SOURCE: Callidus Software Inc.

Callidus Software Inc.

November 01, 2012 16:01 ET

CallidusCloud Announces Third Quarter 2012 Results

PLEASANTON, CA--(Marketwire - Nov 1, 2012) -

  • Q3 Total Revenues up 14% Year over Year
  • Q3 SaaS Revenue up 19% Year over Year
  • Q3 SaaS Bookings highest in 11 Quarters
  • Total Contracted Value Exceeded $100 Million
  • Non-GAAP Recurring Revenue Gross Margin a record 65%
  • 157 New Subscription Customers added in Q3

Callidus Software Inc. (NASDAQ: CALD), a leading provider of hiring, learning, marketing and selling cloud software today announced financial results for the third quarter ended September 30, 2012.

"I am pleased with our third quarter performance. This is the eighth consecutive double-digit revenue growth quarter for CallidusCloud," said Leslie Stretch, President and CEO, CallidusCloud. "Our Selling, Marketing, Learning and Hiring clouds all performed well. We had another strong SaaS bookings quarter and we exceeded the top end of our revenue guidance. We expanded our Non-GAAP recurring revenue gross margins again to a record of 65%. We added a record number of new subscription customers and signed two of the world's largest telcos for our Commissions solution making us the de-facto standard for SPM in this important vertical. We also saw increased instances of multi-product and cross-sell contracts. We were recognized as the leader in the SPM sector by Gartner Group with the only 'Strong Positive' rating in the history of the sector and we received no less than 10 International and American business awards."

Financial Highlights for the Third Quarter 2012

  • Total revenue was $23.9 million for the third quarter, representing an increase of 14% compared to the same quarter last year. Total recurring revenues, which include SaaS revenues and maintenance and support, were $17.5 million, up approximately 10% compared to the third quarter of 2011. SaaS revenues of $13.6 million were up 19%, while maintenance and support revenues of $3.9 million were down 14% as compared to the third quarter of 2011. Service and other revenues of $6.4 million were up 27% as compared to the same quarter of 2011 driven by perpetual licenses of $2.0 Million in the quarter.

  • Total GAAP gross margin was 50% for the third quarter up from 42% in the same quarter in 2011.

  • Non-GAAP gross margin was 56% for the third quarter of 2012 up from 48% for the third quarter of 2011. Non-GAAP gross margin for the third quarter of 2012 excludes $931,000 of stock-based compensation expense and $464,000 of amortization of acquired intangibles. 

  • Third quarter 2012 GAAP recurring revenue gross margin was 61% up from 48% for the third quarter of 2011. Third quarter non-GAAP recurring revenue gross margin, which excludes $353,000 of stock-based compensation and $472,000 of amortization of acquired intangibles was 65%, up from 53% for the third quarter of 2011.

  • GAAP net loss was $6.5 million, or ($0.18) per share, for the third quarter of 2012, which included $3.5 million of stock-based compensation expense, $837,000 of convertible note related interest and amortization expense, $824,000 of amortization of acquired intangible assets, $232,000 of acquisition-related expense and $113,000 of patent litigation defense and restructuring costs. This compares to a GAAP net loss of $4.6 million, or ($0.14) per share, for the third quarter of 2011, which included $2.8 million of stock-based compensation expense, $1,031,000 of convertible note related expense items, gain on extinguishment of debt of $904,000, $697,000 of acquisition related expense, a tax benefit from release of valuation allowance of $572,000, $494,000 of patent litigation cost, $409,000 of amortization of acquired intangible assets, impairment of marketable securities for $375,000 and $99,000 of restructuring expense. 

  • Non-GAAP net loss was $946,000, or ($0.03) per fully diluted share, for the quarter, compared to non-GAAP net loss of $130,000, for the same period last year excluding the items identified above.

Business Highlights for the Third Quarter 2012

  • CallidusCloud was the only vendor to receive the highest "Strong Positive" rating in the 2012 MarketScope for SPM Software by Gartner, the world's leading information technology research and advisory company. The report, which estimates the SPM market size at $1.5-$2 billion during 2012 and 2013, focused on vendors that provide technology for managing training, coaching, hiring, onboarding, territories, quotas and incentive compensation.

