SuccessFactors, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - CURRENT REPORT ON FORM 8-K - SuccessFactors, Inc.	d8k.htm

Exhibit 99.1

LOGO

SuccessFactors Reports 42 Percent Billings Growth and 48 Percent Revenue Growth

SAN MATEO, Calif. – August 2, 2011 – SuccessFactors, Inc. (NYSE: SFSF) the global leader in cloud-based business execution software, today announced results for its second quarter which ended June 30, 2011.

“With 42 percent, SuccessFactors had outstanding growth in Q2. It’s an acceleration of 19 percent sequentially from Q1, which caps the fastest last 10 quarters of growth of any public Cloud company with over $100 million in sales”, said Lars Dalgaard, founder and CEO of SuccessFactors. “The market we have created is mostly unsaturated, and as if we have created a tipping point in demand, brand and offering. Both our organically built products and major acquisitions are performing above expectations, and every geography and market segment is growing great. Despite aggressive hiring, pipeline is growing faster than we can hire salespeople to absorb it, the teams are gelling globally, our customers are seeing real results in executing better on their businesses, and they want to do a lot more business with SuccessFactors”.

Results for the Second Quarter Fiscal 2011:

•

Q2 FY11 Non-GAAP Revenue: For the quarter ended June 30, 2011, non-GAAP revenue was approximately $73.2 million, compared to the company’s prior guidance of $69 million to $70 million, and compared to approximately $49.5 million in the quarter ended June 30, 2010, an increase of approximately 48 percent year-over-year and an increase of 8 percent sequentially from Q111.

•

Q2 FY11 Non-GAAP Operating Income: For the quarter ended June 30, 2011, the company recognized non-GAAP operating income of $2.4 million and GAAP operating loss from operations of $25.9 million. The non-GAAP operating income excludes $17.7 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs and a loss of approximately $10.3 million revaluation of contingent consideration for the quarter ended June 30, 2011.

•

Q2 FY11 Total Deferred Revenue: Total deferred revenue as of June 30, 2011 was $241.7 million, compared to $234.4 million at December 31, 2010 and up approximately 28 percent year-over-year from $188.2 million at June 30, 2010. The acquisition of Plateau Systems, which closed on June 28, 2011, contributed approximately $10.3 million to the deferred revenue balances as of that date

•

Q2 FY11 Cash Flow Generated from Operations: For the quarter ended June 30, 2011, cash flow generated from operating activities was $8.2 million, compared to $6.8 million in the quarter ended June 30, 2010.

•

Q2 FY11 Net Income per Common Share: For the quarter ended June 30, 2011, on a GAAP basis, net loss per common share basic and diluted was $0.09. On a non-GAAP basis, net income per common share, basic and diluted, was $0.03. Non-GAAP net income per common share, both basic and diluted, excludes $17.7 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, approximately $10.3 million revaluation loss of contingent consideration related to business combinations, $1.0 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and approximately $18.0 million tax benefit related to Plateau Systems. This compares to non-GAAP net income per common share basic and diluted of $0.01 in the first quarter of 2011 which excluded approximately $11.0 million of stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, a $11.7 million revaluation gain of contingent consideration related to business combinations and $0.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and non-GAAP net income per common share basic and diluted of $0.04 and $0.03, respectively in the second quarter of 2010 which excluded approximately $4.5 million of stock-based compensation. For the second quarter of 2011, GAAP net loss per common share calculation assumed a weighted average share count of approximately 78.9 million, and non-GAAP net income per share calculation assumed a weighted basic average share count of 78.9 million and a weighted average diluted share count of 83.6 million. For the second quarter of 2010, GAAP net loss per common share calculation assumed a weighted average share count of approximately 72.6 million, and non-GAAP net income per share assumed a weighted average basic share count of 72.6 million and a weighted average diluted share count of 78.4 million.

For Additional Second Quarter Fiscal 2011 Highlights please visit: http://www.successfactors.com/press-releases/.

Guidance:

SuccessFactors is initiating guidance for its third quarter fiscal 2011 and updating its outlook for the full fiscal year 2011, as of August 2, 2011.

