SOURCE: Callidus Software Inc.

Callidus Software Inc.

August 02, 2012 16:01 ET

CallidusCloud Announces Second Quarter 2012 Results

Q2 SaaS Revenue up 30% Year Over Year; Q2 SaaS Billings(1) up 40% Year Over Year; GAAP Gross Margin Reached 47% up From 39% Year Over Year; 147 New Subscription Customers Added in Q2

PLEASANTON, CA--(Marketwire - Aug 2, 2012) -  CallidusCloud® (NASDAQ: CALD), the leader in cloud based solutions for sales effectiveness, today announced financial results for the second quarter ended June 30, 2012.

"I am pleased with our performance in Q2. We had record recurring revenues, strong SaaS billings and a record number of new customers. Our Commissions business performed stronger than ever with deals signed in North America, Colombia, the UAE, and Russia. We saw demand across multiple industries with particular strength in insurance and telecommunications. The Learning, CPQ and Marketing Automation businesses all contributed to a great quarter," said Leslie Stretch, President and CEO of CallidusCloud.

Financial Highlights for the Second Quarter 2012

  • Total revenue was $23.8 million for the second quarter, representing an increase of 17% compared to the same quarter last year. Total recurring revenues, which include SaaS revenues and maintenance and support, were $18.0 million, up 17% compared to the second quarter of 2011. SaaS revenues of $14.0 million were up 30%, benefitting by $740,000 from an early customer acceptance, while maintenance and support revenues of $4.0 million were down 13% as compared to the second quarter of 2011. Service and other revenues of $5.8 million were up 15% as compared to the same quarter of 2011.
  • Total GAAP gross margin was 47% for the second quarter up from 39% in the same quarter in 2011.
  • Non-GAAP gross margin continued at its quarterly record level of 53% for the second quarter of 2012, up from 46% for the second quarter of 2011. Non-GAAP gross margin for the second quarter of 2012 excludes $1.0 million of stock-based compensation expense and $526,000 of amortization of acquired intangibles.
  • Second quarter 2012 GAAP recurring revenue gross margin was 56% up from 44% for the second quarter of 2011. Second quarter non-GAAP recurring revenue gross margin, which excludes $383,000 of stock-based compensation and $488,000 of amortization of acquired intangibles, was 61%, up from 52% for the second quarter of 2011.
  • GAAP net loss was $5.4 million, or ($0.15) per share, for the second quarter of 2012, which included $4.3 million of stock-based compensation expense, a benefit of $1.8 million for an acquisition-related purchase adjustment, $837,000 of convertible note related interest and amortization expense, $785,000 of amortization of acquired intangible assets, $267,000 of acquisition-related expense and $179,000 of restructuring expense and other. This compares to a GAAP net loss of $4.7 million, or ($0.14) per share, for the second quarter of 2011, which included $3.7 million of stock-based compensation expense, $452,000 of convertible note related expense items, $278,000 of patent litigation cost, $255,000 of amortization of acquired intangible assets, and $237,000 of acquisition related expense.
  • Non-GAAP net loss was ($909,000), or ($0.03) per fully diluted share, for the quarter, compared to non-GAAP net income of $165,000, for the same period last year excluding the items identified above.

Business Highlights for the Second Quarter 2012

  • Acquired 6FigureJobs, a premier executive career community and job board. The acquisition extends CallidusCloud's Hiring Cloud suite into a comprehensive sales and executive focused talent recruitment solution.

  • Alliances development including joining Salesforce.com's ISV Force program. This program incentivizes Salesforce.com's end users to partner with CallidusCloud apps across their business beginning with CallidusCloud CPQ from the Selling Cloud and CallidusCloud Litmos Mobile Learning from the Learning Cloud.

  • The CallidusCloud® Sales Effectiveness suite was selected as a finalist for the prestigious International Business Awards -- The Stevies in the "Best Cloud Application/Service", "Best Human Capital Management Solution", and "Best Financial Management Solution" categories.

  • CallidusCloud hosted C3 -- the largest Sales Performance and Effectiveness conference of its kind in May 2012 -- where it announced the launch of its gamification solution. This sales engagement solution uses a reward and scoring system to drive performance-improving behaviors and represents a significant initiative in the SPM space.

