SOURCE: Callidus Software Inc.

Callidus Software Inc.

October 31, 2013 16:01 ET

CallidusCloud Reports 34% SaaS Billings Growth on Record $30.7 Million Revenue

SaaS Revenue Grows 26%: Generates $5.2 Million in Cash From Operations

PLEASANTON, CA--(Marketwired - Oct 31, 2013) - Callidus Software Inc. (NASDAQ: CALD), a leading provider of Cloud sales and marketing effectiveness software, today announced financial results for the third quarter ended September 30, 2013.

"I was very pleased with our Q3 performance. We enjoyed record SaaS bookings and record total revenue. We achieved record recurring revenue margins, a record 12 percent non-GAAP operating income, and our gross margins expanded once again," said Leslie Stretch, President and CEO, CallidusCloud. "I'm excited about the opportunities ahead as we continue to innovate and bring new Cloud offerings to market."

Financial Highlights for the Third Quarter 2013
Total revenue was $30.7 million for the third quarter, an increase of 28% over the prior year. Total recurring revenue was $21.1 million, which includes SaaS revenue of $17.1 million and maintenance revenue of $4.0 million. SaaS revenue increased 26% over the prior year and increased 8% sequentially from Q2 of this year. Services and other revenue of $8.8 million (net of a one-time benefit related to service revenue), increased 38% compared to the same quarter in the prior year.

GAAP Performance

  • Total gross margin was 62% compared to 50% in the same quarter prior year. Recurring revenue gross margin was 65% compared to 60% in the same quarter prior year.

  • Net loss was $1.4 million, or ($0.04) per share, compared to a net loss of $6.4 million, or ($0.18) per share, for the same period prior year.

  • Days Sales Outstanding (DSO) on a gross basis improved to 67 days from 85 days in the prior quarter. Adjusting for a $2.3 million increase in total deferred revenue, DSO on a net basis was 59 days compared to 71 days in the second quarter of 2013.

  • Cash and short term investments ended the quarter at $34.1 million, compared to $27.2 million in the second quarter of 2013.

  • Cash generated from operations was $5.2 million and $7.6 million for the current quarter and year to date 2013, respectively.

  • Deferred revenue increased to a record $49.6 million which represents a 48% year over year increase in SaaS deferred revenue.

Non-GAAP Performance
The following non-GAAP measures are described below and reconciled to the corresponding GAAP measures at the end of this release.

  • Total gross margin was 65% compared to 56% for the same quarter in the prior year. Recurring revenue gross margin was 69% compared to 65% for the same quarter in the prior year.

  • Operating income was $3.7 million compared to an operating loss of $0.6 million for the same quarter in the prior year.

  • Net income was $3.3 million, or $0.07 per fully diluted share, compared to a net loss of $0.9 million, or ($0.03) per fully diluted share for the same quarter in the prior year.

Business Highlights for the Third Quarter 2013

  • Gartner research released the inaugural Magic Quadrant for the Sales Performance Management market. CallidusCloud is the leader in the Magic Quadrant based on our ability to execute and completeness of our vision.

  • CallidusCloud sponsored key industry events including the World Art Work Spotlight on Sales Compensation in Chicago, Boxworks in San Francisco, the AppDirect Partner Summit in San Francisco and the Blues Sales Compensation and Channel Performance Conference in Florida.

  • CallidusCloud was honored with 20 awards at the International Business Awards and the American Business Awards held in Barcelona, San Francisco and Chicago. Awards included Most Innovative Technology Company of the Year, Company of the Year, New Product of the Year, Marketing Team of the Year and Best Website.

  • CallidusCloud announced Thunderbridge, a new innovative Big Sales Data solution set to revolutionize critical sales decision making by providing industry specific data visualizations.