•

Q3 FY11: Non-GAAP revenue for the company’s third fiscal quarter is projected to be in the range of approximately $83.0 million to $84.0 million, or an increase of approximately 55 percent when compared to the same period in the prior year. Non-GAAP revenue includes the effect of deferred revenue from acquired companies that is required to be written down for GAAP purposes under purchase accounting rules. Non-

GAAP net income per common share, basic and diluted, is expected to be above breakeven. Non-GAAP net income per common share estimates exclude the effects of estimated stock-based compensation expense, amortization of intangible assets, future cash consideration of acquisitions, deal related costs and revaluation of contingent consideration related to business combinations and any unrealized foreign exchange gains/losses on an intercompany acquisition loan and assumes average weighted basic and diluted share counts of approximately 83.1 million shares and 95.1 million shares, respectively.

•

Full Year 2011: Non-GAAP revenue for the company’s full fiscal 2011 is now expected to be in the approximate range of $310 million to $315 million, which is an increase of approximately 50 percent when compared to fiscal 2010. The company expects non-GAAP net income per common share for fiscal 2011 to be above breakeven. Non-GAAP net income per common share estimates exclude the effects of estimated stock-based compensation expense, amortization of intangible assets, future cash consideration of acquisitions, deal related costs and revaluation of contingent consideration related to business combinations and any unrealized foreign exchange gains/losses on an intercompany acquisition loan and assumes average weighted basic and diluted share counts of approximately 83.6 million shares and 95.6 million shares, respectively.

Q2 FY11 Financial Results Conference Call:

SuccessFactors will host a conference call today at 2 p.m. PDT/ 5 p.m. EDT to discuss the second quarter and fiscal 2011 financial results with the investment community. A live webcast of the event will be available on SuccessFactors’ Investor Relations website at http://www.successfactors.com/investor. A live domestic dial-in is available at (888) 895-8076 or +1 (973) 200-3188 internationally. A domestic replay will be available at (800) 642-1687 or +1 (706) 645-9291 internationally, passcode 78431668, and available via webcast replay until August 16, 2011.

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 in this press release exclude the impact of stock-based compensation expense, the amortization of intangible assets, integration costs, future cash consideration of acquisition and deal related costs, revaluation of contingent consideration or write-downs for fair value accounting related to business combinations, any unrealized foreign exchange gain/loss on an intercompany loan related to the acquisition of Inform, and a tax benefit related to the acquisition of Jambok and Plateau Systems. The company defines billings as revenue plus change in total deferred revenue. Non-GAAP revenue includes revenue from acquired companies that is required to be written down for GAAP purposes under purchase accounting rules.

About SuccessFactors

SuccessFactors is the leading provider of cloud-based Business Execution Software, which delivers business alignment, team execution, people performance, and learning management solutions to organizations of all sizes across more than 60 industries. With approximately 15 million subscription seats globally, we strive to delight our customers by delivering innovative solutions, content and analytics, process expertise and best practices insights from serving our broad and diverse customer base. Today, we have more than 3,500 customers in more than 168 countries using our application suite in 34 languages.

It’s Time to Love Work Again.

Like us: http://facebook.com/SuccessFactors

Join us for SuccessConnect in Sydney, Australia Aug. 24-25: http://www.successfactors.com/successconnect/.

“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 future financial results and prospects. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: our ability to retain customers and to experience high customer renewal rates; whether customers renew their agreements for additional modules or users; pricing pressures; our ability to sell our applications to customers of acquired companies; our ability to sell applications of acquired companies to our customers; the uncertain impact of the overall global economic conditions, including on customers, prospective customers and partners, renewal rates and length of sales cycles; the fact that the business execution market is at an early stage of development, and may not develop as rapidly as we anticipate; risks related to the integration of the acquisitions, including retaining customers and employees and managing geographically-dispersed operations and incurring liabilities of the acquired business; competitive factors; outages or security breaches; our ability to develop, and market acceptance of, new services; the impact of any discovered product defects or outages; our ability to continue to sell our services outside the HR area; our ability to manage our growth; our ability to successfully expand our sales force and its effectiveness; whether our resellers and other partners will be successful in marketing our products; our ability to continue to manage expenses; the impact of unforeseen expenses, including as a result of integrating acquisitions; 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 these forward-looking statements is included in the section entitled “Risk Factors” in our Annual Report on Form 10-K and in our most recent report on Form 10-Q and in other filings we make with the Securities and Exchange Commission from time to time.

SuccessFactors, Inc.

