News Column

ServiceSource Reports Fourth Quarter and Full Year 2012 Financial Results

Page 2 of 1

LogoTracker

SAN FRANCISCO, CA -- (Marketwire) -- 02/06/13 -- ServiceSource® (NASDAQ: SREV)

•Reports fourth quarter revenue of $67.3 million and full year revenue of $243.7 million, up 11% and 19% year-over-year, respectively •Achieves 2012 adjusted EBITDA of $20.9 million, up 17% year-over-year, and non-GAAP EPS of $0.10 per diluted share •Adds Beckman Coulter, Intralinks and Rockwell Automation to growing list of customers; notable expansions include Adobe Marketing Cloud, Avaya and GE Healthcare, among others •Increases Annual Contract Value (ACV) to $270.4 million, up 13% year-over-year

ServiceSource® (NASDAQ: SREV), the global leader in recurring revenue management, today announced financial results for the fourth quarter and fiscal year ended December 31, 2012.

"ServiceSource delivered a record year of revenue in 2012 resulting in 19% year-over-year growth, despite ACV that was heavily back end loaded," said Mike Smerklo, ServiceSource's Chairman and Chief Executive Officer. "Recurring revenue continues to grow as a percent of total revenue for companies around the world and this trend drives a growing interest in Renew OnDemand, the world's only cloud application built specifically to maximize recurring revenue. Our focus in 2013 is on investing in Renew OnDemand for innovation, improving productivity in our sales organization and executing with consistency."

Revenue was $67.3 million in the fourth quarter, representing an 11% increase over the $60.8 million delivered in the prior year. Revenue for the full year 2012 was $243.7 million, up 19% from $205.5 million in 2011.

For the fourth quarter of fiscal year 2012, adjusted EBITDA was $8.3 million, compared with $9.3 million for the same period last year. GAAP net loss in the quarter was $1.2 million, or $0.02 per share, compared with a profit of $1.7 million, or $0.02 per diluted share for the same period last year. Non-GAAP net income in the quarter was $3.6 million compared with $4.6 million for the same period last year. Non-GAAP EPS was $0.05 per diluted share, compared with $0.06 per diluted share for the same period last year.

For the full year 2012, adjusted EBITDA was $20.9 million, compared with $17.8 million for fiscal year 2011. GAAP net loss for the year was $42.8 million, or $0.58 per share, compared with a profit of $15.1 million, or $0.21 per diluted share for 2011. Non-GAAP net income for the year was $7.9 million, compared with $6.5 million in 2011. Non-GAAP EPS was $0.10 per diluted share, compared with $0.09 per diluted share for 2011.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release.

In addition, the company has named Ashley Fieglein Johnson to the role of Chief Financial Officer effective upon the filing of the company's fiscal year 2012 Form 10-K. Current CFO, David Oppenheimer, announced his departure in December of 2012. Previously, Ms. Johnson held the role of Senior Vice President of Finance at ServiceSource.

Quarterly Conference Call

ServiceSource will discuss its quarterly results and provide 2013 financial guidance today via teleconference at 1:30 p.m. Pacific Time. To access the call within the U.S., please dial (877) 293-5486, or outside the U.S. (914) 495-8592, at least five minutes prior to the start time. A live webcast of the call will also be available at http://ir.servicesource.com/events.cfm under the Events & Presentations menu. A replay of the webcast will also be available on the Company's website at http://ir.servicesource.com.

About ServiceSource International, Inc.

ServiceSource is the global leader in recurring revenue management. The world's most successful companies rely on us to maximize subscription, maintenance and support revenue, improve customer retention and increase business predictability and insight. ServiceSource delivers results with Renew OnDemand, the world's only cloud application built specifically to manage and grow recurring revenue, which can be combined with our industry-leading services.

With over a decade of experience focused exclusively in growing recurring revenue, our services and applications are based on proven best practices and global benchmarks. The company is headquartered in San Francisco, and has over $8 billion under management for customers in more than 150 countries and 40 languages.

ServiceSource, Renew OnDemand and any ServiceSource product or service names or logos above are trademarks of ServiceSource International, Inc. All other trademarks used herein belong to their respective owners.

For more information on ServiceSource, visit http://www.servicesource.com. To connect with ServiceSource, visit us on Twitter, Facebook, LinkedIn and YouTube.


