - 1,310
Changes in assets and
liabilities:
Accounts receivable (7,100) 282 1,493 (604)
Deferred commissions (1,987) (2,305) (5,015) (4,835)
Prepaid expenses and
other current assets 854 531 (1,887) (71)
Other assets (16) (588) 20 (684)
Accounts payable 3,768 1,038 794 3,472
Accrued expenses and
other current
liabilities 1,890 1,388 3,532 3,615
Accrued employee
compensation 3,226 2,692 (1,004) 224
Other liabilities (21) 835 (144) 1,463
Deferred revenue 12,423 10,894 35,047 22,132
------------------- -------------------
Net cash used in
operating
activities (2,330) (2,092) (12,704) (16,213)
------------------- -------------------
Cash flow from investing
activities:
Restricted cash (521) (185) (460) (337)
Capital expenditures (1,595) (1,345) (4,200) (3,880)
Purchases of available-for-
sale securities (41,678) - (75,042) (2,705)
Maturity of available-for-
sale securities 8,981 110 23,484 1,990
------------------- -------------------
Net cash used in
investing
activities (34,813) (1,420) (56,218) (4,932)
------------------- -------------------
Cash flow from financing
activities:
Proceeds from exercise of
stock options, net 548 324 1,208 511
Proceeds from early
exercise of stock options,
net 162 - 162 -
Proceeds from initial
public offering, net of
offering costs (258) - (545) -
Proceeds from follow-on
offering, net of offering
costs - - 27,430 -
Proceeds from exercise of
preferred stock warrants - 20 - 20
Proceeds from advance of
line of credit - 10,000 - 10,000
Principal payments on
capital lease obligations (8) (7) (25) (27)
------------------- -------------------
Net cash provided
by financing
activities 444 10,337 28,230 10,504
------------------- -------------------
Effect of exchange rate
changes on cash and cash
equivalents (133) 21 (90) 27
------------------- -------------------
Net increase (decrease) in
cash and cash equivalents (36,832) 6,846 (40,782) (10,614)
Cash and cash equivalents at
beginning of period 78,324 8,712 82,274 26,172
------------------- -------------------
Cash and cash equivalents at
end of period $ 41,492 $ 15,558 $ 41,492 $ 15,558
=================== ===================
SuccessFactors, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited, in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
--------------------------
Net loss and net loss per
share reconciliations:
--------------------------
GAAP net loss $(20,388) $(20,181) $(58,973) $(49,163)
(a) Stock-based
compensation as
measured under
SFAS123R 2,158 1,613 5,907 2,641
---------- ---------- ---------- ----------
Non-GAAP net loss
excluding stock-based
compensation expense $(18,230) $(18,568) $(53,066) $(46,522)
========== ========== ========== ==========
GAAP net loss per
common share - basic
and diluted $ (0.37) $ (3.30) $ (1.11) $ (12.00)
========== ========== ========== ==========
Non-GAAP net loss per
common share
(excluding stock-
based compensation
expense) - basic and
diluted $ (0.33) $ (0.52) $ (1.00) $ (1.31)
========== ========== ========== ==========
GAAP shares used in
computing net loss
per common share,
basic and diluted 55,433 6,120 53,135 4,098
========== ========== ========== ==========
Non-GAAP shares used
in computing net loss
per common share -
basic and diluted 55,433 35,415 53,135 35,617
========== ========== ========== ==========
--------------------------
Total spend
reconciliation:
--------------------------
GAAP total cost of
revenue and operating
expenses $ 50,100 $ 36,546 $138,929 $ 91,116
(a) Stock-based
compensation as
measured under
SFAS123R 2,158 1,613 5,907 2,641
---------- ---------- ---------- ----------
Non-GAAP total cost of
revenue and operating
expenses (total
spend) $ 47,942 $ 34,933 $133,022 $ 88,475
========== ========== ========== ==========
--------------------------
Gross profit and gross