Condensed Consolidated Balance Sheets

(in thousands)


	As of June 30, 2011			As of December 31, 2010
	(unaudited)			(1)
Assets:
Current assets:
Cash and cash equivalents	$	120,767		$	75,384
Marketable securities		131,627			281,073
Accounts receivable, net of allowance for doubtful accounts		74,805			80,440
Deferred commissions		7,116			7,106
Prepaid expenses and other current assets		14,994			8,022

Total current assets		349,309			452,025
Restricted cash		1,747			913
Property and equipment, net		14,380			8,737
Deferred commissions, less current portion		9,552			12,854
Goodwill		260,909			64,077
Intangible assets		109,649			37,832
Other assets		2,599			975

Total assets	$	748,145		$	577,413


Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	5,807		$	7,254
Accrued expenses and other current liabilities		25,326			11,433
Accrued employee compensation		26,911			23,467
Deferred revenue		229,207			219,868
Notes payable		900			—
Acquisition-related contingent consideration		4,000			5,200

Total current liabilities		292,151			267,222

Deferred revenue, less current portion		12,472			14,577
Notes payable, less current portion		1,643			—
Long-term income taxes payable		2,477			1,987
Acquisition-related contingent consideration, less current portion		21,046			21,050
Other long-term liabilities		2,486			1,248

Total liabilities		332,275			306,084
Stockholders’ equity:
Common stock		83			77
Additional paid-in capital		646,142			499,343
Accumulated other comprehensive income		5,235			3,258
Accumulated deficit		(235,590	)		(231,349	)


Total stockholders’ equity		415,870			271,329

Total liabilities and stockholders’ equity	$	748,145		$	577,413

(1)

The condensed consolidated balance sheet as of December 31, 2010 has been derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

SuccessFactors, Inc.

Condensed Consolidated Statement of Operations

(unaudited, in thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
				With Adoption						With Adoption
				of ASU 2009-13						of ASU 2009-13
Revenue
Subscription and support	$	55,119		$	38,471		$	106,311		$	74,951
Professional services and other		17,731			11,032			34,137			19,287

Total revenue		72,850			49,503			140,448			94,238

Cost of revenue (1)
Subscription and support		11,976			5,762			21,411			10,907
Professional services and other		12,411			5,975			23,046			11,419

Total cost of revenue		24,387			11,737			44,457			22,326

Total gross profit		48,463			37,766			95,991			71,912

Operating expenses: (1)
Sales and marketing		36,387			22,177			67,358			44,419
Research and development		15,525			8,926			29,291			16,651
General and administrative		15,771			8,203			28,718			15,697
Revaluation of contingent consideration		10,303			—			(1,356	)		—
Gain on settlement of litigation, net		(3,619	)		—			(2,906	)		—

Total operating expenses		74,367			39,306			121,105			76,767

Loss from operations		(25,904	)		(1,540	)		(25,114	)		(4,855	)
Unrealized foreign exchange gain on intercompany loan		965			—			1,501			—
Interest income (expense) and other, net		508			(268	)		1,292			(535	)

Loss before benefit for (provision of) income taxes		(24,431	)		(1,808	)		(22,321	)		(5,390	)
Benefit for (provision of) income taxes		17,470			(67	)		18,079			(194	)


Net loss	$	(6,961	)	$	(1,875	)	$	(4,242	)	$	(5,584	)


Basic net loss per common share	$	(0.09	)	$	(0.03	)	$	(0.05	)	$	(0.08	)

Diluted net loss per common share	$	(0.09	)	$	(0.03	)	$	(0.05	)	$	(0.08	)

Shares used in per common share calculation:
Basic *		78,902			72,645			78,225			72,328
Diluted		78,902			72,645			78,225			72,328
(1) Amounts include stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Cost of revenue	$	4,053		$	677		$	6,416		$	1,280
Sales and marketing		4,633			1,794			7,861			3,749
Research and development		2,352			722			3,779			1,597
General and administrative		6,685			1,328			10,705			2,921

	$	17,723		$	4,521		$	28,761		$	9,547

*	Excludes 561,883 shares held in escrow in connection with Inform and Cubetree acquisitions