Financial Outlook for 2013 - Fourth Quarter and Full Year
For the fourth quarter of 2013, the Company expects total revenue to be between $28.0 to $29.0 million. GAAP operating loss is expected to be between $1.9 and $2.3 million with ($0.10) to ($0.11) GAAP loss per share. Non-GAAP operating income is expected to be between $1.6 and $2.2 million with $.03 to $.04 non-GAAP fully diluted earnings per share

For the full year of 2013 the Company expects total revenue to be between $110.2 to $111.2 million, representing an increase to previous guidance of $108.5 to $109.5 million. GAAP operating loss is expected to be between $12.0 and $12.4 million with ($0.48) to ($0.49) GAAP loss per share. Non-GAAP operating income is expected to be between $5.0 to $5.6 million with $0.06 and $0.07 non-GAAP fully diluted earnings per share. This represents an improvement from the prior guidance range of $3.5 to $4.5 million non-GAAP operating income for the year.

Preliminary Outlook for 2014
For the full year of 2014, the Company expects total revenue to be between $125.0 to $126.0 million, and is targeting SaaS revenue growth of over 25%.

Conference Call
In conjunction with this announcement CallidusCloud will host a conference call at 1:30 p.m. Pacific Daylight Time (PDT) today to discuss the third quarter 2013 results and outlook for the fourth quarter 2013 and full year 2013. The conference call will be available via live webcast at the Investor Relations section of CallidusCloud's website.

Webcast site: http://www.calliduscloud.com/about-us/investor-relations/
Dial-in: 866-318-8614 (International callers: 617-399-5133)
Passcode: 23028297
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 accelerate and maximize their lead to money process with sales and marketing effectiveness cloud software. CallidusCloud maximizes and accelerates sales and marketing processes for over 2,000 leading organizations. Small, medium and large enterprises across multiple industries and geographies rely on CallidusCloud for 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 revenues, operating expenses, stock-based compensation expense, amortization of acquired intangibles, restructuring, and patent litigation defense costs 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, relative growth of our recurring revenue, potential decreases in customer spending, uncertainty regarding purchasing trends in the cloud software market, customer cancellations or non-renewal of maintenance contracts or on-demand services, our potential inability to manage effectively any growth we experience, our ability to develop new products and services, increased competition or new entrants in the marketplace, potential impact of acquisitions and investments, and other risks detailed in reports we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K 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

In this release, CallidusCloud has provided 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. CallidusCloud 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 CallidusClouds' operating performance. CallidusCloud 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 CallidusClouds' industry, many of which present non-GAAP financial measures that may resemble our non-GAAP financial measures. Our 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.

©2013. Callidus Software Inc. All rights reserved. Callidus, Callidus Software, the Callidus Software logo, CallidusCloud, the CallidusCloud logo, TrueComp Manager, ActekSoft, ACom3, Salesforce Assessments, iCentera, Webcom, Litmos, the Litmos logo, LeadFormix, 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
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013     2012  
Revenues:                                
  Recurring   $ 21,119     $ 17,533     $ 60,359     $ 52,446  
  Services and other     9,559       6,392       21,791       17,273  
    Total revenues     30,678       23,925       82,150       69,719  
Cost of revenues:                                
  Recurring (1) (2)     7,303       6,989       21,687       22,434  
  Services and other (1) (2)     4,475       5,078       14,436       14,266  
    Total cost of revenues     11,778       12,067       36,123       36,700  
Gross profit     18,900       11,858       46,027       33,019  
                                 
Operating expenses:                                
  Sales and marketing (1) (2)     8,981       8,322       24,516       23,544  
  Research and development (1) (2)     4,146       3,947       12,984       12,037  
  General and administrative (1) (2) (3) (4)     5,757       4,785       16,889       14,639  
  Acquisition related contingent consideration     -       50       -       (1,787 )
  Restructuring     141       (53 )     1,699       561  
    Total operating expenses     19,025       17,051       56,088       48,994  
                                 
Operating loss     (125 )     (5,193 )     (10,061 )     (15,975 )
Interest income and other income (expense) (5) (6)     (831 )     (721 )     (2,670 )     (2,460 )
                                 
Loss before provision (benefit) for income taxes     (956 )     (5,914 )     (12,731 )     (18,435 )
Provision (benefit) for income taxes (7)     457       444       1,700       213  
                                 