margin reconciliation:
--------------------------
GAAP gross profit $ 19,525 $ 10,268 $ 50,120 $ 26,926
(b) Stock-based
compensation in cost
of revenue as
measured under
SFAS123R 283 138 692 259
---------- ---------- ---------- ----------
Non-GAAP gross profit $ 19,808 $ 10,406 $ 50,812 $ 27,185
========== ========== ========== ==========
GAAP gross margin
percentage 66% 61% 64% 61%
========== ========== ========== ==========
Non-GAAP gross margin
percentage 67% 62% 64% 62%
========== ========== ========== ==========
--------------------------
Cost of revenue
reconciliation:
--------------------------
GAAP cost of revenue $ 10,187 $ 6,476 $ 28,767 $ 17,213
(b) Stock-based
compensation in cost
of revenue as
measured under
SFAS123R 283 138 692 259
---------- ---------- ---------- ----------
Non-GAAP cost of
revenue $ 9,904 $ 6,338 $ 28,075 $ 16,954
========== ========== ========== ==========
--------------------------
Total operating expenses
reconciliation:
--------------------------
GAAP operating
expenses $ 39,913 $ 30,070 $110,162 $ 73,903
(c) Stock-based
compensation in
operating expenses as
measured under
SFAS123R 1,875 1,475 5,215 2,382
---------- ---------- ---------- ----------
Non-GAAP operating
expenses $ 38,038 $ 28,595 $104,947 $ 71,521
========== ========== ========== ==========
--------------------------
Total sales and marketing
reconciliation:
--------------------------
GAAP sales and
marketing $ 25,251 $ 20,119 $ 70,121 $ 49,427
(d) Stock-based
compensation in sales
and marketing as
measured under
SFAS123R 1,021 910 2,707 1,390
---------- ---------- ---------- ----------
Non-GAAP sales and
marketing $ 24,230 $ 19,209 $ 67,414 $ 48,037
========== ========== ========== ==========
--------------------------
Total research and
development
reconciliation:
--------------------------
GAAP research and
development $ 6,516 $ 4,192 $ 17,975 $ 11,413
(e) Stock-based
compensation in
research and
development as
measured under
SFAS123R 311 174 790 304
---------- ---------- ---------- ----------
Non-GAAP research and
development $ 6,205 $ 4,018 $ 17,185 $ 11,109
========== ========== ========== ==========
--------------------------
Total general and
administrative
reconciliation:
--------------------------
GAAP general and
administrative
expenses $ 8,146 $ 5,759 $ 22,066 $ 13,063
(f) Stock-based
compensation in
general and
administrative as
measured under
SFAS123R 543 391 1,718 688
---------- ---------- ---------- ----------
Non-GAAP general and
administrative $ 7,603 $ 5,368 $ 20,348 $ 12,375
========== ========== ========== ==========
--------------------------
Operating margin
reconciliation:
--------------------------
GAAP loss from
operations $(20,388) $(19,802) $(60,042) $(46,977)
(b) Stock-based
compensation in cost
of revenue as
measured under
SFAS123R 283 138 692 259
(d) Stock-based
compensation in sales
and marketing as
measured under
SFAS123R 1,021 910 2,707 1,390
(e) Stock-based
compensation in
research and
development as
measured under
SFAS123R 311 174 790 304
(f) Stock-based
compensation in
general and
administrative as
measured under
SFAS123R 543 391 1,718 688
---------- ---------- ---------- ----------
Non-GAAP loss from
operations less
SFAS123R $(18,230) $(18,189) $(54,135) $(44,336)
========== ========== ========== ==========
Revenue $ 29,712 $ 16,744 $ 78,887 $ 44,139
---------- ---------- ---------- ----------
Non-GAAP operating
margin percentage (61%) (109%) (69%) (100%)
========== ========== ========== ==========
CONTACT: SuccessFactors, Inc.
Dominic Paschel, 415-262-4641
Investor Relations
dpaschel@successfactors.com
or
LaunchSquad
Jesse Odell, 415-625-8555
Public Relations
successfactors@launchsquad.com
SOURCE: SuccessFactors, Inc.
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