Financial Outlook
Total revenue for the third quarter of 2012 is expected to be between $22.6 million and $23.6 million. For the full year 2012 we expect total revenues to be between $94.0 million and $95.5 million. GAAP operating expenses are expected to be between $18.6 million and $19.6 million in the third quarter of 2012, which includes stock-based compensation expense of approximately $3.7 million, amortization of acquired intangibles of $800,000 and $500,000 of acquisition related costs and legal costs to defend our intellectual property.

Conference Call

A conference call to discuss the second quarter results and outlook is scheduled for 1:30 p.m. Pacific Daylight Time (PDT) today. The conference call will be available via live webcast at the Investor Relations section of CallidusCloud's website.

Webcast site: http://www.media-server.com/m/acs/899ec808f0b545f52b65d9970fd999be 
Dial-in number: 800-573-4842 (International callers: 617-224-4327)
Passcode: 53540559

Replay: A webcast replay will be available after 6:30 p.m. PT on August 2, 2012 through August 10, 2012. The webcast replay will be available at the Investor Relations section of our website under Calendar of Events.

Note: (1) Billings is defined as revenue plus the change in quarterly deferred revenue.

About Callidus Software
Callidus Software Inc. (NASDAQ: CALD) is the market and technology leader in sales effectiveness cloud computing. Our customers gain a competitive advantage by maximizing sales cost efficiencies and driving improvements in sales effectiveness. CallidusCloud's award-winning multi-tenant SaaS applications set the standard for performance management of a company's sales force and channel partners. Over 2.5 million users rely on our solutions to power their performance. For more information, please visit www.calliduscloud.com

Note on Forward-Looking Statements

The forward-looking statements included in this press release, including discussion of our commercial prospects, estimates of third quarter and full year 2012 revenues, operating expenses, stock-based compensation expense and amortization of acquired intangibles expenses reflect management's best judgment based on factors currently known and involve risks and uncertainties. These risks and uncertainties include, but are not limited to, potential disruption of customer purchase decisions resulting from global economic conditions, timing and size of orders, potential material fluctuations in financial results and future growth rates, decreases in customer spending, uncertainty regarding purchasing trends in the SPM market, customer cancellations or non-renewal of maintenance contracts or on-demand services, our potential inability to manage effectively any growth we experience, uncertainty regarding the demand for and profitability of our on-demand services, increased competition or new entrants in the marketplace, and other risks detailed in Callidus' reports filed with the Securities and Exchange Commission (SEC), including its Form 10-K for 2011 and its first quarter 2012 Form 10-Q which may be obtained by contacting CallidusCloud's Investor Relations department at 925-251-2248, or from the Investor Relations section of CallidusCloud's website (CallidusCloud Investor Relations). Actual results may differ materially from those presently reported. We assume no obligation to update the information contained in this release.

Non-GAAP Financial Measures

Callidus has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP gross margin, non-GAAP recurring revenue gross margin, non-GAAP net loss and non-GAAP net loss per share. Callidus uses non-GAAP measures internally in analyzing its financial results and believes that they are useful to investors, as a supplement to GAAP measures, in evaluating Callidus' operating performance. Callidus believes that the use of these non-GAAP measures provides additional insight for investors to use in evaluation of ongoing operating results and trends and in comparing its financial measures with other companies in Callidus' industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial measures exclude stock-based compensation expense, a benefit from a purchase acquisition-related adjustment, restructuring expense, acquisition related expense, patent litigation cost, convertible note interest expense, amortization of convertible note issuance cost and amortization of acquired intangibles. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

©2012. Callidus Software Inc. All rights reserved. Callidus, Callidus Software, the Callidus Software logo, CallidusCloud, the CallidusCloud logo, TrueComp Manager, ActekSoft, ACom3, ForceLogix, Salesforce Assessments, iCentera, Webcom, LeadFormix, Litmos, the Litmos logo, Rapid Intake, and 6FigureJobs are trademarks, service marks, or registered trademarks of Callidus Software Inc. and its affiliates in the United States and other countries. All other brand, service or product names are trademarks or registered trademarks of their respective companies or owners.