Net loss   $ (1,413 )   $ (6,358 )   $ (14,431 )   $ (18,648 )
                                 
Net loss per share - basic and diluted                                
  Net loss per share   $ (0.04 )   $ (0.18 )   $ (0.38 )   $ (0.53 )
                                 
Shares used in basic and diluted per share computation     38,648       35,853       37,873       35,070  
                                 
(1) Stock-based compensation included in amounts above by category:                          
  Cost of recurring     234       351       612       1,280  
  Cost of services     218       573       860       1,623  
  Sales and marketing     769       997       1,924       2,937  
  Research and development     384       477       1,317       1,376  
  General and administrative     939       1,024       3,632       3,701  
    Total stock-based compensation     2,544       3,422       8,345       10,917  
                                 
(2) Acquisition, acquired and settlement related asset amortization                          
  Cost of recurring     521       540       1,548       1,514  
  Cost of services     12       (6 )     37       38  
  Sales and marketing     234       233       693       646  
  General and administrative     60       60       177       180  
    Total acquisition related asset amortization     827       827       2,455       2,378  
                                 
(3) Acquisition related expense     -       183       -       820  
(4) Patent litigation costs     341       166       1,002       786  
(5) Interest expense on convertible notes     704       704       2,110       2,110  
(6) Amortization of convertible note issuance costs     134       134       402       402  
(7) Tax benefit from release of valuation allowance     -       -       -       (224 )
                                 
                                 
   
   
CALLIDUS SOFTWARE INC.  
CONSOLIDATED BALANCE SHEETS  
                 
(In thousands except per share data)  
                 
    September 30,     December 31,  
    2013     2012  
ASSETS  
Current assets:                
  Cash and cash equivalents   $ 25,192     $ 16,400  
  Short-term investments     8,886       12,771  
  Accounts receivable, net     23,304       22,567  
  Deferred income taxes     40       40  
  Prepaid and other current assets     7,761       6,718  
    Total current assets     65,183       58,496  
                 
Property and equipment, net     12,381       10,580  
Goodwill     31,207       31,207  
Intangible assets, net     18,083       21,196  
Deferred income taxes, noncurrent     392       392  
Deposits and other assets     3,243       2,872  
    Total assets   $ 130,489     $ 124,743  
             
   
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:                
  Accounts payable   $ 1,415     $ 4,705  
  Accrued payroll and related expenses     5,868       5,854  
  Accrued expenses     6,635       8,164  
  Deferred income taxes     944       944  
  Deferred revenue     42,054       35,483  
  Capital lease obligations     1,232       921  
    Total current liabilities     58,148       56,071  
                 
Deferred revenue, noncurrent     7,592       3,702  
Deferred income taxes, noncurrent     345       160  
Other liabilities     1,908       2,159  
Capital lease obligations, noncurrent     1,460       8  
Convertible notes     59,215       59,215  
    Total liabilities     128,668       121,315  
             
Stockholders' equity:                
  Common stock     39       34  
  Additional paid-in capital     268,228       255,331  
  Treasury stock     (14,430 )     (14,430 )
  Accumulated other comprehensive income     161       239  
  Accumulated deficit     (252,177 )     (237,746 )
    Total stockholders' equity     1,821       3,428  
    Total liabilities and stockholders' equity   $ 130,489     $ 124,743  
             
             
CALLIDUS SOFTWARE INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
  Nine Months Ended
September 30,
    2013     2013  
Cash flows from operating activities:                
  Net loss   $ (14,431 )   $ (18,648 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation expense     3,278       2,184  
    Amortization of intangible assets     3,621       3,818  
    Provision for doubtful accounts and service remediation reserves     846       188  
    Stock-based compensation     8,345       10,917  
    Release of valuation allowance     -       (350 )
    Gain on disposal of property and equipment     2       (6 )
    Amortization of convertible notes issuance cost     402       402  
    Net amortization on investments     63       310  
    Acquisition-related contingent consideration     -       (1,787 )
    Changes in operating assets and liabilities:                
      Accounts receivable     (1,583 )     (7,627 )
      Prepaid and other current assets     (1,043 )     (1,809 )
      Other assets     (773 )     322  
      Accounts payable     (3,250 )     (129 )
      Accrued expenses     1,517       741  
      Accrued payroll and related expenses     462       (267 )
      Accrued restructuring     (476 )     37  
      Deferred revenue     10,461       1,635  
      Deferred income taxes     185       111  
Net cash provided by (used in) operating activities     7,626       (9,958 )
                 