ServiceSource International, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Years Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- ---------Net revenue $ 67,345 $ 60,779 $ 243,703 $ 205,501Cost of revenue (1) 35,319 31,007 136,321 113,406 --------- --------- --------- ---------Gross profit 32,026 29,772 107,382 92,095 --------- --------- --------- ---------Operating expenses Sales and marketing (1) 15,767 13,856 56,925 48,520 Research and development (1) 5,960 3,423 19,255 13,073 General and administrative (1) 10,496 8,955 41,135 33,647 --------- --------- --------- ---------Total operating expenses 32,223 26,234 117,315 95,240 --------- --------- --------- ---------Loss from operations (197) 3,538 (9,933) (3,145)Interest expense (56) (51) (236) (503)Other income (expense), net (414) (65) (538) (624) --------- --------- --------- ---------Loss before income taxes (667) 3,422 (10,707) (4,272)Income tax provision (benefit) 518 1,769 32,107 (19,383) --------- --------- --------- ---------Net income (loss) $ (1,185) $ 1,653 $ (42,814) $ 15,111 ========= ========= ========= =========Net income (loss) per common share: Basic $ (0.02) $ 0.02 $ (0.58) $ 0.23 ========= ========= ========= ========= Diluted $ (0.02) $ 0.02 $ (0.58) $ 0.21 ========= ========= ========= =========Weighted-average shares used in computing net income (loss) per common share: Basic 75,090 71,602 74,270 66,656 ========= ========= ========= ========= Diluted 75,090 77,823 74,270 73,585 ========= ========= ========= =========(1) Includes stock-based compensation expense as follows: Three Months Ended Years Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- ---------Cost of revenue $ 722 $ 591 $ 2,772 $ 1,877Sales and marketing 2,310 1,475 8,146 4,456Research and development 425 303 1,880 1,167General and administrative 2,158 1,126 8,077 4,099 --------- --------- --------- ---------Total stock-based compensation $ 5,615 $ 3,495 $ 20,875 $ 11,599 --------- --------- --------- --------- ServiceSource International, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) December 31, 2012 2011 --------- ---------AssetsCurrent assets: Cash and cash equivalents $ 76,568 $ 65,983 Short-term investments 32,874 42,882 Accounts receivable, net 65,238 54,095 Current portion of deferred income taxes 389 3,526 Prepaid expenses and other 5,178 7,945 --------- ---------Total current assets 180,247 174,431Property and equipment, net 34,513 26,840Deferred income taxes, net of current portion 2,321 30,238Other assets, net 1,057 1,118Goodwill 6,334 6,334 --------- ---------Total assets $ 224,472 $ 238,961 ========= =========Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable $ 3,293 $ 8,617 Accrued taxes 1,056 924 Accrued compensation and benefits 15,738 21,749 Other accrued liabilities (including deferred revenue of $2,295 and $1,132 at December 31, 2012 and December 31, 2011, respectively) 10,403 7,639 Current portion of capital lease obligations 326 706 --------- ---------Total current liabilities 30,816 39,635Long-term liabilities 6,729 2,310 --------- ---------Total liabilities 37,545 41,945 --------- ---------Stockholders' equity: Common stock 8 7 Treasury stock (441) (441) Additional paid-in capital 210,650 177,796 Retained earnings (accumulated deficit) (23,398) 19,416 Accumulated other comprehensive income 108 238 --------- ---------Total stockholders' equity 186,927 197,016 --------- ---------Total liabilities and stockholders' equity $ 224,472 $ 238,961 --------- --------- ServiceSource International, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Years Ended December 31, -------------------- 2012 2011 --------- ---------Cash flows from operating activitiesNet income (loss) $ (42,814) $ 15,111Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 10,014 9,372 Loss on disposal of fixed assets - 46 Amortization of deferred financing costs 147 351 Accretion on premium on short-term investments 577 276 Deferred income taxes 31,682 (19,259) Stock-based compensation 20,875 11,599 Tax benefit from stock-based compensation (1,488) (2,835)Changes in operating assets and liabilities: Accounts receivable (10,714) (4,972) Prepaid expenses and other 4,067 (3,164) Accounts payable (2,477) 2,235 Accrued taxes (802) 2,064 Accrued compensation and benefits (5,290) 6,617 Accrued payables to customers - (30,640)* Other accrued liabilities 6,859 1,968 --------- ---------Net cash provided by (used in) operating activities 10,636 (11,231) --------- ---------Cash flows from investing activitiesAcquisition of property and equipment (19,986) (14,050)Purchases of short-term investments (64,000) (53,795)Sales of short-term investments 52,050 2,113Maturities of short-term investments 21,415 8,190 --------- ---------Net cash used in investing activities (10,521) (57,542) --------- ---------Cash flows from financing activitiesNet proceeds from issuance of common stock in initial public offering and follow-on offering - 110,753Proceeds from revolving credit facility - 23,424Repayment of revolving credit facility - (23,424)Repayments of long-term debt and capital leases (725) (16,252)Payments of deferred debt issuance costs (141) (200)Proceeds from common stock issuances 10,387 15,045Tax benefit from stock-based compensation 1,488 2,835 --------- ---------Net cash provided by financing activities 11,009 112,181 --------- ---------Net increase in cash and cash equivalents 11,124 43,408Effect of exchange rate changes on cash and cash equivalents (539) (77)Cash and cash equivalents at beginning of period 65,983 22,652 --------- ---------Cash and cash equivalents at end of period $ 76,568 $ 65,983 ========= =========* Activity in 2011 resulted from $18.1 million in payments to Oracle/Sun and the related settlement of accrued payables owed to Oracle/Sun and amounts owed to the Company by Oracle/Sun.




