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SuccessFactors Announces 52 Percent Revenue Growth In First Quarter Fiscal 2011
Apr 26, 2011 (05:04 PM EDT)


-- Q1 FY11 Non-GAAP revenue grows to a record $68.0 million, up 52 percent year-over-year.

-- Q1 FY11 billings grows to $62.7 million, up 31 percent year-over-year.

-- Raises Fiscal 2011 revenue guidance.

-- Announces definitive agreement to acquire Plateau Systems Ltd., a leading learning management system (LMS), a Next Generation Portal technology, and CaaS - Content as a Service. Adds core LMS functionality to the existing social learning capabilities from recently acquired Jambok, and significantly enhances the SuccessFactors Business Execution (BizX) software suite.

SAN MATEO, Calif., April 26, 2011 /PRNewswire/ -- SuccessFactors, Inc. (NASDAQ: SFSF) today announced results for its first quarter fiscal 2011 which ended March 31, 2011.  

(Logo:  http://photos.prnewswire.com/prnh/20090602/SF26086LOGO)

"Despite very strong compares, SuccessFactors delivered strong growth in Q1, while hiring aggressively for future growth and customer investment," said Lars Dalgaard, founder and CEO of SuccessFactors.  "SuccessFactors leads the very large market that we created in BizX cloud-computing.  We continue to win market share while simultaneously expanding our total available market through new innovations and acquisitions. By acquiring Plateau Systems Ltd., which was eagerly requested by our sales reps and many customers, we will add learning to SuccessFactors' scalable and secure platform and further expand our total available market. Plateau Systems Ltd. brings us a spectacular group of enterprise customers with one of the highest renewal rates in the industry at approximately 99%. By combining Plateau's products with our Jambok social mobile video learning acquisition, we will be able to provide customers a truly unique offering, further solidifying SuccessFactors' position as an innovator."  

Results for the First Quarter Fiscal 2011:

  • Q1 FY11 Non-GAAP Revenue: For the quarter ended March 31, 2011, non-GAAP revenue was $68.0 million, compared to the company's prior guidance of $62.5 million to $63.5 million, and compared to $44.7 million in the quarter ended March 31, 2010, an increase of approximately 52 percent year-over-year and an increase of 10 percent sequentially from Q410.
  • Q1 FY11 Non-GAAP Operating Income: For the quarter ended March 31, 2011, the Company recognized non-GAAP operating income of $0.5 million and GAAP operating income  from operations of $0.8 million.  The non-GAAP operating income excludes $11.0 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs and a gain of approximately $11.7 million revaluation of contingent consideration for the quarter ended March 31, 2011.
  • Q1 FY11 Total Deferred Revenue: Total deferred revenue as of March 31, 2011 was $229.6 million, compared to $234.4 million at December 31, 2010 and up approximately 24 percent year-over-year from $184.9 million at March 31, 2010.  
  • Q1 FY11 Cash Flow Generated from Operations: For the quarter ended March 31, 2011, cash flow generated from operating activities was $10.4 million, compared to $13.1 million in the quarter ended March 31, 2010.
  • Q1 FY11 Net Income per Common Share: For the quarter ended March 31, 2011, on a GAAP basis, net income per common share basic and diluted were $0.04 and $0.03, respectively.  On a non-GAAP basis, net income per common share, basic and diluted, was $0.01.  Non-GAAP net income per common share, both basic and diluted, excludes $11.0 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, approximately $11.7 million revaluation gain of contingent consideration related to business combinations, $0.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and approximately $1.2 million tax benefit related to Jambok.  This compares to non-GAAP net income per common share of $0.00 in the fourth quarter of 2010 which excluded approximately $9.1 million of stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, a $4.8 million revaluation gain of contingent consideration related to business combinations and $1.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and non-GAAP net income per common share of $0.02 in the first quarter of 2010 which excluded approximately $5.0 million of stock-based compensation.  For the first quarter of 2011, GAAP net income per common share calculation assumed a weighted average share count of approximately 77.5 million for basic and 83.0 million for diluted.  For the fourth quarter of 2010, GAAP net loss per common share calculation assumed a weighted average share count of approximately 76.4 million.  For the first quarter of 2010, GAAP net loss per common share calculation assumed average weighted share count of approximately 72.0 million.

