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$57,574
Cost of revenue (1) 38,498  32,576 
Gross profit 22,623  24,998 
Operating expenses
Sales and marketing (1)14,80813,477
Research and development (1)6,2484,581
General and administrative (1) 11,222  10,075 
Total operating expenses 32,278  28,133 
Loss from operations(9,655)(3,135)
Other expense, net (107) (91)
Loss before income taxes(9,762)(3,226)
Income tax provision (benefit) 693  (1,950)
Net loss$(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 marketing2,5341,674
Research and development486363
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 investments49,75532,874
Accounts receivable, net59,03965,238
Current portion of deferred income taxes177389
Prepaid expenses and other 5,089  5,178 
Total current assets182,007180,247
Property and equipment, net32,34234,513
Deferred income taxes, net of current portion2,0692,321
Other assets, net7351,057
Goodwill 6,334  6,334 
Total assets$223,487 $224,472 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable5,319$3,293
Accrued taxes2691,056
Accrued compensation and benefits14,67715,738
Other accrued liabilities11,07410,403
Current portion of capital lease obligations 325  326 
Total current liabilities31,66430,816
Long-term liabilities 5,548  6,729 
Total liabilities 37,212  37,545 
Stockholders' equity:
Common stock88
Treasury stock(441)(441)
Additional paid-in capital220,357210,650
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 amortization3,2062,268
Loss on disposal of fixed assets2928
Provision for doubtful accounts(67)-
Amortization of deferred financing costs1227
Accretion on premium on short-term investments174154
Deferred income taxes461(873)
Stock-based compensation5,9214,247
Income tax charge from stock-based compensation181362
Changes in operating assets and liabilities:
Accounts receivable5,863(5,084)
Prepaid expenses and other415(2,407)
Accounts payable2,077(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 investments5081,430
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 issuances3,7415,821
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 equivalents277(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, net10791
Depreciation 3,206  2,268 
EBITDA(6,449)(867)
Stock-based compensation 5,921  4,247 
Adjusted EBITDA$(528)$3,380 
 
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