Attached files
| file | filename |
|---|---|
| 8-K - 8-K - KENEXA CORP | form8-k.htm |
| EX-99.2 - CONFERENCE CALL - KENEXA CORP | ex99-2.htm |
Exhibit
99.1
Kenexa
Announces Financial Results for First Quarter 2010
WAYNE,
Pa. – May 4, 2010 – Kenexa (Nasdaq: KNXA), a
global provider of business solutions for human resources, today announced
operating results for the first quarter ended March 31,
2010.
For the
first quarter of 2010, Kenexa reported total revenue of $39.7 million, compared
to $38.8 million for the first quarter of 2009. Within total revenue,
subscription revenue was $33.3 million for the first quarter of 2010, consistent
with the first quarter of 2009. Professional services and other
revenue was $6.4 million for the first quarter of 2010, compared to $5.6 million
for the first quarter and $5.7 million for the fourth quarter of
2009.
“Our
first quarter results were consistent with our expectations and are highlighted
by a return to positive year-over-year revenue growth and cash flow that
materially exceeded our reported profitability,” said Rudy Karsan, Chief
Executive Officer of Kenexa. “The underlying momentum of Kenexa’s
business is evidenced by continued growth of our deferred revenue, combined with
another strong quarter of competitive wins with large, global
organizations. Customer and industry analyst response to Kenexa’s
technology and product roadmap continues to be very favorable, and we are able
to offer the Global 5,000 a unique value proposition based on an end-to-end
product suite and industry leading domain expertise.”
Karsan
concluded, “While we remain somewhat cautious from a near-term perspective, our
longer-term optimism continues to grow. We expect recent sales
activity and improved renewal rates to drive sequential revenue growth in the
second quarter, and we will continue to execute against our sales and marketing
investment strategy to position Kenexa for market share gains as the economic
environment and jobs market eventually improve.”
Non-GAAP
income from operations, which excludes share-based compensation expense and
amortization of acquired intangibles, was $2.3 million for the three months
ended March 31, 2010. For the three months ended March 31, 2009,
non-GAAP income from operations, which excludes share-based compensation
expense, amortization of acquired intangibles, a non-cash goodwill impairment
charge, severance expenses and professional fees associated with our variable
interest entity, was $3.9 million. Non-GAAP net income available to
common shareholders was $2.2 million for the three months ended March 31,
2010. Non-GAAP net income available to common shareholders was $0.10
per diluted share for the quarter ended March 31, 2010, compared to $0.14 per
diluted share in the first quarter of 2009.
Kenexa’s
income from operations for the three months ended March 31, 2010, determined in
accordance with GAAP, was $62,000, compared with loss from operations of $33.6
million for the same period of 2009. GAAP net loss allocable to common
shareholders was $18,000, or $0.00 per diluted share for the three months ended
March 31, 2010, compared to a net loss of $34.3 million and a loss of $1.52 per
diluted share in the same period of 2009. GAAP loss from operations, net loss
and net loss per share in the first quarter of 2009 included the impact of a
$33.3 million non-cash goodwill impairment charge.
A
reconciliation of GAAP to non-GAAP results has been provided in the financial
statement tables included at the end of this press release. An explanation of
these measures is also included below under the heading “Non-GAAP Financial
Measures.”
Kenexa
had cash, cash equivalents and investments of $62.6 million at March 31, 2010,
an increase from $58.8 million at the end of the prior quarter. The
Company generated cash from operations of $8.8 million during the first quarter,
which was partially offset by capital expenditures. Deferred revenue
was $54.5 million at March 31, 2010, an increase of approximately $4.5 million
compared to the end of the fourth quarter 2009 and an increase of 32% from the
end of the year ago period.
Other
First Quarter Highlights
|
·
|
More
than 30 “preferred partner” customers were added during the quarter
(defined as customers that spend more than $50,000
annually).
|
|
·
|
The
average annual revenue from the Company’s top 80 customers was greater
than $1.0 million, consistent with the end of the prior
quarter.
|
|
·
|
Kenexa
was named a major player in the IDC
MarketScape: Worldwide Integrated Talent Management 2010 Vendor
Analysis for the second consecutive year. Kenexa was
judged a major player based on the strength of its global talent
management capabilities and
strategies.
|
|
·
|
Kenexa
Recruiter BrassRing was selected as a finalist for the prestigious CODiE
Awards in the Best Human Capital Management Solution
category.