  • CallidusCloud collected 10 awards at the American Business Awards and International Business Awards including favorite company, best website, best new product and best new financial management cloud app for CallidusCloud's Commissions solution.

  • CallidusCloud's CPQ solution joined the Oracle ISV program following on from its addition to the salesforce.com ISV program.

  • CallidusCloud sponsored key industry events including Dreamforce, Cloudforce, Oracle Open World, Aberdeen Marketing Leadership Summit, Sales 2.0, Sales Management Association Sales Productivity Conference and the World at Work, Spotlight on Sales Compensation conference.

Financial Outlook
Total revenue for the fourth quarter of 2012 is expected to be between $24.8 million and $25.8 million. For the full year 2012 this translates to total revenues of between $94.5 million and $95.5 million. GAAP operating expenses are expected to be between $20.0 million and $21.0 million in the fourth quarter of 2012, which includes stock-based compensation expense of approximately $3.6 million, approximately $1.0 million in one-time transfer fees related to converting our Hyderabad contractors to employees, amortization of acquired intangibles of $825,000 and $340,000 of patent litigation defense costs.

Conference Call

A conference call to discuss the third 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 Callidus Software's website.

Webcast site: http://www.calliduscloud.com/about-us/investor-relations/

Dial-in: 800-561-2693 (International callers: 617-614-3523)
Passcode: 79945512

Replay information: A webcast replay will be available on the Investor Relations section of our website under Calendar of Events.

For more information, please visit: http://www.calliduscloud.com/about-us/investor-relations/

About CallidusCloud
Callidus Software Inc. (NASDAQ: CALD), doing business as CallidusCloud, is a leading provider of cloud software. CallidusCloud enables organizations to drive performance and productivity across their business with our hiring, learning, marketing and selling clouds. From back office to the field, from desktop to mobile, we ensure organizations have the right tools to be more effective and perform better. The combined power of our clouds, our people, and our partners fuels growth, empowers the work force and delivers real value. CallidusCloud drives performance and productivity for over 1500 leading organizations. Small, medium and large enterprises across multiple industries and geographies rely on CallidusCloud for quicker hiring, simpler learning, better marketing, and smarter selling.

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 fourth 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 second quarter 2012 Form 10-Q which may be obtained by contacting Callidus Software's Investor Relations department at 925-251-2248, or from the Investor Relations section of Callidus Software'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 defense 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     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
                         
Revenues:                                
  Recurring   $ 17,533     $ 16,015     $ 52,446     $ 46,067  
  Services and other     6,393       5,044       17,273       15,158  
                                   
    Total revenues     23,926       21,059       69,719       61,225  
                                 
Cost of revenues:                                
  Recurring (1) (2)     6,923       8,363       22,365       24,860  
  Services and other (1) (2)     5,084       3,937       14,271       11,952  
                                   
    Total cost of revenues     12,007       12,300       36,636       36,812  
                                 
Gross profit     11,919       8,759       33,083       24,413  
                                 
Operating expenses:                                
  Sales and marketing (1) (2)     8,351       5,253       23,573       14,303  
  Research and development (1) (2)     4,023       3,145       12,116       8,416  
  General and administrative (1) (2) (3) (4)     4,831       4,673       14,685       12,500  
  Acquisition-related adjustment     50       -       (1,787 )     -  
  Restructuring     (53 )     99       561       136  
                                   
    Total operating expenses     17,202       13,170       49,148       35,355  
                                 
Operating loss     (5,283 )     (4,411 )     (16,065 )     (10,942 )
                                 
Interest and other income (expense), net (5) (6) (8) (9)     (737 )     (638 )     (2,476 )     (1,079 )
                                 
Loss before provision (benefit) for income taxes     (6,020 )     (5,049 )     (18,541 )     (12,021 )
                                 
Provision (benefit) for income taxes (7)     444       (478 )     213       (279 )
                                 