   
CALLIDUS SOFTWARE INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
                         
(In thousands, except for per share data)  
(unaudited)  
                         
    Three months ended     Six months ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
Revenues:                                
  Recurring   $ 18,027     $ 15,350     $ 34,913     $ 30,052  
  Services and other     5,754       5,005       10,881       10,114  
                                 
    Total revenues     23,781       20,355       45,794       40,166  
                                 
Cost of revenues:                                
  Recurring (1) (2)     7,902       8,537       15,460       16,497  
  Services and other (1) (2)     4,815       3,978       9,213       8,015  
                                 
    Total cost of revenues     12,717       12,515       24,673       24,512  
                                 
Gross profit     11,064       7,840       21,121       15,654  
                                 
Operating expenses:                                
  Sales and marketing (1) (2)     8,285       4,856       15,196       9,050  
  Research and development (1)     4,067       2,756       8,076       5,270  
  General and administrative (1) (2) (3) (4)     4,849       4,353       9,854       7,827  
  Acquisition-related adjustment     (1,837 )     -       (1,837 )     -  
  Restructuring     172       (2 )     614       37  
                                 
    Total operating expenses     15,536       11,963       31,903       22,184  
                                 
Operating loss     (4,472 )     (4,123 )     (10,782 )     (6,530 )
                                 
Interest and other income (expense), net (5) (6)     (944 )     (491 )     (1,739 )     (442 )
                                 
Loss before provision (benefit) for income taxes     (5,416 )     (4,614 )     (12,521 )     (6,972 )
                                 
Provision (benefit) for income taxes (7)     17       119       (105 )     199  
                                 
                                 
Net loss   $ (5,433 )   $ (4,733 )   $ (12,416 )   $ (7,171 )
                                 
                                 
Basic and diluted net loss per share   $ (0.15 )   $ (0.14 )   $ (0.36 )   $ (0.22 )
                                 
                                 
Shares used in basic and diluted per share computation     35,235       33,048       34,674       33,079  
                                 
                                 
(1) Stock-based compensation included in amounts above by category:                                
                                 
  Cost of recurring   $ 383     $ 1,037     $ 929     $ 1,791  
  Cost of services and other     573       362       1,050       685  
  Sales and marketing     1,165       452       1,940       820  
  Research and development     485       363       899       724  
  General and administrative     1,687       1,464       2,677       2,063  
    Total stock-based compensation     4,293       3,678       7,495       6,083  
                                 
(2) Acquisition, acquired and settlement related asset amortization                                
                                 
  Cost of recurring     488       86       974       124  
  Cost of services and other     38       -       44       -  
  Sales and marketing     202       154       413       297  
  General and administrative     57       15       120       24  
    Total acquisition related asset amortization     785       255       1,551       445  
                                 
(3) Acquisition-related expense     267       237       637       383  
(4) Patent litigation cost     7       278       620       578  
(5) Interest expense on convertible notes     703       392       1,406       392  
(6) Amortization of convertible note issuance cost     134       60       268       60  
(7) Tax benefit from release of valuation allowance     -       -       (224 )     -  
                                 
                                 
                                 
CALLIDUS SOFTWARE INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
             
(In thousands)  
(unaudited)  
             
    June 30,     December 31,  
Assets   2012     2011  
                 
Current assets:                
  Cash and cash equivalents   $ 5,922     $ 17,383  
  Short-term investments     25,613       35,406  
  Accounts receivable, net     28,710       21,778  
  Deferred income taxes     110       110  
  Prepaid and other current assets     7,168       5,831  
                 
    Total current assets     67,523       80,508  
                 
                 
Property and equipment, net     6,962       6,772  
Goodwill     30,916       24,245  
Intangible assets, net     23,403       17,769  
Deferred income taxes, noncurrent     206       206  
Deposits and other assets     3,388       3,936  
                 
    Total assets   $ 132,398     $ 133,436  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 4,553     $ 3,515  
  Accrued payroll and related expenses     3,899       4,278  
  Accrued expenses     12,542       12,272  
  Deferred income taxes     596       596  
  Deferred revenue     32,663       30,211  
  Capital lease obligations     1,229       1,196  
                 
    Total current liabilities     55,482       52,068  
                 
Deferred revenue, noncurrent     3,216       4,257  
Deferred income taxes, noncurrent     269       197  
Other liabilities     1,976       2,413  
Capital lease obligations, noncurrent     306       915  
Convertible notes     59,215       59,215  
                 
    Total liabilities     120,464       119,065  
                 
Stockholders' equity:                
  Common stock     34       33  
  Additional paid-in capital     248,758       238,798  
  Treasury stock     (14,430 )     (14,430 )
  Accumulated other comprehensive income     207       189  
  Accumulated deficit     (222,635 )     (210,219 )
                 
