HispanicBusiness

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%                     --------- --------  --------- --------