                                 
Net loss   $ (6,464 )   $ (4,571 )   $ (18,754 )   $ (11,742 )
                                 
                                 
Basic and diluted net loss per share   $ (0.18 )   $ (0.14 )   $ (0.53 )   $ (0.36 )
                                 
                                 
Shares used in basic and diluted per share computation     35,853       32,327       35,070       32,826  
                                 
                                 
(1) Stock-based compensation included in amounts above by category:                          
                                 
  Cost of recurring   $ 353     $ 731     $ 1,282     $ 2,523  
  Cost of services and other     578       370       1,623       1,054  
  Sales and marketing     1,026       502       2,971       1,320  
  Research and development     485       366       1,384       1,090  
  General and administrative     1,070       843       3,747       2,907  
    Total stock-based compensation     3,512       2,812       11,007       8,894  
                                 
(2) Acquisition, acquired and settlement related asset amortization                          
                                 
  Cost of recurring     472       163       1,378       286  
  Cost of services and other     (8 )     -       36       -  
  Sales and marketing     233       222       646       519  
  Research and development     68       -       136       -  
  General and administrative     59       24       180       47  
    Total acquisition related asset amortization     824       409       2,376       852  
                                 
(3) Acquisition-related expense     182       697       820       1,080  
(4) Patent litigation cost     166       494       786       1,072  
(5) Interest expense on convertible notes     703       874       2,110       1,265  
(6) Amortization of convertible note issuance cost     134       157       402       216  
(7) Tax benefit from release of valuation allowance     -       (572 )     (224 )     (572 )
(8) Gain on extinguishment of convertible note     -       (904 )     -       (904 )
(9) Impairment of asset     -       375       -       375  
                                 
   
CALLIDUS SOFTWARE INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
             
(In thousands)  
(unaudited)  
             
    September 30,     December 31,  
Assets   2012     2011  
             
Current assets:                
  Cash and cash equivalents   $ 6,631     $ 17,383  
  Short-term investments     19,856       35,406  
  Accounts receivable, net     29,490       21,778  
  Deferred income taxes     110       110  
  Prepaid and other current assets     7,773       5,831  
                   
    Total current assets     63,860       80,508  
                 
                 
Property and equipment, net     9,827       6,772  
Goodwill     31,213       24,416  
Intangible assets, net     22,362       17,769  
Deferred income taxes, noncurrent     206       206  
Deposits and other assets     3,212       3,936  
                 
    Total assets   $ 130,680     $ 133,607  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 5,040     $ 3,515  
  Accrued payroll and related expenses     4,011       4,278  
  Accrued expenses     12,118       12,272  
  Deferred income taxes     596       596  
  Deferred revenue     32,794       30,211  
  Capital lease obligations     1,107       1,196  
                   
    Total current liabilities     55,666       52,068  
                 
Deferred revenue, noncurrent     3,450       4,257  
Deferred income taxes, noncurrent     308       197  
Other liabilities     1,881       2,413  
Capital lease obligations, noncurrent     128       915  
Convertible notes     59,215       59,215  
                 
    Total liabilities     120,648       119,065  
                 
Stockholders' equity:                
  Common stock     34       33  
  Additional paid-in capital     252,948       238,798  
  Treasury stock     (14,430 )     (14,430 )
  Accumulated other comprehensive income     282       189  
  Accumulated deficit     (228,802 )     (210,048 )
                   
    Total stockholders' equity     10,032       14,542  
                   
    Total liabilities and stockholders' equity   $ 130,680     $ 133,607  
                 
   
CALLIDUS SOFTWARE INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(unaudited)  
             