    Total stockholders' equity     11,934       14,371  
                 
    Total liabilities and stockholders' equity   $ 132,398     $ 133,436  
                 
                 
                 
CALLIDUS SOFTWARE INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(unaudited)  
    Six months ended, June 30,  
    2012     2011  
         
                 
Cash flows from operating activities:                
  Net loss   $ (12,416 )   $ (7,171 )
                   
  Adjustments to reconcile net loss to net cash provided by (used in)                
    operating activities:                
    Depreciation expense     1,490       1,587  
    Amortization of intangible assets     2,558       1,394  
    Provision for doubtful accounts and service remediation reserves     52       47  
    Stock-based compensation     7,495       6,040  
    Stock-based compensation related to acquisition     -       42  
    Release of valuation allowance     (224 )     -  
    Gain on disposal of property     (5 )     -  
    Amortization of convertible note issuance cost     268       60  
    Net amortization on investments     231       173  
    Acquisition-related adjustment     (1,837 )     -  
      Changes in operating assets and liabilities:                
      Accounts receivable     (6,712 )     1,623  
      Prepaid and other current assets     (637 )     2,064  
      Other assets     548       (3,172 )
      Accounts payable     118       (1,161 )
      Accrued expenses     (374 )     931  
      Accrued payroll and related expenses     (379 )     81  
      Accrued restructuring     230       (209 )
      Deferred revenue     1,270       (848 )
      Deferred income taxes     72       77  
Net cash provided by (used in) operating activities     (8,252 )     1,558  
                 
  Cash flows from investing activities:                
  Purchases of investments     (16,536 )     (33,569 )
  Proceeds from maturities and sale of investments     26,111       10,063  
  Purchases of property and equipment     (1,714 )     (982 )
  Proceeds from disposal of property and equipment     5       -  
  Purchases of intangible assets     (4,485 )     (1,128 )
  Acquisitions, net of cash acquired     (7,721 )     (5,860 )
Net cash used in investing activities     (4,340 )     (31,476 )
                 
  Cash flows from financing activities:                
  Proceeds from issuance of common stock     4,295       4,516  
  Repurchase of stock     -       (14,430 )
  Repurchase of common stock from employees for payment of taxes onvesting of restricted stock units     (1,829 )     (681 )
  Payment of consideration related to acquisition     (723 )     (600 )
  Proceeds from issuance of convertible notes, net of issuance costs     -       77,369  
  Repayment of debt assumed through acquisition     (30 )     -  
  Payment of principal under capital lease     (587 )     (601 )
Net cash provided by financing activities     1,126       65,573  
Effect of exchange rates on cash and cash equivalents     5       37  
Net increase (decrease) in cash and cash equivalents     (11,461 )     35,692  
Cash and cash equivalents at beginning of period     17,383       12,830  
Cash and cash equivalents at end of period   $ 5,922     $ 48,522  
                 
                 
                 
CALLIDUS SOFTWARE INC.  
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
(In thousands, except for percentages and per share data)  
(unaudited)  
                         
    Three months ended     Six months ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
Non-GAAP gross profit reconciliation                                
                                 
Gross profit   $ 11,064     $ 7,840     $ 21,121     $ 15,654  
                                 
    Profit margin, as a % of total revenues     47 %     39 %     46 %     39 %
Add back:                                
    Non-cash stock-based compensation     956       1,399       1,979       2,476  
    Non-cash amortization of acquired intangible assets     526       86       1,018       124  
Non-GAAP gross profit   $ 12,546     $ 9,325     $ 24,118     $ 18,254  
                                 
    Profit margin, as a % of total revenues     53 %     46 %     53 %     45 %
                                 
                                 
Non-GAAP recurring revenue gross profit reconciliation                                
                                 
Recurring revenue gross profit   $ 10,125     $ 6,813     $ 19,453     $ 13,555  
    Recurring revenue profit margin, as a % of recurring revenues     56 %     44 %     56 %     45 %
Add back:                                
    Non-cash stock-based compensation     383       1,037       929       1,791  
    Non-cash amortization of acquired intangible assets     488       86       974       124  
Non-GAAP Recurring revenue gross profit   $ 10,996     $ 7,936     $ 21,356     $ 15,470  
    Recurring revenue profit margin, as a % of recurring revenues     61 %     52 %     61 %     51 %
                                 
                                 
Non-GAAP operating expense reconciliation:                                
                                 