Use of Non-GAAP Financial Measures

To supplement its financial statements presented in accordance with generally accepted accounting principles, or GAAP, ServiceSource also provides investors with non-GAAP gross profit, net income, net income per share and Adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the closest GAAP financial measure is presented in the financial tables below under the heading, "GAAP to Non-GAAP Reconciliation."

ServiceSource believes that the non-GAAP financial information provided in this release can assist investors in understanding and assessing its on-going core operations and prospects for the future and provides an additional tool for investors to use in comparing ServiceSource's financial results with other companies in the industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP gross profit consists of gross profit plus stock based compensation and amortization of internally-developed software.

Non-GAAP net income consists of net income (loss) plus stock-based compensation, amortization of internally-developed software and applying an income tax rate of 40% reflecting our estimated tax expense on our core operations. Accordingly, our non-GAAP calculation of net income has excluded a one-time, non-cash income tax charge of $33.1 million recorded during the period ended June 30, 2012 related to a valuation allowance for a substantial portion of the company's deferred tax assets. Results for the year ended December 31, 2011 reflect a one-time tax benefit related to the conversion of ServiceSource from a limited liability corporation to a Delaware corporation, which has also been excluded from the calculation of non-GAAP net income. Stock-based compensation expense is expected to vary depending on the number of new grants issued, changes in the company's stock price, stock market volatility, expected option lives and risk-free rates of return, all of which are difficult to estimate.

EBITDA consists of net income (loss) plus depreciation and amortization, interest expense, other expenses, net, and income tax expense. Adjusted EBITDA consists of EBITDA plus non-cash, stock-based compensation expense. ServiceSource uses Adjusted EBITDA as a measure of operating performance because it assists the company in comparing performance on a consistent basis, as it removes from the operating results the impact of the company's capital structure.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States.