    Nine months ended September 30,  
    2012     2011  
       
             
Cash flows from operating activities:                
  Net loss   $ (18,754 )   $ (11,742 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
    Depreciation expense     2,184       2,338  
    Amortization of intangible assets     3,818       2,284  
    Provision for doubtful accounts and service remediation reserves     188       88  
    Stock-based compensation     11,007       8,852  
    Stock-based compensation related to acquisition     -       42  
    Release of valuation allowance     (350 )     -  
    Gain on disposal of property and equipment     (6 )     -  
    Impairment of investments     -       375  
    Amortization of convertible note issuance cost     402       217  
    Gain on extinguishment of convertible notes     -       (904 )
    Net amortization on investments     310       351  
    Acquisition-related adjustment     (1,787 )     -  
      Changes in operating assets and liabilities:                
      Accounts receivable     (7,628 )     (593 )
      Prepaid and other current assets     (1,875 )     1,594  
      Other assets     322       (2,923 )
      Accounts payable     (114 )     (302 )
      Accrued expenses     742       (257 )
      Accrued payroll and related expenses     (267 )     313  
      Accrued restructuring     37       (251 )
      Deferred revenue     1,635       (1,648 )
      Deferred income taxes     111       144  
Net cash used in operating activities     (10,025 )     (2,022 )
                 
  Cash flows from investing activities:                
  Purchases of investments     (16,536 )     (47,864 )
  Proceeds from maturities and sale of investments     31,811       22,595  
  Purchases of property and equipment     (4,927 )     (1,827 )
  Proceeds from disposal of property and equipment     6       -  
  Purchases of intangible assets     (4,485 )     (1,381 )
  Acquisitions, net of cash acquired     (7,721 )     (12,237 )
Net cash used in investing activities     (1,852 )     (40,714 )
                 
  Cash flows from financing activities:                
  Proceeds from issuance of common stock     5,223       5,424  
  Repurchases of common stock     -       (14,430 )
  Repurchase of common stock from employees for payment of taxes onvesting of restricted stock units     (2,079 )     (1,046 )
  Payment of consideration related to acquisitions     (1,160 )     (1,175 )
  Repurchase of convertible notes     -       (19,188 )
  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     (887 )     (896 )
Net cash provided by financing activities     1,067       46,058  
Effect of exchange rates on cash and cash equivalents     58       1  
Net increase (decrease) in cash and cash equivalents     (10,752 )     3,323  
Cash and cash equivalents at beginning of period     17,383       12,830  
Cash and cash equivalents at end of period   $ 6,631     $ 16,153  
                 
   
CALLIDUS SOFTWARE INC.  
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
(In thousands, except for percentages and per share data)  
(unaudited)  
                         
    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
                         
Non-GAAP gross profit reconciliation                    
                         
Gross profit   $ 11,919     $8,759     $33,083     $24,413  
                           
  Profit margin, as a % of total revenues     50 %   42 %   47 %   40 %
Add back:                          
  Non-cash stock-based compensation     931     1,101     2,905     3,577  
  Non-cash amortization of acquired intangible assets     464     163     1,414     286  
Non-GAAP gross profit   $ 13,314     $10,023     $37,402     $28,276  
                           
  Profit margin, as a % of total revenues     56 %   48 %   54 %   46 %
                           
                           
Non-GAAP recurring revenue gross profit reconciliation                          
                           
Recurring revenue gross profit   $ 10,610     $7,652     $30,081     $21,207  
  Recurring revenue profit margin, as a % of recurring revenues     61 %   48 %   57 %   46 %
Add back:                          
  Non-cash stock-based compensation     353     731     1,282     2,523  
  Non-cash amortization of acquired intangible assets     472     163     1,378     286  
Non-GAAP Recurring revenue gross profit   $ 11,435     $8,546     $32,741     $24,016  
  Recurring revenue profit margin, as a % of recurring revenues     65 %   53 %   62 %   52 %
                           
                           
Non-GAAP operating expense reconciliation:                          
                           
Operating expenses   $ 17,202     $13,170     $49,148     $35,355  
  Operating expenses, as a % of total revenues     72 %   63 %   70 %   58 %
Add back:                          
  Non-cash stock-based compensation     (2,581 )   (1,711 )   (8,102 )   (5,317 )
  Non-cash amortization of acquired intangible assets     (360 )   (246 )   (962 )   (566 )
  Acquisition-related expense     (182 )   (697 )   (820 )   (1,080 )
  Patent litigation cost     (166 )   (494 )   (786 )   (1,072 )
  Acquisition-related adjustment     (50 )   -     1,787     -  
  Restructuring     53     (99 )   (561 )   (136 )
Non-GAAP Operating Expenses   $ 13,916     $9,923     $39,704     $ 27,184  
  Non-GAAP Operating expenses, as a % of total revenues     58 %   49 %   57 %   44 %
                           