|
|
·
|
Kenexa
was included on TrainingIndustry.com’s 2010 Leadership Training Companies
“Watch List.” Criteria for the list included: new and
innovative service offerings; a unique approach to leadership development
solutions; a commitment to thought leadership; and the quality of initial
clients.
|
Business
Outlook
Based on
information as of today, May 4, 2010, the Company is issuing guidance for the
second quarter and full year 2010 as follows:
Second Quarter
2010: The Company expects revenue to be $41 million to $43 million, and
non-GAAP operating income to be $3.7 million to $3.9 million. Assuming an
effective tax rate for reporting purposes of approximately 20% and approximately
23.2 million shares outstanding, Kenexa expects its non-GAAP net income per
diluted share to be $0.12 to $0.13.
Full Year
2010: The Company expects revenue to be $162 million to $169 million, and
non-GAAP operating income to be $14.5 million to $18.5 million. Assuming an
effective tax rate for reporting purposes of approximately 20% and approximately
23.2 million shares outstanding, Kenexa expects its non-GAAP net income per
diluted share to be $0.52 to $0.66.
Conference
Call Information
Kenexa
will host a conference call today, May 4, 2010, at 5:00 pm (Eastern Time) to
discuss the Company's financial results. To access this call, dial 877-407-9039
(domestic) or 201-689-8470 (international). A replay of this conference call
will be available through May 11, 2010, at 877-660-6853 (domestic) or
201-612-7415 (international). The replay account number is 3055 and the passcode
is 348586. A live webcast of this conference call will be available on the
"Investor Relations" page of the Company's Web site, (www.kenexa.com)
and a replay will be archived on the Web site as well.
Forward-Looking
Statements
This
press release includes certain “forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, plans, objectives,
expectations and intentions and other statements contained in this press release
that are not historical facts and statements identified by words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates"
or words of similar meaning. These statements may contain, among
other things, guidance as to future revenue and earnings, operations, expected
benefits from acquisitions, prospects of the business generally, intellectual
property and the development of products. These statements are based
on our current beliefs or expectations and are inherently subject to various
risks and uncertainties, including those set forth under the caption "Risk
Factors" in Kenexa’s most recent Annual Report on Form 10-K as filed with the
Securities and Exchange Commission and as revised or supplemented by Kenexa’s
quarterly reports on Form 10-Q. Actual results may differ materially
from these expectations due to changes in global political, economic, business,
competitive, market and regulatory factors, Kenexa’s ability to implement
business and acquisition strategies or to complete or integrate
acquisitions. Kenexa does not undertake any obligation to update any
forward-looking statements contained in this document as a result of new
information, future events or otherwise.
Non-GAAP
Financial Measures
This
press release contains non-GAAP financial measures. Kenexa believes
that non-GAAP measures of financial results provide useful information to
management and investors regarding certain financial and business trends
relating to Kenexa’s financial condition and results of
operations. The Company’s management uses these non-GAAP results to
compare the Company’s performance to that of prior periods for trend analyses,
for purposes of determining executive incentive compensation, and for budget and
planning purposes. These measures are used in monthly financial
reports prepared for management and in quarterly financial reports presented to
the Company’s Board of Directors. The Company believes that the use
of these non-GAAP financial measures provides an additional tool for investors
to use in evaluating ongoing operating results and trends and in comparing its
financial measures with other companies in the Company’s industry, many of which
present similar non-GAAP financial measures to investors.
Management
of the Company does not consider such non-GAAP measures in isolation or as an
alternative to such measures determined in accordance with GAAP. The principal
limitation of such non-GAAP financial measures is that they exclude significant
expenses that are required by GAAP to be recorded. In addition, they
are subject to inherent limitations as they reflect the exercise of judgments by
management about which charges are excluded from the non-GAAP financial
measures.
In order
to compensate for these limitations, management of the Company presents its
non-GAAP financial measures in connection with its GAAP
results. Kenexa urges investors and potential investors in the
Company’s securities to review the reconciliation of its non-GAAP financial
measures to the comparable GAAP financial measures which it includes in press
releases announcing earnings information, including this press release, and not
to rely on any single financial measure to evaluate the Company’s
business.
Kenexa
presents the following non-GAAP financial measures in this press release:
non-GAAP income from operations; non-GAAP net income available to common
shareholders’; non-GAAP gross profit; non-GAAP sales and marketing expense;
non-GAAP general and administrative expense; non-GAAP research and development
expense; non-GAAP operating margin, and non-GAAP net income per diluted share as
described below.