SuccessFactors, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
				With Adoption						With Adoption
				of ASU 2009-13						of ASU 2009-13
Cash flow from operating activities:
Net loss	$	(6,961	)	$	(1,875	)	$	(4,242	)	$	(5,584	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,872			1,332			3,613			2,605
Amortization of deferred commissions		4,115			2,225			8,278			4,325
Stock-based compensation expense		9,443			4,521			17,091			9,547
Amortization of intangible assets		1,919			—			3,564			—
(Gain) or loss on revaluation of contingent consideration		10,303			—			(1,356	)		—
Unrealized foreign exchange gain on intercompany loan		(965	)		—			(1,501	)		—
Changes in assets and liabilities:
Accounts receivable		(1,471	)		(3,758	)		16,332			11,391
Deferred commissions		(2,502	)		(2,317	)		(4,986	)		(4,209	)
Prepaid expenses and other current assets		7,215			323			4,524			(1,186	)
Other assets		1,494			(149	)		1,533			(545	)
Accounts payable		(42	)		615			(1,756	)		280
Accrued expenses and other current liabilities		5,463			226			8,694			470
Accrued employee compensation		2,153			2,628			(2,485	)		(3,396	)
Long-term income taxes payable		70			(81	)		139			(116	)
Other liabilities		(25,787	)		(129	)		(25,837	)		(216	)
Deferred revenue		1,833			3,244			(3,041	)		6,570

Net cash provided by operating activities		8,152			6,805			18,564			19,936


Cash flow from investing activities:
Restricted cash		(1	)		9			(6	)		12
Advances to principal shareholders of Inform		—			(2,175	)		—			(2,175	)
Capital expenditures		(1,173	)		(1,150	)		(3,040	)		(1,782	)
Proceeds from sale of assets		—			—			—			1
Acquisitions, net of cash acquired		(127,473	)		—			(130,296	)		—
Purchases of available-for-sale securities		(17,640	)		(111,182	)		(46,283	)		(145,641	)
Proceeds from maturities of available-for-sale securities		33,489			66,003			102,996			92,103
Proceeds from sales of available-for-sale securities		61,474			23,244			91,897			43,244

Net cash (used in) provided by investing activities		(51,324	)		(25,251	)		15,268			(14,238	)


Cash flow from financing activities:
Offering costs		—			(111	)		—			(111	)
Proceeds from exercise of stock options, net		5,612			2,797			10,974			4,733
Principal payments on capital lease obligations		—			(10	)		—			—

Net cash provided by financing activities		5,612			2,676			10,974			4,622

Effect of exchange rate changes on cash and cash equivalents		95			(163	)		577			(267	)

Net (decrease) increase in cash and cash equivalents		(37,465	)		(15,933	)		45,383			10,053
Cash and cash equivalents at beginning of period		158,232			102,604			75,384			76,618

Cash and cash equivalents at end of period	$	120,767		$	86,671		$	120,767		$	86,671


Non-cash transactions:
Purchase of software licenses	$	2,543		$	—		$	2,543		$	—

SuccessFactors, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited, in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
*Non-GAAP Revenue*
Revenue	$	72,850		$	49,503		$	140,448		$	94,238
(a) Net impact of acquisition related deferred revenue before fair value adjustment		300			—			652			—

Non-GAAP Revenue	$	73,150		$	49,503		$	141,100		$	94,238


*Billings reconciliation:*
GAAP Revenue	$	72,850		$	49,503		$	140,448		$	94,238


Ending total deferred revenue		241,679			188,194			241,679			188,194
Less: Beginning total deferred revenue		229,571			184,950			234,445			181,591
Less: Beginning total deferred revenue from acquisitions		10,275			—			10,275			—

Change in total deferred revenue		1,833			3,244			(3,041	)		6,603


Billings (revenue plus change in total deferred revenue)	$	74,683		$	52,747		$	137,407		$	100,841


*Billings profit (loss) and margin reconciliation:*
Billings	$	74,683		$	52,747		$	137,407		$	100,841
Non-GAAP total cost of revenue and operating expenses (total spend)		70,728			46,522			138,157			89,546

Billings profit (loss)	$	3,955		$	6,225		$	(750	)	$	11,295

Billings margin		5	%		12	%		-1	%		11	%

*Net income (loss) and net income (loss) per share reconciliations:*
GAAP net loss	$	(6,961	)	$	(1,875	)	$	(4,242	)	$	(5,584	)
(a) Net impact of acquisition related deferred revenue before fair value adjustment		300			—			652			—
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		17,723			4,521			28,761			9,547
(c) Revaluation of contingent consideration		10,303			—			(1,356	)		—
(d) Foreign exchange unrealized gain on intercompany acquisition loan related to Inform		(965	)		—			(1,501	)		—
(e) Tax benefit related to Jambok and Plateau		(18,022	)		—			(19,173	)		—

