SOURCE: Salary.com

Salary.com

February 08, 2010 16:05 ET

Salary.com Announces Third Quarter 2010 Financial Results

Reports 35th Consecutive Quarter of Revenue Growth

NEEDHAM, MA--(Marketwire - February 8, 2010) - Salary.com, Inc. (NASDAQ: SLRY), a leading provider of on-demand talent management, payroll, and compensation solutions, today announced financial results for its third quarter of fiscal 2010, which ended December 31, 2009.

Revenue in the third quarter of fiscal 2010 was $11.9 million, an increase of 8% over the third quarter of fiscal 2009. Calculated bookings were $13.3 million, a decrease of 7% over the third quarter of fiscal 2009, and an increase of 9% from the second quarter of fiscal 2010. Non-GAAP operating cash flow, which excludes cash payments for severance, was an outflow of $416,000 in the third quarter of fiscal 2010, and an inflow of $476,000 year-to-date. GAAP operating cash flow was an outflow of $530,000 in the third quarter of fiscal 2010.

Kent Plunkett, founder and chief executive officer of Salary.com™, stated, "We have recorded our 35th consecutive quarter of revenue growth, with revenue at the upper end of our expected range. Strong revenue and effective cost management helped us achieve GAAP and non-GAAP net losses that were better than the low end of our guided ranges. Despite a smaller than expected net loss, non-GAAP operating cash flow dipped negative in Q3, though on a year-to-date basis operating cash flow improved by approximately $7 million compared to the same period in fiscal 2009. We remain committed to -- and continue to anticipate -- delivering positive operating cash flow on a full-year basis, excluding severance payments. Order trends were healthy in the third quarter with momentum increasing toward quarter-end, resulting in calculated bookings that were up 9% from the second quarter of fiscal 2010. We believe our family of SaaS-based human capital management software and data is increasingly competitive in the marketplace and positions us for long-term success."

Third Quarter 2010 Financial Summary

-- Third quarter revenue was $11.9 million, an increase of 8% over the
   third quarter of fiscal 2009.

-- On a GAAP basis, for the third quarter of fiscal 2010, Salary.com
   reported a net loss of $4.0 million, or ($0.24) per diluted share,
   compared to a net loss of $5.2 million, or ($0.31) per diluted share, in
   the third 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 $1.0 million, or ($0.06) per diluted share, for the third quarter of
   fiscal 2010, a substantial improvement compared to a net loss of
   $2.6 million, or ($0.16) per diluted share, in the third quarter of
   fiscal 2009.

-- Cash and cash equivalents as of December 31, 2009 were $11.2 million,
   compared to $16.1 million as of September 30, 2009. Net cash as of
   December 31, 2009 was $8.7 million, compared to $10.1 million as of
   September 30, 2009.

-- Current deferred revenue was $28.6 million as of December 31, 2009,
   compared to $27.3 million as of September 30, 2009.  Total deferred
   revenue grew to $31.3 million as of December 31, 2009, from
   $29.9 million as of September 30, 2009.

-- Excluding cash payments for severance, non-GAAP cash flow from
   operations was a net outflow of $416,000 in the third quarter of fiscal
   2010. Non-GAAP operating cash flow for the three quarters ended
   December 31, 2009 was an inflow of $476,000. Including payments for
   severance, GAAP cash flow from operations was a net outflow of $530,000
   in the third quarter of fiscal 2010, a $3.2 million improvement compared
   to the same period a year ago.

Additional Third Quarter Business Highlights

--  During the third quarter, Salary.com added approximately 100 customers,
    and ended the quarter with approximately 3,600 enterprise customers.

--  New customer additions in the third quarter of fiscal 2010 included:
    ACCO Brands Corporation, Elliot Health Systems, First Citizens Banc
    Corporation, MDU Resource Group, News Corporation, and Pinnacle
    Airlines.

--  Fourteen transactions larger than $100,000 were completed during the
    third quarter. Four of those transactions were larger than $250,000 in
    size.

Bryce Chicoyne, Salary.com's chief financial officer, said, "We delivered results at the top end of our revenue guidance, and a better than expected net loss. Higher accounts receivable, largely due to challenges with a single account, caused our non-GAAP operating cash flow to dip negative in the third quarter. However, management remains committed to driving top-line growth and delivering positive operating cash flow on a full-year basis. Continued trends of posting larger transactions that include multiple products combined with healthy retention rates continue to drive our long-term optimism."