The
Company’s non-GAAP financial measures exclude the following:
Share-based
compensation. Share-based compensation consists of expenses
for stock options and stock awards that the Company began recording in
accordance with SFAS 123(R) during the first quarter of 2006. Share-based
compensation was $1.3 million for the three months ended March 31, 2010 and $1.2
million for the three months ended March 31, 2009. Share-based compensation
expenses are excluded in the Company’s non-GAAP financial measures because
share-based compensation amounts are difficult to forecast. This is due in part
to the magnitude of the charges which depends upon the volume and timing of
stock option grants, which are unpredictable and can vary dramatically from
period to period, and external factors such as interest rates and the trading
price and volatility of the Company’s common stock. The Company
believes that this exclusion provides meaningful supplemental information
regarding the Company’s operating results because these non-GAAP financial
measures facilitate the comparison of results for future periods with results
from past periods. The dilutive effect of all outstanding options is included in
the calculation of diluted earnings per share on both a GAAP and a non-GAAP
basis.
Amortization
of acquired intangible assets. In accordance with GAAP, operating
expenses include amortization of acquired intangible assets which are amortized
over the estimated useful lives of such assets. Amortization of
acquired intangible assets was $0.9 million for the three months ended March 31,
2010, and $1.1 million for the three months ended March 31, 2009. Amortization
of acquired intangible assets is excluded from the Company’s non-GAAP financial
measures because the Company believes that such exclusion facilitates
comparisons to its historical operating results and to the results of other
companies in the same industry, which have their own unique acquisition
histories.
Goodwill
impairment charge. The Company recorded a non-cash goodwill
impairment charge in the first quarter of 2009 of $33.3 million as a result of a
substantial decrease in the Company’s stock price, reflecting the impact of the
unprecedented turmoil in world economies and the resultant impact on the
Company’s operations.
Severance
expenses. The company incurred charges in the amount of $1.2 million in
relation to additional severance expenses in the first quarter of 2009. These
charges were excluded from non-GAAP income to facilitate a more meaningful
comparison to the prior year’s results.
Professional
fees associated with our variable interest entity. The company
incurred professional fees in connection with its Chinese expansion in the
amount of $0.7 million during the first quarter of 2009. The Company
believes that such exclusion facilitates comparisons to its historical operating
results and to the results of other companies in the same industry, which have
their own unique acquisition histories.
About
Kenexa
Kenexa®
provides business solutions for human resources. We help global organizations
multiply business success by identifying the best individuals for every job and
fostering optimal work environments for every organization. For more than 20
years, Kenexa has studied human behavior and team dynamics in the workplace, and
has developed the software solutions, business processes and expert consulting
that help organizations impact positive business outcomes through HR. Kenexa is
the only company that offers a comprehensive suite of unified products and
services that support the entire employee lifecycle from pre-hire to exit.
Additional information about Kenexa and its global products and services can be
accessed at www.kenexa.com.
# #
#
Note
to editors: Kenexa is a registered trademark of Kenexa. Other company
names, product names and company logos mentioned herein are the trademarks or
registered trademarks of their respective owners.