                           
Non-GAAP operating income (loss) reconciliation:                          
                           
Operating loss   $ (5,283 )   $(4,411 )   $(16,065 )   $(10,942 )
  Operating loss, as a % of total revenues                          
      -22 %   -21 %   -23 %   -18 %
Add back:                          
  Non-cash stock-based compensation     3,512     2,812     11,007     8,894  
  Non-cash amortization of acquired intangible assets     824     409     2,376     852  
  Acquisition-related expense     182     697     820     1,080  
  Patent litigation cost     166     494     786     1,072  
  Acquisition-related adjustment     50     -     (1,787 )   -  
  Restructuring     (53 )   99     561     136  
Non-GAAP Operating income (loss)   $ (602 )   $100     $(2,302 )   $1,092  
  Non-GAAP Operating income (loss), as a % of total revenues     -3 %   0 %   -3 %   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     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
                         
Non-GAAP net loss reconciliation:                        
                         
Net loss   $ (6,464 )   $ (4,571 )   $ (18,754 )   $ (11,742 )
  Net loss, as a % of total revenues     -27 %     -22 %     -27 %     -19 %
Add back:                                
  Non-cash stock-based compensation     3,512       2,812       11,007       8,894  
  Non-cash amortization of acquired intangible assets     824       409       2,376       852  
  Acquisition related expenses     182       697       820       1,080  
  Patent litigation costs     166       494       786       1,072  
  Acquisition-related adjustment     50       -       (1,787 )     -  
  Restructuring     (53 )     99       561       136  
  Interest expense on convertible notes     703       874       2,110       1,265  
  Amortization of convertible note issuance cost     134       157       402       216  
  Tax benefit from release of valuation allowance     -       (572 )     (224 )     (572 )
  Gain on extinguishment of convertible note     -       (904 )     -       (904 )
  Impairment of asset     -       375       -       375  
Non-GAAP Net income (loss)   $ (946 )   $ (130 )   $ (2,703 )   $ 672  
  Non-GAAP Net income (loss), as a % of total revenues     -4 %     -1 %     -4 %     1 %
                                 
                                 
Non-GAAP net income (loss) per share reconciliation:                                
                                 
Net loss per basic and diluted share   $ (0.18 )   $ (0.14 )   $ (0.53 )   $ (0.36 )
Add back:                                
  Non-cash stock-based compensation     0.10       0.09       0.31       0.27  
  Non-cash amortization of acquired intangible assets     0.02       0.01       0.07       0.03  
  Acquisition related expenses     0.01       0.02       0.02       0.03  
  Patent litigation costs     -       0.02       0.02       0.03  
  Acquisition-related adjustment     -       -       (0.05 )     -  
  Restructuring     -       -       0.02       -  
  Interest expense on convertible notes     0.02       0.03       0.06       0.04  
  Amortization of convertible note issuance cost     -       -       0.01       0.01  
  Tax benefit from release of valuation allowance     -       (0.02 )     (0.01 )     (0.02 )
  Gain on extinguishment of convertible note     -       (0.03 )     -       (0.03 )
  Impairment of asset     -       0.01       -       0.01  
Non-GAAP net income (loss) per basic share   $ (0.03 )   $ (0.01 )   $ (0.08 )   $ 0.01  
                                 
Non-GAAP net income (loss) per diluted share   $ (0.03 )     - $     $ (0.08 )   $ 0.02  
                                 
                                 
Basic and fully diluted shares reconciliation:                                
                                 
Basic shares     35,853       32,327       35,070       32,826  
Add back:                                
  Weighted average effect of dilutive securities     -       10,740       -       6,877  
Diluted shares     35,853       43,067       35,070       39,703  
                                 

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