Business Outlook

For the fourth quarter of fiscal 2010, Salary.com expects total revenue in the range of $11.0 million to $12.0 million. Non-GAAP net loss is expected to be in the range of $1.6 million to $3.0 million. Non-GAAP net loss excludes non-cash stock-based compensation expenses in the range of $1.6 million to $1.8 million, amortization of intangibles in the range of $1.1 million to $1.2 million, and restructuring charges of approximately $300,000. GAAP net loss for the fourth quarter of fiscal 2010 is expected to be in the range of $4.6 million to $6.3 million. Weighted average diluted shares for the quarter are estimated to be approximately 16.6 million shares.

For the full year fiscal 2010, we expect revenue to be in the range of $45.9 million to $46.9 million. Non-GAAP net loss is expected to be in the range of $6.9 million to $8.3 million. Non-GAAP net loss excludes non-cash impact of stock-based compensation in the range of $6.2 million to $6.5 million, amortization of intangibles in the range of $4.6 million to $4.7 million, and restructuring charges of approximately $500,000. On a GAAP basis, net loss for fiscal 2010 is expected to be in the range of $18.4 million to $20.1 million. Non-GAAP cash flow from operations, which excludes the above mentioned restructuring costs, is expected to be in the range of $0.5 million to $1.0 million in fiscal 2010. Weighted average diluted shares for the year are estimated to be approximately 16.5 million shares.

Conference call

What:      Salary.com third quarter financial results and business overview
           conference call and webcast
When:      Monday, February 8, 2010
Time:      5:00 PM ET
Live Call: (888) 500-6948, domestic
           (719) 325-2364, international
Replay:    (888) 203-1112, conference ID 7542416, domestic
           (719) 457-0820, conference ID 7542416, 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 (loss) and operating expenses and exclude amortization of intangible assets, stock-based compensation, and restructuring charges. This press release also discusses operating cash flows excluding severance costs. By excluding these items and by providing information on the Company's non-GAAP financial measure of bookings (which includes the Company's GAAP revenue and change in its deferred revenue) 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 these 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 fourth 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 continued impact of the recent 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 to 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 September 30, 2009. Salary.com expressly disclaims any obligation to update any forward-looking statements.


Exhibit 1

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


                                                December 31,    March 31,
ASSETS                                              2009          2009
                                                ------------- -------------
Current assets:
 Cash and cash equivalents                      $      11,225 $      21,085
 Accounts receivable, net of allowance for
  doubtful accounts                                     8,069         6,040
 Prepaid expenses and other current assets              1,627         1,558
                                                ------------- -------------
Total current assets before funds held for
 clients                                               20,921        28,683
 Funds held for clients                                10,388        12,964
                                                ------------- -------------
    Total current assets                               31,309        41,647
                                                ------------- -------------

Property, equipment and software, net                   2,213         3,025
Goodwill and intangible assets, net                    32,111        32,350
Other assets                                            1,381         1,679
                                                ------------- -------------
    Total assets                                $      67,014 $      78,701
                                                ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued compensation      $       3,630 $       2,342
 Accrued expenses and other current liabilities         5,934         3,300
 Long term debt                                         2,525         8,125
 Deferred revenue, current portion                     28,632        26,556
                                                ------------- -------------
Total current liabilities before client funds
 obligations                                           40,721        40,323
 Client funds obligations                              10,388        12,964
                                                ------------- -------------
    Total current liabilities                          51,109        53,287
                                                ------------- -------------

 Deferred revenue, net of current portion               2,707         1,729
 Long term liabilities                                  1,675         1,742
                                                ------------- -------------
    Total liabilities                                  55,491        56,758
                                                ------------- -------------

Total stockholders' equity
  Total stockholders' equity                           11,523        21,943
                                                ------------- -------------
    Total liabilities and stockholders' equity  $      67,014 $      78,701
                                                ============= =============



Exhibit 2

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

                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenues:
  Subscription revenues         $  11,312  $  10,267  $  32,506  $  29,115
  Advertising revenues                560        735      2,369      2,048
                                ---------  ---------  ---------  ---------
Total revenues                     11,872     11,002     34,875     31,163

  Cost of revenues (1)              3,746      2,961     11,125      9,333
                                ---------  ---------  ---------  ---------
Gross profit                        8,126      8,041     23,750     21,830
                                ---------  ---------  ---------  ---------

Operating expenses:
  Research and development (1)      2,436      2,211      7,137      6,317
  Sales and marketing (1)           5,249      6,715     16,525     20,357
  General and administrative (1)    3,643      3,749     11,413     11,726
  Amortization of intangible
   assets                             764        495      2,257      1,288
                                ---------  ---------  ---------  ---------
Total operating expenses           12,092     13,170     37,332     39,688
                                ---------  ---------  ---------  ---------
Loss from operations               (3,966)    (5,129)   (13,582)   (17,858)
                                ---------  ---------  ---------  ---------