CONTACTS:
MEDIA
CONTACT:
|
Jennifer
Meyer
Kenexa
(612)
332-6383
jennifer.meyer@kenexa.com
|
Jeanne
Achille
The
Devon Group
(732)
224-1000, ext. 11
jeanne@devonpr.com
|
INVESTOR
CONTACT:
Kori
Doherty
ICR
(610) 956-6730
kdoherty@icrinc.com
|
Kenexa
Corporation and Subsidiaries
|
||||||||
|
Consolidated
Balance Sheets
|
||||||||
|
(In
thousands, except share data)
|
||||||||
|
March
31,
|
December
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Assets
|
(unaudited)
|
|||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$
|
38,302
|
$
|
29,221
|
||||
|
Short-term
investments
|
24,252
|
29,570
|
||||||
|
Accounts
receivable, net of allowance for doubtful accounts of $2,019 and $2,090,
respectively
|
26,082
|
26,782
|
||||||
|
Unbilled
receivables
|
3,355
|
4,457
|
||||||
|
Income
tax receivable
|
1,630
|
1,704
|
||||||
|
Deferred
income taxes
|
7,926
|
8,685
|
||||||
|
Prepaid
expenses and other current assets
|
9,844
|
8,428
|
||||||
|
Total
current assets
|
111,391
|
108,847
|
||||||
|
Property
and equipment, net of accumulated depreciation
|
19,462
|
19,530
|
||||||
|
Software,
net of accumulated amortization
|
18,148
|
17,337
|
||||||
|
Goodwill
|
3,664
|
3,204
|
||||||
|
Intangible
assets, net of accumulated amortization
|
7,963
|
9,143
|
||||||
|
Deferred
income taxes, non-current
|
34,911
|
34,879
|
||||||
|
Other
long-term assets
|
10,121
|
9,403
|
||||||
|
Total
assets
|
$
|
205,660
|
$
|
202,343
|
||||
|
Liabilities
and Shareholders' equity
|
||||||||
|
Current
liabilities
|
||||||||
|
Accounts
payable
|
$
|
5,644
|
$
|
5,727
|
||||
|
Notes
payable, current
|
6
|
16
|
||||||
|
Commissions
payable
|
1,127
|
671
|
||||||
|
Accrued
compensation and benefits
|
3,284
|
4,820
|
||||||
|
Other
accrued liabilities
|
6,192
|
6,376
|
||||||
|
Deferred
revenue
|
54,504
|
49,964
|
||||||
|
Capital
lease obligations
|
208
|
211
|
||||||
|
Total
current liabilities
|
70,965
|
67,785
|
||||||
|
Capital
lease obligations, less current portion
|
208
|
259
|
||||||
|
Deferred
income taxes
|
226
|
850
|
||||||
|
Other
liabilities
|
1,979
|
1,981
|
||||||
|
Total
liabilities
|
73,378
|
70,875
|
||||||
|
Commitments
and Contingencies
|
||||||||
|
Temporary
equity
|
||||||||
|
Noncontrolling
interest
|
1,393
|
1,330
|
||||||
|
Shareholders'
equity
|
||||||||
|
Preferred
stock, par value $0.01; 10,000,000 shares authorized; no shares issued or
outstanding
|
-
|
-
|
||||||
|
Class
A common stock, $0.01 par value; 100,000,000 shares authorized; and
22,593,922 and 22,561,883 shares issued, respectively
|
226
|
226
|
||||||
|
Additional
paid-in capital
|
276,616
|
275,127
|
||||||
|
Accumulated
deficit
|
(141,730
|
)
|
(141,712
|
)
|
||||
|
Accumulated
other comprehensive loss
|
(4,223
|
)
|
(3,503
|
)
|
||||
|
Total
shareholders' equity
|
130,889
|
130,138
|
||||||
|
Total
liabilities and shareholders' equity
|
$
|
205,660
|
$
|
202,343
|
||||
|
Kenexa
Corporation and Subsidiaries
|
||||||||
|
Consolidated
Statements of Operations
|
||||||||
|
(In
thousands, except share and per share data)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Revenues:
|
||||||||
|
Subscription
|
$
|
33,252
|
$
|
33,265
|
||||
|
Other
|
6,412
|
5,566
|
||||||
|
Total
revenues
|
39,664
|
38,831
|
||||||
|
Cost
of revenues
|
13,811
|
13,696
|
||||||
|
Gross
profit
|
25,853
|
25,135
|
||||||
|
Operating
expenses:
|
||||||||
|
Sales
and marketing
|
9,640
|
8,705
|
||||||
|
General
and administrative
|
9,831
|
10,873
|
||||||
|
Research
and development
|
2,284
|
2,568
|
||||||
|
Depreciation
and amortization
|
4,036
|
3,228
|
||||||
|
Goodwill
impairment charge
|
-
|
33,329
|
||||||
|
Total
operating expenses
|
25,791
|
58,703
|
||||||
|
Income
(loss) from operations
|
62
|
(33,568
|
)
|