Plateau Systems Ltd. Acquisition:

Today, SuccessFactors announced it has entered into a definitive agreement to acquire Plateau Systems Ltd. the leading learning management system (LMS), a Next Generation Portal technology, and CaaS- Content as a Service. This acquisition forms a symbiotic combination with SuccessFactors' acquisition of social video mobile learning provider Jambok.

Customers will now have the ability to further increase employee development and business execution by implementing a comprehensive social and traditional learning strategy that includes evangelizing internal experts, utilizing easy-to-use video creation and sharing tools, as well as managing, developing, and deploying online, instructor-led, and self-study training.  

Under the terms of the acquisition agreement, SuccessFactors will pay $145 million in cash plus $145 million in stock, of which $15 million is for employee stock options and RSUs, for Plateau Systems Ltd.. The acquisition is subject to various closing conditions, including filings under the Hart-Scott-Rodino Antitrust Improvements Act and the issuance of a permit from the California Department of Corporations, and is currently expected to close during summer 2011.

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

Guidance:

SuccessFactors is initiating guidance for its second quarter fiscal 2011 and updating its outlook for the full fiscal year 2011, as of April 26, 2011.  

  • Q2 FY11:  Non-GAAP revenue for the company's second fiscal quarter is projected to be in the range of approximately $69.0 million to $70.0 million.  Note that 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 breakeven. This guidance does not take into account the proposed acquisition of Plateau Systems Ltd.  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 78.6 million shares and 85.4 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 $275 million to $280 million, which is an increase of approximately 30 percent when compared to fiscal 2010.  The company expects non-GAAP net income per common share for fiscal 2011 to be approximately breakeven.  This guidance does not take into account the proposed acquisition of Plateau Systems Ltd.  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 79.3 million shares and 85.7 million shares, respectively.

Q1 FY11 Financial Results Conference Call:

SuccessFactors will host a conference call today at 2:00 p.m. (PT) / 5:00 p.m. (ET) to discuss the first quarter and fiscal 2011 financial results with the investment community.  A live web broadcast 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 (973) 200-3188 internationally.  A domestic replay will be available at (800) 642-1687 or (706) 645-9291 internationally, passcode 58088990, and available via webcast replay until May 6th, 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 and any 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. 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, Inc.

SuccessFactors is the leading provider of cloud-based Business Execution (BizX) software solutions to organizations of all sizes, with more than 8 million users across multiple industries and geographies. We strive to delight our customers by delivering innovative solutions, a broad range of content, process expertise and best practices knowledge gained from serving our large and varied customer base. Today, we have more than 3,200 customers in more than 168 countries using our application suite in 34 languages. 

Execution Is The Difference™

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

Join us for SuccessConnect in San Francisco, May 11-12, Amsterdam, May 19-20 and Sydney, 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 growth prospects, financial results and benefits of acquisitions.  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; 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, unforeseen liabilities and managing geographically-dispersed operations; 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; and the impact of unforeseen expenses, including as a result of integrating acquisitions..  If any such risks or uncertainties materialize or if any of the assumptions prove 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 other filings we make with the Securities and Exchange Commission from time to time.

CONTACT:
Investors
Karen Moran
SuccessFactors, Inc.
Investor Relations
650-645-4439
kmoran@successfactors.com

Media
Andrea Meyer
SuccessFactors, Inc.
Public Relations
415-370-7329
ameyer@successfactors.com

SuccessFactors, Inc.

Condensed Consolidated Statement of Operations

(unaudited, in thousands)








Three Months Ended



March 31,



2011


2010





With Adoption





of ASU 2009-13

Revenue





Subscription and support


$ 51,192


$            36,480

Professional services and other


16,406


8,255

Total revenue


67,598


44,735

Cost of revenue (1)





Subscription and support


9,435


5,145

Professional services and other


10,635


5,444

Total cost of revenue


20,070


10,589

Total gross profit


47,528


34,146






Operating expenses: (1)





Sales and marketing


30,971


22,242

Research and development


13,766


7,725

General and administrative


13,660


7,494

Revaluation of contingent consideration


(11,659)


-

Total operating expenses


46,738


37,461






Income (loss) from operations


790


(3,315)






Unrealized foreign exchange gain on intercompany loan


536


-

Interest income (expense) and other, net


784


(268)

Income (loss) before provision for income taxes


2,110


(3,583)






Benefit for (provision of) income taxes


609


(127)

Net income (loss)


$   2,719


$            (3,710)






Basic net income (loss) per common share


$     0.04


$              (0.05)

Diluted net income (loss) per common share


$     0.03


$              (0.05)






Shares used in per common share calculation:





Basic *


77,542


72,008

Diluted


82,982


72,008


_____________


(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



March 31,



2011


2010

Cost of revenue


$   2,363


$                 603

Sales and marketing


3,228


1,955

Research and development


1,427


875

General and administrative


4,020


1,593



$ 11,038


$              5,026


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



SuccessFactors, Inc.

Condensed Consolidated Balance Sheets

(in thousands)











As of March 31,


As of December 31,



2011


2010



(unaudited)


(1)

Assets:





Current assets:





Cash and cash equivalents


$           158,232


$                      75,384

Marketable securities


209,259


281,073

Accounts receivable, net of allowance for doubtful accounts


62,661


80,440

Deferred commissions


7,677


7,106

Prepaid expenses and other current assets


10,727


8,022

Total current assets


448,556


452,025

Restricted cash


918


913

Property and equipment, net


9,353


8,737

Deferred commissions, less current portion


10,604


12,854

Goodwill


67,391


64,077

Intangible assets


39,863


37,832

Other assets


936


975

Total assets


$           577,621


$                    577,413






Liabilities and stockholders' equity:





Current liabilities:





Accounts payable


$               5,540


$                        7,254

Accrued expenses and other current liabilities


15,471


11,433

Accrued employee compensation


18,829


23,467

Deferred revenue


217,335


219,868

Acquisition-related contingent consideration


2,222


5,200

Total current liabilities


259,397


267,222






Deferred revenue, less current portion


12,236


14,577

Long-term income taxes payable


2,056


1,987

Acquisition-related contingent consideration, less current portion


12,435


21,050

Other long-term liabilities


2,350


1,248

Total liabilities


288,474


306,084






Stockholders’ equity:





Common stock


79


77

Additional paid-in capital


513,536


499,343

Accumulated other comprehensive income


4,162


3,258

Accumulated deficit


(228,630)


(231,349)

Total stockholders’ equity


289,147


271,329






Total liabilities and stockholders’ equity


$           577,621


$                    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 Statements of Cash Flows  

(unaudited, in thousands)








Three Months Ended



March 31,



2011


2010





With Adoption





of ASU 2009-13

Cash flow from operating activities:





Net income (loss)


$     2,719


$            (3,710)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:





Depreciation and amortization


1,741


1,273

Amortization of deferred commissions


4,164


2,100

Stock-based compensation expense


7,648


5,026

Amortization of intangible assets


1,645


-

Gain on revaluation of contingent consideration


(11,659)


-

Unrealized foreign exchange gain on intercompany loan


(536)


-

Changes in assets and liabilities:





Accounts receivable


17,803


15,149

Deferred commissions


(2,485)


(1,892)

Prepaid expenses and other current assets


(2,691)


(1,508)

Other assets


39


(396)

Accounts payable


(1,714)


(335)

Accrued expenses and other current liabilities


3,230


244

Accrued employee compensation


(4,638)


(6,024)

Long-term income taxes payable


69


(35)

Other liabilities


(49)


(87)

Deferred revenue


(4,874)


3,326

Net cash provided by operating activities


10,412


13,131






Cash flow from investing activities:





Restricted cash


(5)


3

Capital expenditures


(1,867)


(632)

Proceeds from sale of assets


-


1

Acquisitions, net of cash acquired


(2,823)


-

Purchases of available-for-sale securities


(28,643)


(34,459)

Proceeds from maturities of available-for-sale securities


69,507


26,100

Proceeds from sales of available-for-sale securities


30,423


20,000

Net cash provided by investing activities


66,592


11,013






Cash flow from financing activities:





Proceeds from exercise of stock options, net


5,362


1,936

Principal payments on capital lease obligations


-


10

Net cash provided by financing activities


5,362


1,946






Effect of exchange rate changes on cash and cash equivalents


482


(104)

Net increase in cash and cash equivalents


82,848


25,986

Cash and cash equivalents at beginning of period


75,384


76,618

Cash and cash equivalents at end of period


$ 158,232


$          102,604




SuccessFactors, Inc.


Reconciliation of GAAP to Non-GAAP Measures


(unaudited, in thousands, except per share data)










Three Months Ended




March 31,




2011


2010







Non-GAAP Revenue






Revenue


$   67,598


$   44,735


(a) Net impact of acquisition related deferred revenue before fair value adjustment


352


-


Non-GAAP Revenue


$   67,950


$   44,735













Billings reconciliation:






GAAP Revenue


$   67,598


$   44,735








Ending total deferred revenue


229,571


184,950


Less:  Beginning total deferred revenue


234,445


181,624


Change in total deferred revenue


(4,874)


3,326








Billings (revenue plus change in total deferred revenue)


$   62,724


$   48,061







Billings (loss) profit and margin reconciliation:






Billings revenue


$   62,724


$   48,061


Non-GAAP total cost of revenue and operating expenses (total spend)


67,429


43,024


Billings (loss) profit


$   (4,705)


$     5,037


Billings margin


-8%


10%







Net income (loss) and net income (loss) per share reconciliations:






GAAP net income (loss)


$     2,719


$   (3,710)


(a) Net impact of acquisition related deferred revenue before fair value adjustment


352


-


(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs

11,038


5,026


(c) Revaluation of contingent consideration


(11,659)


-


(d) Foreign exchange unrealized gain on intercompany acquisition loan related to Inform


(536)


-


(e) Tax benefit related to Jambok


(1,151)


-


Non-GAAP net income excluding stock-based compensation expense and other items


$        763


$     1,316








GAAP net income (loss) per common share - basic


$       0.04


$     (0.05)


GAAP net income (loss) per common share - diluted


$       0.03


$     (0.05)


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


$       0.01


$       0.02


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


$       0.01


$       0.02








GAAP shares used in computing net loss per common share, basic


77,542


72,008


GAAP shares used in computing net loss per common share, diluted


82,982


72,008







Total spend reconciliation:






GAAP total cost of revenue and operating expenses


$   66,808


$   48,050


(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs

11,038


5,026


(c) Revaluation of contingent consideration


(11,659)


-


Non-GAAP total cost of revenue and operating expenses (total spend)


$   67,429


$   43,024







Gross profit and gross margin reconciliations:






GAAP gross profit


$   47,528


$   34,146


(a) Net impact of acquisition related deferred revenue before fair value adjustment


352


-


(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs

2,363


603


Non-GAAP gross profit


$   50,243


$   34,749








GAAP gross margin percentage


70%


76%


Non-GAAP gross margin percentage


74%


78%







Cost of revenue reconciliation:






GAAP cost of revenue


$   20,070


$   10,589


(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs

2,363


603


Non-GAAP cost of revenue


$   17,707


$     9,986







Total operating expenses reconciliation:






GAAP operating expenses


$   46,738


$   37,461


(b2) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs

8,675


4,423


(c) Revaluation of contingent consideration


(11,659)


-


Non-GAAP operating expenses


$   49,722


$   33,038







Total sales and marketing reconciliation:






GAAP sales and marketing


$   30,971


$   22,242


(b3) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs

3,228


1,955


Non-GAAP sales and marketing


$   27,743


$   20,287







Total research and development reconciliation:






GAAP research and development


$   13,766


$     7,725


(b4) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs

1,427


875


Non-GAAP research and development


$   12,339


$     6,850







Total general and administrative reconciliation:






GAAP general and administrative expenses


$   13,660


$     7,494


(b5) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs

4,020


1,593


Non-GAAP general and administrative


$     9,640


$     5,901







Operating margin reconciliation:






GAAP income (loss) from operations


$        790


$   (3,315)


(a) Net impact of acquisition related deferred revenue before fair value adjustment


352


-


(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs

11,038


5,026


(c) Revaluation of contingent consideration


(11,659)


-


Non-GAAP income from operations less stock-based compensation and other items


$        521


$     1,711








Non-GAAP Revenue


$   67,950


$   44,735


Non-GAAP operating margin percentage


1%


4%







Free cash flow reconciliation:






Net cash provided by operating activities


$   10,412


$   13,131


Less: Capital expenditures


(1,867)


(632)


Free cash flow


$     8,545


$   12,499



SOURCE SuccessFactors, Inc.