ServiceSource Reports First Quarter 2013 Financial Results

ServiceSource Reports First Quarter 2013 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)-- ServiceSource® (NAS: SREV) , the global leader in recurring revenue management, today announced its financial results for the first quarter ended March 31, 2013.

  • Revenue: $61.1 million dollars

  • Adjusted EBITDA: loss of $0.5 million dollars

  • Record amount of cash and cash equivalents totaling $117.7 million dollars

  • Four new Renew OnDemand subscription deals signed

  • Successful Spring 2013 release of Renew OnDemand with enhanced analytics

"With several new Renew OnDemand subscriptions, we are excited by the strong momentum this gives us to start the year," said Mike Smerklo, ServiceSource's Chairman and Chief Executive Officer. "We remain focused on the evolution of our business to lead with our world-class SaaS solution, purpose-built for recurring revenue, and we will continue to invest appropriately to capture this new growth opportunity."


Revenue for the first quarter of fiscal 2013 was $61.1 million, a 6% increase over the $57.6 million delivered in the same period of 2012.

Adjusted EBITDA in the quarter, which excludes stock-based compensation, was a loss of $0.5 million, compared with $3.4 million for the same period last year.

GAAP net loss in the quarter was $10.5 million, or $0.14 per share, compared with a net loss of $1.3 million, or $0.02 per share for the same period last year.

Non-GAAP net loss in the quarter was $1.5 million, or $0.02 per share, compared with a net income of approximately $1.0 million, or $0.01 per diluted share for the same period last year.

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

Quarterly Conference Call

ServiceSource will discuss its quarterly results and provide second quarter 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, LinkedIn and YouTube.

ServiceSource International, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2013

2012

Net revenue

$

61,121

$

57,574

Cost of revenue (1)

38,498

32,576

Gross profit

22,623

24,998

Operating expenses

Sales and marketing (1)

14,808

13,477

Research and development (1)

6,248

4,581

General and administrative (1)

11,222

10,075

Total operating expenses

32,278

28,133

Loss from operations

(9,655

)

(3,135

)

Other expense, net

(107

)

(91

)

Loss before income taxes

(9,762

)

(3,226

)

Income tax provision (benefit)

693

(1,950

)

Net loss

$

(10,455

)

$

(1,276

)

Net loss per common share:

Basic

(0.14

)

$

(0.02

)

Diluted

$

(0.14

)

$

(0.02

)

Weighted-average shares used in computing net

loss per common share:

Basic

75,610

73,212

Diluted

75,610

73,212

(1) Includes stock-based compensation expense as follows:

Three Months Ended

March 31,

2013

2012

Cost of revenue

$

732

$

572

Sales and marketing

2,534

1,674

Research and development

486

363

General and administrative

2,169

1,638

Total stock-based compensation

$

5,921

$

4,247

ServiceSource International, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

March 31,

December 31,

2013

2012

Assets

Current assets:

Cash and cash equivalents

$

67,947

$

76,568

Short-term investments

49,755

32,874

Accounts receivable, net

59,039

65,238

Current portion of deferred income taxes

177

389

Prepaid expenses and other

5,089

5,178

Total current assets

182,007

180,247

Property and equipment, net

32,342

34,513

Deferred income taxes, net of current portion

2,069

2,321

Other assets, net

735

1,057

Goodwill

6,334

6,334

Total assets

$

223,487

$

224,472

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

5,319

$

3,293

Accrued taxes

269

1,056

Accrued compensation and benefits

14,677

15,738

Other accrued liabilities

11,074

10,403

Current portion of capital lease obligations

325

326

Total current liabilities

31,664

30,816

Long-term liabilities

5,548

6,729

Total liabilities

37,212

37,545

Stockholders' equity:

Common stock

8

8

Treasury stock

(441

)

(441

)

Additional paid-in capital

220,357

210,650

Accumulated deficit

(33,853

)

(23,398

)

Accumulated other comprehensive income

204

108

Total stockholders' equity

186,275

186,927

Total liabilities and stockholders' equity

$

223,487

$

224,472

ServiceSource International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2013

2012

Cash flows from operating activities

Net loss

$

(10,455

)

$

(1,276

)

Adjustments to reconcile net loss to net cash

provided by (used in) operating activities:

Depreciation and amortization

3,206

2,268

Loss on disposal of fixed assets

29

28

Provision for doubtful accounts

(67

)

-

Amortization of deferred financing costs

12

27

Accretion on premium on short-term investments

174

154

Deferred income taxes

461

(873

)

Stock-based compensation

5,921

4,247

Income tax charge from stock-based compensation

181

362

Changes in operating assets and liabilities:

Accounts receivable

5,863

(5,084

)

Prepaid expenses and other

415

(2,407

)

Accounts payable

2,077

(1,257

)

Accrued taxes

(779

)

490

Accrued compensation and benefits

(890

)

(6,783

)

Other accrued liabilities

(268

)

3,780

Net cash provided by (used in) operating activities

5,880

(6,324

)

Cash flows used in investing activities

Acquisition of property and equipment

(1,232

)

(6,631

)

Purchases of short-term investments

(18,034

)

(8,390

)

Sales of short-term investments

508

1,430

Maturities of short-term investments

500

4,890

Net cash used in investing activities

(18,258

)

(8,701

)

Cash flows from financing activities

Repayments of capital leases

(80

)

(80

)

Proceeds from common stock issuances

3,741

5,821

Income tax charge from stock-based compensation

(181

)

(362

)

Net cash provided by financing activities

3,480

5,379

Net decrease in cash and cash equivalents

(8,898

)

(9,646

)

Effect of exchange rate changes on cash and cash equivalents

277

(232

)

Cash and cash equivalents at beginning of period

76,568

65,983

Cash and cash equivalents at end of period

$

67,947

$

56,105

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. 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 Loss to Adjusted EBITDA

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2013

2012

Net loss

$

(10,455

)

$

(1,276

)

Income tax provision (benefit)

693

(1,950

)

Other expense, net

107

91

Depreciation

3,206

2,268

EBITDA

(6,449

)

(867

)

Stock-based compensation

5,921

4,247

Adjusted EBITDA

$

(528

)

$

3,380