Operating expenses   $ 15,536     $ 11,963     $ 31,903     $ 22,184  
    Operating expenses, as a % of total revenues     65 %     59 %     70 %     55 %
Add back:                                
    Non-cash stock-based compensation     (3,337 )     (2,279 )     (5,516 )     (3,607 )
    Non-cash amortization of acquired intangible assets     (259 )     (169 )     (533 )     (321 )
    Acquisition-related expense     (267 )     (237 )     (637 )     (383 )
    Patent litigation cost     (7 )     (278 )     (620 )     (578 )
    Acquisition-related adjustment     1,837       -       1,837       -  
    Restructuring     (172 )     2       (614 )     (37 )
Non-GAAP Operating Expenses   $ 13,331     $ 9,002     $ 25,820     $ 17,258  
    Non-GAAP Operating expenses, as a % of total revenues     56 %     44 %     56 %     43 %
                                 
                                 
Non-GAAP operating income (loss) reconciliation:                                
                                 
Operating loss   $ (4,472 )   $ (4,123 )   $ (10,782 )   $ (6,530 )
    Operating loss, as a % of total revenues     -19 %     -20 %     -24 %     -16 %
Add back:                                
    Non-cash stock-based compensation     4,293       3,678       7,495       6,083  
    Non-cash amortization of acquired intangible assets     785       255       1,551       445  
    Acquisition-related expense     267       237       637       383  
    Patent litigation cost     7       278       620       578  
    Acquisition-related adjustment     (1,837 )     -       (1,837 )     -  
    Restructuring     172       (2 )     614       37  
Non-GAAP Operating income (loss)   $ (785 )   $ 323     $ (1,702 )   $ 996  
    Non-GAAP Operating income (loss), as a % of total revenues     -3 %     2 %     -4 %     2 %
                                 
                                 
CALLIDUS SOFTWARE INC.  
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
(In thousands, except for percentages and per share data)  
(unaudited)  
                         
    Three months ended     Six months ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
Non-GAAP net loss reconciliation:                                
                                 
Net loss   $ (5,433 )   $ (4,733 )   $ (12,416 )   $ (7,171 )
    Net loss, as a % of total revenues     -23 %     -23 %     -27 %     -18 %
Add back:                                
    Non-cash stock-based compensation     4,293       3,678       7,495       6,083  
    Non-cash amortization of acquired intangible assets     785       255       1,551       445  
    Acquisition related expenses     267       237       637       383  
    Patent litigation costs     7       278       620       578  
    Acquisition-related adjustment     (1,837 )     -       (1,837 )     -  
    Restructuring     172       (2 )     614       37  
    Interest expense on convertible notes     703       392       1,406       392  
    Amortization of convertible note issuance cost     134       60       268       60  
    Tax benefit from release of valuation allowance     -       -       (224 )     -  
Non-GAAP Net income (loss)   $ (909 )   $ 165     $ (1,886 )   $ 807  
    Non-GAAP Net income (loss), as a % of total revenues     -4 %     1 %     -4 %     2 %
                                 
                                 
Non-GAAP net income (loss) per share reconciliation:                                
                                 
Net loss per basic and diluted share   $ (0.15 )   $ (0.14 )   $ (0.36 )   $ (0.22 )
Add back:                                
    Non-cash stock-based compensation     0.12       0.11       0.22       0.18  
    Non-cash amortization of acquired intangible assets     0.02       0.01       0.04       0.01  
    Acquisition related expenses     0.01       -       0.02       0.01  
    Patent litigation costs     -       0.01       0.02       0.02  
    Acquisition-related adjustment     (0.05 )     -       (0.05 )     -  
    Restructuring     -       -       0.02       -  
    Interest expense on convertible notes     0.02       0.01       0.04       0.02  
    Amortization of convertible note issuance cost     -       -       0.01       -  
    Tax benefit from release of valuation allowance     -       -       (0.01 )     -  
Non-GAAP net income (loss) per basic share   $ (0.03 )   $ -     $ (0.05 )   $ 0.02  
                                 
Non-GAAP net income (loss) per diluted share   $ (0.03 )   $ -     $ (0.05 )   $ 0.02  
                                 
                                 
Basic and fully diluted shares reconciliation:                                
                                 
Basic shares     35,235       33,048       34,674       33,079  
Add back:                                
    Weighted average effect of dilutive securities     -       15,797       -       15,508  
Diluted shares     35,235       48,845       34,674       48,587  
                                 

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