Other income:
  Interest income                       1         61         11        518
  Other income (expense)               21        (52)      (136)      (109)
                                ---------  ---------  ---------  ---------
Total other income                     22          9       (125)       409
                                ---------  ---------  ---------  ---------
Loss before provision for
 income taxes                      (3,944)    (5,120)   (13,707)   (17,449)
Provision for income taxes             16         36         62        179
                                ---------  ---------  ---------  ---------
Net loss                        $  (3,960) $  (5,156) $ (13,769) $ (17,628)
                                =========  =========  =========  =========

Net loss per share - basic and
 diluted                        $   (0.24) $   (0.31) $   (0.84) $   (1.09)
                                =========  =========  =========  =========

Weighted average shares
 outstanding - basic and
 diluted                           16,512     16,601     16,313     16,229

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

                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

  Cost of revenues              $     200  $     298  $     630  $   1,105
  Research and development            288        282        826      1,070
  Sales and marketing                 537        574      1,705      2,011
  General and administrative          646        523      1,491      1,956
                                ---------  ---------  ---------  ---------
                                $   1,671  $   1,677  $   4,652  $   6,142
                                =========  =========  =========  =========



Exhibit 3

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


                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Cash flows from operating
 activities:
  Net loss                      $  (3,960) $  (5,156) $ (13,769) $ (17,628)
  Adjustments to reconcile net
   loss to net cash
   provided by (used in)
   operating activities:
    Depreciation and
     amortization                   1,590      1,256      4,843      3,439
    Stock-based compensation        1,671      1,677      4,652      6,142
    Other non-cash items               23        (93)       352        396
    Change in operating assets
     and liabilities                  146     (1,420)     3,898        847
                                ---------  ---------  ---------  ---------
       Net cash used in
        operating activities         (530)    (3,736)       (24)    (6,804)
                                ---------  ---------  ---------  ---------

Cash flows from investing
 activities:
  Cash paid for acquisition of
   business                           (75)    (7,024)      (121)   (12,661)
  Cash paid for intangible
   assets                             (72)         -       (456)       (32)
  Increase in restricted cash           -         (5)        (1)      (383)
  Purchases of property and
   equipment                          (17)      (985)      (162)    (1,533)
  Capitalization of software
   development costs                  (46)       (18)      (219)       (97)
  Proceeds on sale of property
   and equipment                       20          -         23          -
  Net increase in assets held to
   satisfy client funds
   obligations                       (987)    (7,509)     2,576     (7,509)
                                ---------  ---------  ---------  ---------
       Net cash provided by
        (used in) investing
        activities                 (1,177)   (15,541)     1,640    (22,215)
                                ---------  ---------  ---------  ---------

Cash flows from financing
 activities:
  Net proceeds from exercise
   (buyback) of common stock
   options and warrants              (406)        47     (2,752)       142
    Net proceeds from line of
     credit and notes payable      (3,575)     7,235     (5,802)     7,171
    Net increase in client funds
     obligation                       987      7,509     (2,576)     7,509
                                ---------  ---------  ---------  ---------
       Net cash provided by
        (used in) financing
        activities                 (2,994)    14,791    (11,130)    14,822
                                ---------  ---------  ---------  ---------

Effect of exchange rate changes
 on cash and cash equivalents        (154)       (58)      (346)       (56)
                                ---------  ---------  ---------  ---------
Decrease in cash and cash
 equivalents                       (4,855)    (4,544)    (9,860)   (14,253)

Cash and cash equivalents,
 beginning of period               16,080     28,018     21,085     37,727
                                ---------  ---------  ---------  ---------

Cash and cash equivalents, end
 of period                      $  11,225  $  23,474  $  11,225  $  23,474
                                =========  =========  =========  =========



Exhibit 4

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

                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Reconciliation of GAAP loss
 from operations to non-GAAP
 loss from operations:

  Loss from operations          $  (3,966) $  (5,129) $ (13,582) $ (17,858)
  Amortization of intangible
   assets                             764        495      2,257      1,288
  Amortization of intangible
   assets (included in cost of
   revenues)                          427        403      1,269      1,226
  Restructuring charges               114          -        232          -
  Stock-based compensation          1,671      1,677      4,652      6,142
                                ---------  ---------  ---------  ---------
Non-GAAP loss from operations   $    (990) $  (2,554) $  (5,172) $  (9,202)
                                =========  =========  =========  =========

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

  GAAP net loss                 $  (3,960) $  (5,156) $ (13,769) $ (17,628)
  Amortization of intangible
   assets                             764        495      2,257      1,288
  Amortization of intangible
   assets (included in cost of
   revenues)                          427        403      1,269      1,226
  Restructuring charges               114          -        232          -
  Stock-based compensation          1,671      1,677      4,652      6,142
                                ---------  ---------  ---------  ---------
  Non-GAAP net loss             $    (984) $  (2,581) $  (5,359) $  (8,972)
                                =========  =========  =========  =========