Cash flows from investing activities:                
  Purchases of investments     (5,634 )     (16,536 )
  Proceeds from maturities and sale of investments     9,450       31,811  
  Purchases of property and equipment     (1,714 )     (4,927 )
  Proceeds from disposal of property and equipment     -       6  
  Purchases of intangible assets     (634 )     (4,485 )
  Acquisitions, net of cash acquired     -       (7,721 )
Net cash provided by (used in) investing activities     1,468       (1,852 )
                 
Cash flows from financing activities:                
  Proceeds from issuance of common stock     5,375       5,222  
  Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units    
(818
)    
(2,079
)
  Payment of consideration related to acquisitions     (3,078 )     (1,160 )
  Repayment of debt assumed through acquisition     -       (30 )
  Payment of principal under capital leases     (1,709 )     (887 )
Net cash (used in) provided by financing activities     (230 )     1,066  
Effect of exchange rates on cash and cash equivalents     (72 )     58  
Net increase (decrease) in cash and cash equivalents     8,792       (10,686 )
Cash and cash equivalents at beginning of period     16,400       17,383  
Cash and cash equivalents at end of period   $ 25,192     $ 6,697  
                 
                 
   
   
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,  
    2013     2012     2013     2012  
                                 
Non-GAAP gross profit reconciliation                                
                                 
Gross profit   $ 18,900     $ 11,858     $ 46,027     $ 33,019  
                                 
  Profit margin, as a % of total revenues     62 %     50 %     56 %     47 %
Add back:                                
  Non-cash stock-based compensation     452       924       1,472       2,903  
  Non-cash amortization of acquired intangible assets    
533
     
534
     
1,585
     
1,552
 
Non-GAAP gross profit   $ 19,885     $ 13,316     $ 49,084     $ 37,474  
                                 
  Profit margin, as a % of total revenues     65 %     56 %     60 %     54 %
                                 
                                 
Non-GAAP recurring revenue gross profit reconciliation                                
                                 
Recurring revenue gross profit   $ 13,816     $ 10,544     $ 38,672       30,012  
  Recurring revenue profit margin, as a % ofrecurring revenues    
65
%    
60
%    
64
%    
57
%
Add back:                                
  Non-cash stock-based compensation     234       351       612       1,280  
  Non-cash amortization of acquired intangible assets    
521
     
540
     
1,548
     
1,514
 
Non-GAAP Recurring revenue gross profit   $ 14,571     $ 11,435     $ 40,832     $ 32,806  
  Recurring revenue profit margin, as a % ofrecurring revenues    
69
%    
65
%    
68
%    
63
%
                                 
                                 
Non-GAAP operating expense reconciliation:                                
                                 
Operating expenses   $ 19,025       17,051     $ 56,088       48,994  
  Operating expenses, as a % of totalrevenues    
62
%    
71
%    
68
%    
70
%
Add back:                                
  Non-cash stock-based compensation     (2,092 )     (2,498 )     (6,873 )     (8,014 )
  Non-cash amortization of acquired intangible assets    
(294
)    
(293
)    
(870
)    
(826
)
  Acquisition-related expense     -       (183 )     -       (820 )
  Patent litigation and settlement costs     (341 )     (166 )     (1,002 )     (786 )
  Acquisition-related adjustment     -       (50 )     -       1,787  
  Restructuring     (141 )     53       (1,699 )     (561 )
Non-GAAP Operating Expenses   $ 16,157     $ 13,914     $ 45,644     $ 39,774  
  Non-GAAP Operating expenses, as a %of total revenues    
53
%    
58
%    
56
%    
57
%
                                 