|||||
|
Interest
income, net
|
146
|
63
|
||||||
|
Loss
on change in fair market value of ARS and put option, net
|
(31
|
)
|
(295
|
)
|
||||
|
Income
(loss) before income taxes
|
177
|
(33,800
|
)
|
|||||
|
Income
tax expense
|
133
|
482
|
||||||
|
Net
income (loss)
|
$
|
44
|
$
|
(34,282
|
)
|
|||
|
Income
allocated to noncontrolling interests
|
(62
|
)
|
-
|
|||||
|
Net
loss allocable to common shareholders'
|
$
|
(18
|
)
|
$
|
(34,282
|
)
|
||
|
Basic
net loss per share
|
$
|
0.00
|
$
|
(1.52
|
)
|
|||
|
Weighted
average shares used to compute net loss allocable to common shareholders’
per share – basic
|
22,577,266
|
22,509,304
|
||||||
|
Diluted
net loss per share
|
$
|
0.00
|
$
|
(1.52
|
)
|
|||
|
Weighted
average shares used to compute net loss allocable to common shareholders’
per share – diluted
|
22,577,266
|
22,509,304
|
||||||
|
Non-GAAP
income from operations and non-GAAP net income
reconciliation:
|
||||||||
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Non-GAAP
income from operations reconciliation:
|
||||||||
|
Income
(loss) from operations
|
$
|
62
|
$
|
(33,568
|
)
|
|||
|
Add
back:
|
||||||||
|
Share-based
compensation expense
|
1,291
|
1,245
|
||||||
|
Amortization
of acquired intangibles
|
921
|
1,083
|
||||||
|
Severance
expense
|
-
|
1,156
|
||||||
|
Professional
fees associated with variable interest entity
|
-
|
687
|
||||||
|
Goodwill
impairment charge
|
-
|
33,329
|
||||||
|
Non-GAAP
income from operations
|
$
|
2,274
|
$
|
3,932
|
||||
|
Weighted
average shares used to compute non-GAAP net income per share -
basic
|
22,577,266
|
22,509,304
|
||||||
|
Dilutive
effect of options and restricted stock units
|
410,296
|
19,935
|
||||||
|
Weighted
average shares used to compute non-GAAP net income per share -
diluted
|
22,987,562
|
22,529,239
|
||||||
|
Non-GAAP
income from operations as a percentage of total revenue
|
6
|
%
|
10
|
%
|
||||
|
Non-GAAP
income reconciliation:
|
||||||||
|
Net
loss allocable to common shareholders'
|
$
|
(18
|
)
|
$
|
(34,282
|
)
|
||
|
Add
back:
|
||||||||
|
Share-based
compensation expense
|
1,291
|
1,245
|
||||||
|
Amortization
of acquired intangibles
|
921
|
1,083
|
||||||
|
Severance
expense
|
-
|
1,156
|
||||||
|
Professional
fees associated with variable interest entity
|
-
|
687
|
||||||
|
Goodwill
impairment charge
|
-
|
33,329
|
||||||
|
Non-GAAP
net income available to common shareholders'
|
$
|
2,194
|
$
|
3,218
|
||||
|
Non-GAAP
basic net income per share available to common
shareholders'
|
$
|
0.10
|
$
|
0.14
|
||||
|
Non-GAAP
diluted net income per share available to common
shareholders'
|
$
|
0.10
|
$
|
0.14
|
||||
|
Other
non-GAAP measures referenced on earnings call:
|
||||||||
|
Gross
profit
|
$
|
25,853
|
$
|
25,135
|
||||
|
Add:
share-based compensation expense
|
84
|
110
|
||||||
|
Add:
severance expense
|
-
|
651
|
||||||
|
Non-GAAP
gross profit
|
$
|
25,937
|
$
|
25,896
|
||||
|
Sales
and marketing
|
$
|
9,640
|
$
|
8,705
|
||||
|
Less:
share-based compensation expense
|
(290
|
)
|
(239
|
)
|
||||
|
Less:
severance expense
|
-
|
(202
|
)
|
|||||
|
Non-GAAP
sales and marketing
|
$
|
9,350
|
$
|
8,264
|
||||
|
General
and administrative
|
$
|
9,831
|
$
|
10,873
|
||||
|
Less:
share-based compensation expense
|
(820
|
)
|
(808
|
)
|
||||
|
Less:
severance expense
|
-
|
(165
|
)
|
|||||
|
Less:
professional fees associated with variable interest entity
|
-
|
(687
|
)
|
|||||
|
Non-GAAP
general and administrative
|
$
|
9,011
|
$
|
9,213
|
||||
|
Research
and development
|
$
|
2,284
|
$
|
2,568
|
||||
|
Less:
share-based compensation expense
|
(97
|
)
|
(88
|
)
|
||||
|
Less:
severance expense
|
-
|
(138
|
)
|
|||||
|
Non-GAAP
research and development
|
$
|
2,187
|
$
|
2,342
|
||||