Non-GAAP net loss per share     $   (0.06) $   (0.16) $   (0.33) $   (0.55)
                                =========  =========  =========  =========

Weighted average shares
 outstanding - basic and
 diluted                           16,512     16,601     16,313     16,229




Exhibit 5

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


                         Three months ended December 31, 2009
             --------------------------------------------------------------
                       Amortization  Stock-based
             US GAAP  of Intangible  Compensation  Restructuring  Non-GAAP
             Results      Assets       Expense        Charges     Results
             --------- ------------  ------------  -------------  ---------

Cost of
 revenues    $   3,746 $       (427) $       (200) $           -  $   3,119

Research and
 development
 expenses        2,436            -          (288)             -      2,148
Sales and
 marketing
 expenses        5,249            -          (537)             -      4,712
General and
 administrative
 expenses        3,643            -          (646)          (114)     2,883
Amortization
 of intangible
 assets            764         (764)            -              -          -
             --------- ------------  ------------  -------------  ---------
  Total
   operating
   expenses  $  12,092 $       (764) $     (1,471) $        (114) $   9,743
             ========= ============  ============  =============  =========

                         Three months ended December 31, 2008
             --------------------------------------------------------------
                       Amortization  Stock-based
             US GAAP  of Intangible  Compensation  Restructuring  Non-GAAP
             Results      Assets       Expense        Charges     Results
             --------- ------------  ------------  -------------  ---------

Cost of
 revenues    $   2,961 $       (403) $       (298) $           -  $   2,260

Research and
 development
 expenses        2,211            -          (282)             -      1,929
Sales and
 marketing
 expenses        6,715            -          (574)             -      6,141
General and
 administrative
 expenses        3,749            -          (523)             -      3,226
Amortization
 of intangible
 assets            495         (495)            -              -          -
             --------- ------------  ------------  -------------  ---------
  Total
   operating
   expenses  $  13,170 $       (495) $     (1,379) $           -  $  11,296
             ========= ============  ============  =============  =========

                          Nine months ended December 31, 2009
             --------------------------------------------------------------
                       Amortization  Stock-based
             US GAAP  of Intangible  Compensation  Restructuring  Non-GAAP
             Results      Assets       Expense        Charges     Results
             --------- ------------  ------------  -------------  ---------

Cost of
 revenues    $  11,125 $     (1,269) $       (630) $           -  $   9,226

Research and
 development
 expenses        7,137            -          (826)             -      6,311
Sales and
 marketing
 expenses       16,525            -        (1,705)             -     14,820
General and
 administrative
 expenses       11,413            -        (1,491)          (232)     9,690
Amortization
 of intangible
 assets          2,257       (2,257)            -              -          -
             --------- ------------  ------------  -------------  ---------
  Total
   operating
   expenses  $  37,332 $     (2,257) $     (4,022) $        (232) $  30,821
             ========= ============  ============  =============  =========

                          Nine months ended December 31, 2008
             --------------------------------------------------------------
                       Amortization  Stock-based
             US GAAP  of Intangible  Compensation  Restructuring  Non-GAAP
             Results      Assets       Expense        Charges     Results
             --------- ------------  ------------  -------------  ---------

Cost of
 revenues    $   9,333 $     (1,226) $     (1,105) $           -  $   7,002

Research and
 development
 expenses        6,317            -        (1,070)             -      5,247
Sales and
 marketing
 expenses       20,357            -        (2,011)             -     18,346
General and
 administrative
 expenses       11,726            -        (1,956)             -      9,770
Amortization
 of intangible
 assets          1,288       (1,288)            -              -          -
             --------- ------------  ------------  -------------  ---------
  Total
   operating
   expenses  $  39,688 $     (1,288) $     (5,037) $           -  $  33,363
             ========= ============  ============  =============  =========



Exhibit 6

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


                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------- ---------------------
                                   2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Calculated bookings:
  Revenue                       $   11,872 $   11,002 $   34,875 $   31,163
  Change in deferred revenue         1,474      3,350      3,054      5,270
                                ---------- ---------- ---------- ----------
  Calculated bookings           $   13,346 $   14,352 $   37,929 $   36,433
                                ========== ========== ========== ==========



Exhibit 7

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


                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

  Net cash used in operating
   activities                   $    (530) $  (3,736) $     (24) $  (6,804)
  Payments of severance related
   payments                           114          -        500          -
                                ---------  ---------  ---------  ---------
  Non-GAAP cash provided by
   operating activities         $    (416) $  (3,736) $     476  $  (6,804)
                                =========  =========  =========  =========