Non-GAAP net income excluding stock-based compensation expense and other items	$	2,378		$	2,646		$	3,141		$	3,963

GAAP net loss per common share - basic and diluted	$	(0.09	)	$	(0.03	)	$	(0.05	)	$	(0.08	)

Non-GAAP net income per common share (excluding stock-based compensation expense and other items) - basic	$	0.03		$	0.04		$	0.04		$	0.05

Non-GAAP net income per common share (excluding stock-based compensation expense and other items) - diluted	$	0.03		$	0.03		$	0.04		$	0.05

GAAP shares used in computing net loss per common share, basic		78,902			72,645			78,225			72,328

GAAP shares used in computing net loss per common share, diluted		83,621			78,360			83,245			78,148


*Total spend reconciliation:*
GAAP total cost of revenue and operating expenses	$	98,754		$	51,043		$	165,562		$	99,093
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		17,723			4,521			28,761			9,547
(c) Revaluation of contingent consideration		10,303			—			(1,356	)		—

Non-GAAP total cost of revenue and operating expenses (total spend)	$	70,728		$	46,522		$	138,157		$	89,546


*Gross profit and gross margin reconciliations:*
GAAP gross profit	$	48,463		$	37,766		$	95,991		$	71,912
(a) Net impact of acquisition related deferred revenue before fair value adjustment		300			—			652			—
(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		4,053			677			6,416			1,280

Non-GAAP gross profit	$	52,816		$	38,443		$	103,059		$	73,192


GAAP gross margin percentage		67	%		76	%		68	%		76	%

Non-GAAP gross margin percentage		72	%		78	%		73	%		78	%


*Cost of revenue reconciliation:*
GAAP cost of revenue	$	24,387		$	11,737		$	44,457		$	22,326
(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		4,053			677			6,416			1,280

Non-GAAP cost of revenue	$	20,334		$	11,060		$	38,041		$	21,046


*Total operating expenses reconciliation:*
GAAP operating expenses	$	74,367		$	39,306		$	121,105		$	76,767
(b2) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		13,670			3,844			22,344			8,267
(c) Revaluation of contingent consideration		10,303			—			(1,356	)		—

Non-GAAP operating expenses	$	50,394		$	35,462		$	100,117		$	68,500


*Total sales and marketing reconciliation:*
GAAP sales and marketing	$	36,387		$	22,177		$	67,358		$	44,419
(b3) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		4,633			1,794			7,861			3,749

Non-GAAP sales and marketing	$	31,754		$	20,383		$	59,497		$	40,670


*Total research and development reconciliation:*
GAAP research and development	$	15,525		$	8,926		$	29,291		$	16,651
(b4) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,352			722			3,779			1,597

Non-GAAP research and development	$	13,173		$	8,204		$	25,512		$	15,054


*Total general and administrative reconciliation:*
GAAP general and administrative expenses	$	15,771		$	8,203		$	28,718		$	15,697
(b5) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		6,685			1,328			10,705			2,921

Non-GAAP general and administrative	$	9,086		$	6,875		$	18,013		$	12,776


*Operating margin reconciliation:*
GAAP loss from operations	$	(25,904	)	$	(1,540	)	$	(25,114	)	$	(4,855	)
(a) Net impact of acquisition related deferred revenue before fair value adjustment		300			—			652			—
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		17,723			4,521			28,761			9,547
(c) Revaluation of contingent consideration		10,303			—			(1,356	)		—

Non-GAAP income from operations less stock-based compensation and other items	$	2,422		$	2,981		$	2,943		$	4,692

Non-GAAP Revenue	$	73,150		$	49,503		$	141,100		$	94,238

Non-GAAP operating margin percentage		3	%		6	%		2	%		5	%


*Free cash flow reconciliation:*
Net cash provided by operating activities	$	8,152		$	6,805		$	18,564		$	19,936
Less: Capital expenditures		(1,173	)		(1,150	)		(3,040	)		(1,782	)

Free cash flow	$	6,979		$	5,655		$	15,524		$	18,154

Contact:

For investor inquiries:

Karen Moran

+1-650.645.4439

kmoran@successfactors.com

For media inquiries:

Andrea Meyer

+1-415.370.7329

ameyer@successfactors.com

SuccessFactors, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - August 2, 2011

Attached files

SuccessFactors, Inc. Reports