ServiceSource International, Inc. Reconciliation of Net Income (Loss) to Adjusted EBITDA (In thousands) (Unaudited) Three Months Ended Years Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- ---------Net income (loss) $ (1,185) $ 1,653 $ (42,814) $ 15,111Income tax provision (benefit) 518 1,769 32,107 (19,383)Interest expense 56 51 236 503Other income (expense), net 414 65 538 624Depreciation 2,922 2,263 10,003 9,372 --------- --------- --------- ---------EBITDA 2,725 5,801 70 6,227Stock-based compensation 5,615 3,495 20,875 11,599 --------- --------- --------- ---------Adjusted EBITDA $ 8,340 $ 9,296 $ 20,945 $ 17,826 --------- --------- --------- --------- ServiceSource International, Inc. GAAP To Non-GAAP Reconciliation (Dollars in thousands, except per share amounts) (unaudited) Three Months Ended Years Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- ---------Gross Profit GAAP gross profit $ 32,026 $ 29,772 $ 107,382 $ 92,095 Non-GAAP adjustments: Stock-based compensation (A) 722 591 2,772 1,877 Amortization of internally-developed software (B) 577 261 1,467 1,457 --------- --------- --------- --------- Non-GAAP gross profit $ 33,325 $ 30,624 $ 111,621 $ 95,429 ========= ========= ========= =========Gross Profit % GAAP gross profit 48% 49% 44% 45% Non-GAAP adjustments: Stock-based compensation (A) 1% 1% 1% 1% Amortization of internally-developed software (B) 1% 0% 1% 1% --------- --------- --------- --------- Non-GAAP gross profit 49% 50% 46% 47% ========= ========= ========= =========Certain totals do not add due to roundingOperating ExpensesGAAP operating expenses $ 32,223 $ 26,234 $ 117,315 $ 95,240Stock-based compensation (A) (4,893) (2,904) (18,103) (9,722)Amortization of internally- developed software (B) (412) (554) (1,579) (2,477) --------- --------- --------- ---------Non-GAAP operating expenses $ 26,918 $ 22,776 $ 97,633 $ 83,041 ========= ========= ========= =========Net Income (Loss) GAAP net income (loss) $ (1,185) $ 1,653 $ (42,814) $ 15,111 Non-GAAP adjustments: Stock-based compensation (A) 5,615 3,495 20,875 11,599 Amortization of internally-developed software (B) 989 815 3,046 3,934 One-time tax items (C) - - 33,072 (20,740) Income tax effect on non-GAAP adjustments and impact of normalizing the effective income tax rate (D) (1,857) (1,324) (6,251) (3,417) --------- --------- --------- ---------Non-GAAP net income $ 3,562 $ 4,639 $ 7,928 $ 6,487 ========= ========= ========= =========Diluted Net Income (Loss) Per Share GAAP diluted net income (loss) per share $ (0.02) $ 0.02 $ (0.58) $ 0.21 Non-GAAP adjustments: Stock-based compensation (A) 0.07 0.04 0.26 0.16 Amortization of internally-developed software (B) 0.01 0.01 0.04 0.05 One-time tax items (C) - - 0.42 (0.28) Income tax effect on non-GAAP adjustments as well as the impact of normalizing the effective income tax rate and calculating non-GAAP net income per share using a fully- diluted share count (D) (0.02) (0.01) (0.05) (0.05) --------- --------- --------- ---------Non-GAAP diluted net income per share $ 0.05 $ 0.06 $ 0.10 $ 0.09 ========= ========= ========= =========Shares used in calculating diluted net income per share on a non-GAAP basis 77,831 77,823 79,093 73,585 ========= ========= ========= =========Footnotes to GAAP to Non-GAAP Reconciliation----------------------------------------------------------------------------(A) Stock-based compensation. Included in our GAAP presentation of cost of revenue and operating expenses, stock-based compensation consists of expenses for stock options and awards and purchase rights under our stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.(B) Amortization of internally-developed software. Included in our GAAP presentation of cost of revenue and operating expenses, amortization of internally-developed software reflects non-cash expense for certain software purchases and software developed or obtained for internal use. We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance.(C) One-time tax items. We elected to be treated as a corporation under Subchapter C of Chapter 1 of the United States Internal Revenue Code, effective March 1, 2011, and therefore became subject to federal and state tax expense beginning March 1, 2011. As a result of this tax election, we recorded a net deferred tax asset and a one-time non-cash tax benefit of $21.4 million in the first quarter of 2011. During the second quarter of 2012, we recorded a $33.1 million non-cash charge against a substantial portion of our deferred tax assets, much of which was recorded in connection with electing to be treated as a corporation, because the recoverability of these items for financial reporting purposes is uncertain. We have excluded these items from our non-GAAP measures because they are non-recurring and unique, they are non-cash in nature and are not indicative of our core operating performance.(D) Income tax effect on non-GAAP adjustments as well as the impact of normalizing the effective income tax rate and calculating non-GAAP net income per share using a fully-diluted share count. This adjusts (i) the provision for income taxes to reflect the effect of the non-GAAP items A, B and C noted above on our non-GAAP net income; (ii) the income tax rate to a normalized effective tax rate of 40%; and (iii) non-GAAP earnings per share based on a fully-diluted share count. ServiceSource International, Inc. Revenue by Segment (In thousands) (unaudited) Three Months Ended December 31, -------------------------------------- 2012 2011 ------------------ ------------------ % of % of $ Revenue $ Revenue --------- -------- --------- --------NALA $ 39,320 58% $ 39,047 64%EMEA 21,478 32% 16,732 28%APJ 6,547 10% 5,000 8% --------- -------- --------- -------- $ 67,345 100% $ 60,779 100% ========= ======== ========= ======== Years Ended December 31, -------------------------------------- 2012 2011 ------------------ ------------------ % of % of $ Revenue $ Revenue --------- -------- --------- --------NALA $ 150,041 62% $ 127,430 62%EMEA 66,902 27% 58,344 28%APJ 26,760 11% 19,727 10% --------- -------- --------- -------- $ 243,703 100% $ 205,501 100% --------- -------- --------- --------





Investor Relations Contact for ServiceSource:

Mike Magaro
ServiceSource International, Inc.
(415) 901-1168
mmagaro@servicesource.com



Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters