SOURCE: Salary.com

Salary.com

November 05, 2009 16:05 ET

Salary.com™ Announces Second Quarter 2010 Financial Results

Reports 34th Consecutive Quarter of Revenue Growth; Achieves Positive Operating Cash Flow for Second Quarter in a Row

NEEDHAM, MA--(Marketwire - November 5, 2009) - Salary.com, Inc. (NASDAQ: SLRY), a leading provider of on-demand talent management, payroll, and compensation solutions, today announced financial results for its second quarter of fiscal 2010, which ended September 30, 2009.

Revenue in the second quarter of 2010 was $11.6 million, an increase of 10% over the second quarter of fiscal 2009. Bookings were $12.2 million, an increase of 9% over the second quarter of fiscal 2009. Non-GAAP operating cash flow, which excludes cash payments for severance, was positive with a cash inflow of $0.5 million in the second quarter of 2010. GAAP operating cash flow was an inflow of $0.4 million in the second quarter of 2010.

Kent Plunkett, founder and chief executive officer, stated, "We are pleased to have completed our 34th consecutive quarter of revenue growth and achieved positive operating cash flow from operations for the second quarter in a row. Our broad strategy of offering an array of integrated, best-in-breed human capital management tools and data again contributed to larger overall transaction sizes in the second quarter, with 14 transactions over $100,000 in the quarter and six of those larger than $250,000. We believe Salary.com's strong execution is reflected in continued bookings and cash flow growth as we continue to gain momentum as a human capital management leader."

Second Quarter 2010 Financial Summary

--  Second quarter revenue was $11.6 million, an increase of 10% over the
    second quarter of fiscal 2009.
    
--  On a GAAP basis, for the second quarter of fiscal 2010, Salary.com
    reported a net loss of $4.7 million, or ($0.29) per diluted share, compared
    to a net loss of $6.3 million, or ($0.39) per diluted share, in the second
    quarter of fiscal 2009.
    
--  On a non-GAAP basis, excluding stock-based compensation, amortization
    of intangibles and restructuring expenses, Salary.com reported a net loss
    of $1.9 million, or ($0.12) per diluted share, for the second quarter of
    fiscal 2010, compared to a net loss of $3.0 million, or ($0.18) per diluted
    share, in the second quarter of fiscal 2009.
    
--  Cash and cash equivalents as of September 30, 2009 were $16.1 million,
    compared to $17.0 million as of June 30, 2009.
    
--  Current deferred revenue was $27.3 million as of September 30, 2009,
    compared to $27.4 million as of June 30, 2009.  Total deferred revenue grew
    to $29.9 million as of September 30, 2009, from $29.3 million as of June
    30, 2009.
    
--  Excluding non-recurring cash payments for severance, non-GAAP cash
    flow from operations was a net inflow of $0.5 million in the second quarter
    of fiscal 2010. Including the non-recurring payments for severance, GAAP
    cash flow from operations was a net inflow of $0.4 million, a $1.4 million
    improvement compared to the same period a year ago.
    

Additional Second Quarter Business Highlights

--  During the second quarter, Salary.com added approximately 100
    customers, and ended the quarter with approximately 3,600 enterprise
    customers.
    
--  New customer additions in the second quarter of fiscal 2010 included:
    Boston Medical Center, Caraco Pharmaceutical Laboratories, Ltd., Casio
    America, Inc., The Cooper Health System, Emergint Technologies Inc., and
    Washington Mills Management, Inc.
    
--  During the second quarter, Salary.com held user conferences in Boston,
    Chicago, New York, San Francisco, and Singapore, with over 500 customers
    attending.  The user groups offered four separate tracks for different
    human resources disciplines and featured industry experts from Gartner,
    IDC, and Bersin & Associates as speakers.
    
--  At the HR Technology® Conference in October, Salary.com won the
    Talent Management Shootout in a vote by hundreds of human resources
    professionals.  TalentManager won the contest against three competitors
    after a demonstration of its easy-to-learn and easy-to-use features and the
    seamless integration of TalentManager's data-driven content with
    Salary.com's performance, competency, goal management, compensation
    planning, succession planning, career planning, and employee development
    software and data solutions. Bersin and Associates published the reasons
    they believe Salary.com won the Shootout in a blog post available at
    http://www.bersin.com/Blog/post/Why-Salarycom-Won-the-2009-HR-Technology-Shootout.aspx.
    
--  During the second quarter, Salary.com repurchased approximately
    179,000 shares at an average purchase price of $3.01 per share.  To date,
    the Company has repurchased approximately 1.3 million shares at an average
    price of $2.03 per share.
    

Bryce Chicoyne, Salary.com's chief financial officer said, "Our effective execution in the second quarter resulted in an increase in bookings, revenue, and operating cash flow on both a year-over-year and sequential basis, and I am proud of that accomplishment. We remain committed to long-term revenue growth and cash flow generation and are managing the company with that in mind. Larger deal trends and a continued strong customer retention rate are fueling our optimism for long-term growth."

Business Outlook

For the third quarter of fiscal 2010, Salary.com expects total revenue in the range of $11.4 million to $11.9 million. Non-GAAP net loss is expected to be in the range of $1.7 million to $2.2 million. Non-GAAP net loss excludes non-cash stock-based compensation expenses in the range of $1.7 million to $2.0 million, amortization of intangibles in the range of $1.2 million to $1.3 million, and restructuring charges of approximately $100,000. GAAP net loss for the third quarter of fiscal 2010 is expected to be in the range of $4.7 million to $5.8 million. Weighted average diluted shares for the quarter are estimated to be approximately 16.2 million shares.

For the full year fiscal 2010, we expect revenue to be in the range of $46.5 million to $50.5 million. Non-GAAP net loss is expected to be in the range of $4.8 million to $8.8 million. Non-GAAP net loss excludes non-cash impact of stock-based compensation in the range of $8.0million to $10.0 million, amortization of intangibles in the range of $4.8 million to $5.1 million, and restructuring charges of approximately $200,000. On a GAAP basis, net loss for fiscal 2010 is expected to be in the range of $19.3 million to $23.3 million. Non-GAAP cash flow from operations, which excludes $500,000 in severance, is expected to be in the range of $1.2 million to $2.2 million in fiscal 2010. Weighted average diluted shares for the year are estimated to be approximately 16.3 million shares.

Conference call

What:       Salary.com second quarter financial results and business
            overview conference call and webcast
When:       Thursday, November 5, 2009
Time:       5:00 PM ET
Live Call:  (877) 879-6201, domestic
            (719) 325-4891, international
Replay:     (888) 203-1112, conference ID 9646334, domestic
            (719) 457-0820, conference ID 9646334, international
Webcast:    http://investor.salary.com/events.cfm (live and replay)

NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures in the text of this press release and accompanying non-GAAP supplemental information represent financial measures used by Salary.com's management to evaluate the operating performance of the Company and to conduct its business operations. Non-GAAP financial measures discussed in the press release relate to the Company's net income and operating expenses and exclude amortization of intangible assets, stock-based compensation, and restructuring charges. This press release also discusses operating cash flows excluding non-recurring severance costs as well. By excluding these items and by providing information on the Company's bookings in addition to its GAAP revenues, Salary.com can evaluate its operations and can compare its results on a more consistent basis to the results of other companies in the industry. Management uses the non-GAAP financial measures for planning purposes, including the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company's financial and operational performance and in assisting investors in comparing the Company's financial performance to those of other companies in the Company's industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures are not intended to be an alternative to financial measures prepared in accordance with GAAP and should not be considered in isolation from our GAAP results of operations. Pursuant to the requirements of the SEC rules under Regulation G, a detailed reconciliation between the Company's GAAP and non-GAAP financial results is provided in this press release and investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company's SEC filings.

About Salary.com, Inc.

Salary.com™ is a leading provider of on-demand talent management, payroll, and compensation solutions helping businesses and individuals manage pay and performance. Salary.com's highly configurable software applications, proprietary data and consulting services help HR and compensation professionals automate, streamline and optimize critical talent management processes including: payroll, benefits, HR administration, market pricing, compensation planning, performance management, competency management, learning and development, and succession planning. Built with compensation and competency data at the core, Salary.com solutions provide businesses of all sizes with the most productive and cost-effective way to manage and inspire their most important asset -- their people. For more information, visit www.salary.com.

SLRY-F

Safe Harbor Statement

This 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 are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "may," "will," "expects," "projects," "anticipates," "estimates," "believes," "intends," "plans," "should," "seeks," and similar expressions. This press release contains forward-looking statements relating to, among other things, Salary.com's expectations and assumptions concerning future performance and growth, including expectations of financial performance in the third quarter of 2010 and the full fiscal year 2010. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. The risks and uncertainties referred to above include, but are not limited to, the impact of a global economic recession and uncertainty in the information technology spending environment, risks associated with possible fluctuations in our operating results and rate of growth, integration and performance of acquired businesses, our history of operating losses, the possibility that we will not achieve GAAP profitability or our expectations for Non-GAAP net loss, our ability maintain and expand our customer base and product and service offerings, interruptions or delays in our service or our Web hosting, our business model, our ability to continue to obtain compensation data, breach of our security measures, the emerging market in which we operate, our ability to hire, retain and motivate our employees and manage our growth, our ability to generate additional revenues from our investments in sales and marketing, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, successful customer deployment and utilization of our services, our ability to effectively protect our intellectual property and not infringe on the intellectual property of others, fluctuations in the number of shares outstanding and general economic factors, as well as those risks and uncertainties described in Salary.com's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended March 31, 2009 and Form 10-Q for the quarter ended June 30, 2009. Salary.com expressly disclaims any obligation to update any forward-looking statements. The information and opinions contained in the third-party website links referred to in this press release do not reflect the views of Salary.com. Salary.com has not verified, prepared, or adopted any such information or opinions.

Exhibit 1

                             Salary.com, Inc.
                  Condensed Consolidated Balance Sheets
                        (in thousands, unaudited)



                                                  September 30,  March 31,
ASSETS                                                2009         2009
                                                  ------------ ------------
Current assets:
 Cash and cash equivalents                        $     16,080 $     21,085
 Accounts receivable, net of allowance for
  doubtful accounts                                      6,626        6,040
 Prepaid expenses and other current assets               1,599        1,558
                                                  ------------ ------------
Total current assets before funds held for
 clients                                                24,305       28,683
 Funds held for clients                                  9,401       12,964
                                                  ------------ ------------
    Total current assets                                33,706       41,647
                                                  ------------ ------------

Property, equipment and software, net                    2,515        3,025
Goodwill and intangible assets, net                     33,292       32,350
Other assets                                             1,383        1,679
                                                  ------------ ------------
    Total assets                                  $     70,896 $     78,701
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued compensation        $      3,904 $      2,342
 Accrued expenses and other current liabilities          6,082        3,300
 Long term debt                                          6,025        8,125
 Deferred revenue, current portion                      27,280       26,556
                                                  ------------ ------------
Total current liabilities before client funds
 obligations                                            43,291       40,323
 Client funds obligations                                9,401       12,964
                                                  ------------ ------------
    Total current liabilities                           52,692       53,287
                                                  ------------ ------------

 Deferred revenue, net of current portion                2,585        1,729
 Long term liabilities                                   1,768        1,742
                                                  ------------ ------------
    Total liabilities                                   57,045       56,758
                                                  ------------ ------------

Total stockholders' equity
  Total stockholders' equity                            13,851       21,943
                                                  ------------ ------------
    Total liabilities and stockholders' equity    $     70,896 $     78,701
                                                  ============ ============



Exhibit 2


                             Salary.com, Inc.
                  Consolidated Statements of Operations
                        (in thousands, unaudited)


                                 Three Months Ended     Six Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenues:
 Subscription revenues          $  10,750  $   9,858  $  21,194  $  18,848
 Advertising revenues                 895        688      1,808      1,313
                                ---------  ---------  ---------  ---------
Total revenues                     11,645     10,546     23,002     20,161

 Cost of revenues (1)               3,746      3,131      7,379      6,372
                                ---------  ---------  ---------  ---------
Gross profit                        7,899      7,415     15,623     13,789
                                ---------  ---------  ---------  ---------

Operating expenses:
 Research and development (1)       2,438      2,296      4,701      4,105
 Sales and marketing (1)            5,559      7,153     11,275     13,643
 General and administrative (1)     3,735      3,941      7,770      7,937
 Amortization of intangible
  assets                              756        444      1,494        823
                                ---------  ---------  ---------  ---------
Total operating expenses           12,488     13,834     25,240     26,508
                                ---------  ---------  ---------  ---------
Loss from operations               (4,589)    (6,419)    (9,617)   (12,719)
                                ---------  ---------  ---------  ---------

Other income:
 Interest income                        4        206         11        457
 Other income (expense)               (56)       (30)      (157)       (57)
                                ---------  ---------  ---------  ---------
Total other income                    (52)       176       (146)       400
                                ---------  ---------  ---------  ---------
Loss before provision for
 income taxes                      (4,641)    (6,243)    (9,763)   (12,319)
Provision for income taxes             20         56         46        143
                                ---------  ---------  ---------  ---------
Net loss                        $  (4,661) $  (6,299) $  (9,809) $ (12,462)
                                =========  =========  =========  =========

Net loss per share - basic and
 diluted                        $   (0.29) $   (0.39) $   (0.61) $   (0.78)
                                =========  =========  =========  =========

Weighted average shares
 outstanding - basic and
 diluted                           16,165     16,247     16,212     16,041

(1)  Amounts include
 stock-based compensation
 expense, as follows:

                                 Three Months Ended     Six Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                     2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

 Cost of revenues               $     205  $     407  $     430  $     807
 Research and development             278        521        538        788
 Sales and marketing                  587        720      1,168      1,437
 General and administrative           426        829        845      1,433
                                ---------  ---------  ---------  ---------
                                $   1,496  $   2,477  $   2,981  $   4,465
                                =========  =========  =========  =========

Exhibit 3


                             Salary.com, Inc.
              Condensed Consolidated Statements of Cash Flows
                        (in thousands, unaudited)


                                 Three Months Ended     Six Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Cash flows from operating
 activities:
 Net loss                       $  (4,661) $  (6,299) $  (9,809) $ (12,462)
 Adjustments to reconcile net
  loss to net cash
  provided by (used in)
   operating activities:
   Depreciation and
    amortization                    1,634      1,166      3,253      2,183
   Stock-based compensation         1,496      2,478      2,981      4,465
   Other non-cash items               (79)       434        329        489
   Change in operating assets
    and liabilities                 2,028      1,249      3,752      2,257
                                ---------  ---------  ---------  ---------
       Net cash provided by
        (used in) operating
        activities                    418       (972)       506     (3,068)
                                ---------  ---------  ---------  ---------

Cash flows from investing
 activities:
 Cash paid for acquisition of
  business                            (46)    (5,387)       (46)    (5,637)
 Cash paid for intangible
  assets                             (342)        (2)      (384)       (32)
 Increase in restricted cash            -         (6)        (1)      (378)
 Purchases of property and
  equipment                           (81)      (221)      (145)      (548)
 Capitalization of software
  development costs                  (134)       (34)      (173)       (79)
 Proceeds on sale of property
  and equipment                         2          -          3          -
 Net increase in assets held to
  satisfy client funds
  obligations                      (7,056)         -      3,563          -
                                ---------  ---------  ---------  ---------
       Net cash used in
        investing activities       (7,657)    (5,650)     2,817     (6,674)
                                ---------  ---------  ---------  ---------

Cash flows from financing
 activities:
 Net proceeds from exercise
  (buyback) of common stock
  options and warrants               (674)        (5)    (2,346)        95
  Net proceeds from line of
   credit and notes payable           (55)       (64)    (2,227)       (64)
  Net increase in client funds
   obligation                       7,056          -     (3,563)         -
                                ---------  ---------  ---------  ---------
       Net cash provided by
        (used in) financing
        activities                  6,327        (69)    (8,136)        31
                                ---------  ---------  ---------  ---------

Effect of exchange rate changes
 on cash and cash equivalents
                                      (26)         2       (192)         2
                                ---------  ---------  ---------  ---------
Decrease in cash and cash
 equivalents                         (938)    (6,689)    (5,005)    (9,709)

Cash and cash equivalents,
 beginning of period               17,018     34,707     21,085     37,727
                                ---------  ---------  ---------  ---------

Cash and cash equivalents, end
 of period                      $  16,080  $  28,018  $  16,080  $  28,018
                                =========  =========  =========  =========


Exhibit 4


                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                 Three Months Ended     Six Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Reconciliation of GAAP loss
 from operations to
 non-GAAP loss from operations:

 Loss from operations           $  (4,589) $  (6,419) $  (9,617) $ (12,719)
 Amortization of intangible
  assets                              756        444      1,494        823
 Amortization of intangible
  assets (included in cost of
  revenues)                           428        425        842        822
 Restructuring charges                118          -        118          -
 Stock-based compensation           1,496      2,477      2,981      4,465
                                ---------  ---------  ---------  ---------
Non-GAAP loss from operations   $  (1,791) $  (3,073) $  (4,182) $  (6,609)
                                =========  =========  =========  =========

Reconciliation of GAAP net loss
 to non-GAAP
 net loss:

 GAAP net loss                  $  (4,661) $  (6,299) $  (9,809) $ (12,462)
 Amortization of intangible
  assets                              756        444      1,494        823
 Amortization of intangible
  assets (included in cost of
  revenues)                           428        425        842        822
 Restructuring charges                118          -        118          -
 Stock-based compensation           1,496      2,477      2,981      4,465
                                ---------  ---------  ---------  ---------
 Non-GAAP net loss              $  (1,863) $  (2,953) $  (4,374) $  (6,352)
                                =========  =========  =========  =========

Non-GAAP net loss per share     $   (0.12) $   (0.18) $   (0.27) $   (0.40)
                                =========  =========  =========  =========

Weighted average shares
 outstanding - basic and
 diluted                           16,165     16,247     16,212     16,041



Exhibit 5


                                SALARY.COM
      Reconciliation of Certain GAAP to Non-GAAP Financial Measures
                        (In thousands, unaudited)


                             Three months ended September 30, 2009
                     ------------------------------------------------------
                              Amortization  Stock-
                                   of       based     Restruct-
                      US GAAP  Intangible Compensation  uring    Non-GAAP
                      Results    Assets     Expense    Charges    Results
                     ---------- ---------  ---------  ---------  ----------

Cost of revenues     $    3,746 $    (428) $    (205) $       -  $    3,113

Research and
 development
 expenses                 2,438         -       (278)         -       2,160
Sales and marketing
 expenses                 5,559         -       (587)         -       4,972
General and
 administrative
 expenses                 3,735         -       (426)      (118)      3,191
Amortization of
 intangible assets          756      (756)         -          -           -
                     ---------- ---------  ---------  ---------  ----------
   Total operating
    expenses         $   12,488 $    (756) $  (1,291) $    (118) $   10,323
                     ========== =========  =========  =========  ==========

                              Three months ended September 30, 2008
                     ------------------------------------------------------
                              Amortization  Stock-
                                   of       based     Restruct-
                      US GAAP  Intangible Compensation  uring    Non-GAAP
                      Results    Assets     Expense    Charges    Results
                     ---------- ---------  ---------  ---------  ----------

Cost of revenues     $    3,131 $    (425) $    (407) $       -  $    2,299

Research and
 development
 expenses                 2,296         -       (521)         -       1,775
Sales and marketing
 expenses                 7,153         -       (720)         -       6,433
General and
 administrative
 expenses                 3,941         -       (829)         -       3,112
Amortization of
 intangible assets          444      (444)         -          -           -
                     ---------- ---------  ---------  ---------  ----------
   Total operating
    expenses         $   13,834 $    (444) $  (2,070) $       -  $   11,320
                     ========== =========  =========  =========  ==========

                               Six months ended September 30, 2009
                     ------------------------------------------------------
                              Amortization  Stock-
                                   of       based     Restruct-
                      US GAAP  Intangible Compensation  uring    Non-GAAP
                      Results    Assets     Expense    Charges    Results
                     ---------- ---------  ---------  ---------  ----------

Cost of revenues     $    7,379 $    (842) $    (430) $       -  $    6,107

Research and
 development
 expenses                 4,701         -       (538)         -       4,163
Sales and marketing
 expenses                11,275         -     (1,168)         -      10,107
General and
 administrative
 expenses                 7,770         -       (845)      (118)      6,807
Amortization of
 intangible assets        1,494    (1,494)         -          -           -
                     ---------- ---------  ---------  ---------  ----------
   Total operating
    expenses         $   25,240 $  (1,494) $  (2,551) $    (118) $   21,077
                     ========== =========  =========  =========  ==========

                               Six months ended September 30, 2008
                     ------------------------------------------------------
                              Amortization  Stock-
                                   of       based     Restruct-
                      US GAAP  Intangible Compensation  uring    Non-GAAP
                      Results    Assets     Expense    Charges    Results
                     ---------- ---------  ---------  ---------  ----------

Cost of revenues     $    6,372 $    (822) $    (807) $       -  $    4,743

Research and
 development
 expenses                 4,105         -       (788)         -       3,317
Sales and marketing
 expenses                13,643         -     (1,437)         -      12,206
General and
 administrative
 expenses                 7,937         -     (1,433)         -       6,504
Amortization of
 intangible assets          823      (823)         -          -           -
                     ---------- ---------  ---------  ---------  ----------
   Total operating
    expenses         $   26,508 $    (823) $  (3,658) $       -  $   22,027
                     ========== =========  =========  =========  ==========



Exhibit 6

                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                                       Three Months Ended
                                                          September 30,
                                                      ---------------------
                                                        2009       2008
                                                      ---------- ----------
Calculated bookings:

 Revenue                                              $   11,645 $   10,546
 Change in deferred revenue                                  569        685
                                                      ---------- ----------
   Calculated bookings                                $   12,214 $   11,231
                                                      ========== ==========



Exhibit 7

                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                                Three Months   Six Months
                                                    Ended         Ended
                                                September 30, September 30,
                                                ------------- -------------
                                                    2009          2009
                                                ------------- -------------

 Net cash provided by operating activities      $         418 $         506
 Payments of severance related payments                   112           399
                                                ------------- -------------
 Non-GAAP cash provided by operating activities $         530 $         905
                                                ============= =============