                                 
Non-GAAP operating income (loss) reconciliation:                                
                                 
Operating loss   $ (125 )     (5,193 )   $ (10,061 )     (15,975 )
  Operating loss, as a % of totalrevenues    
0
%    
-22
%    
-12
%    
-23
%
Add back:                                
  Non-cash stock-based compensation     2,544       3,422       8,345       10,917  
  Non-cash amortization of acquired intangible assets    
827
     
827
     
2,455
     
2,378
 
  Acquisition-related expense     -       183       -       820  
  Patent litigation and settlement costs     341       166       1,002       786  
  Acquisition-related adjustment     -       50       -       (1,787 )
  Restructuring     141       (53 )     1,699       561  
Non-GAAP Operating income (loss)   $ 3,728     $ (598 )   $ 3,440     $ (2,300 )
  Non-GAAP Operating income (loss), as a %of total revenues    
12
%    
-2
%    
4
%    
-3
%
                                 
                                 
   
   
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,  
    2013     2012     2013     2012  
                                 
Non-GAAP net loss reconciliation:                                
                                 
Net loss   $ (1,413 )   $ (6,358 )   $ (14,431 )     (18,648 )
  Net loss, as a % of total revenues    
-5
%    
-27
%    
-18
%    
-27
%
Add back:                                
  Non-cash stock-based compensation     2,544       3,422       8,345       10,917  
  Non-cash amortization of acquired intangible assets    
827
     
827
     
2,455
     
2,378
 
  Acquisition related expenses     -       183       -       820  
  Patent litigation and settlement costs     341       166       1,002       786  
  Acquisition-related adjustment     -       50       -       (1,787 )
  Restructuring     141       (53 )     1,699       561  
  Interest expense on convertible notes     704       704       2,110       2,110  
  Amortization of convertible note issuance cost     134       134       402       402  
  Tax benefit from release of valuation allowance     -       -       -       (224 )
Non-GAAP Net income (loss)   $ 3,278     $ (925 )   $ 1,582     $ (2,685 )
  Non-GAAP Net income (loss), as a %of total revenues    
11
%    
-4
%    
2
%    
-4
%
                                 
                                 
Non-GAAP net income (loss) per share reconciliation:                                
                                 
Net loss per basic and diluted share   $ (0.04 )     (0.18 )   $ (0.38 )   $ (0.53 )
Add back:                                
  Non-cash stock-based compensation     0.07       0.10       0.22       0.30  
  Non-cash amortization of acquired intangible assets     0.02       0.02       0.06       0.07  
  Acquisition related expenses     -       0.01       -       0.02  
  Patent litigation and settlement costs     0.01       -       0.03       0.02  
  Acquisition-related adjustment     -       -       -       (0.05 )
  Restructuring     -       -       0.04       0.02  
  Interest expense on convertible notes     0.02       0.02       0.06       0.06  
  Amortization of convertible note issuance cost     -       -       0.01       0.01  
  Tax benefit from release of valuation allowance     -       -       -       -  
  Diluted shares impact on non-GAAP basis     (0.01 )     -       (0.01 )     -  
Non-GAAP net income (loss) per diluted share   $ 0.07     $ (0.03 )   $ 0.03     $ (0.08 )
                                 
                                 
Basic and fully diluted shares reconciliation:                                
                                 
Basic shares     38,648       35,853       37,873       35,070  
Add back:                                
  Weighted average effect of dilutive securities     9,383       -       9,037       -  
Diluted shares     48,031       35,853       46,910       35,070  
                                 
                                 
 
 
CALLIDUS SOFTWARE INC.
FINANCIAL OUTLOOK
(In thousands)
(unaudited)
 

The guidance figures provided below and elsewhere in this press release are forward-looking statements, reflect a number of estimates, assumptions and other uncertainties, and are approximate in nature because of the company's future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and the company assumes no obligation to update it.

     
     
  Three months ended
  December 31, 2013
  GAAP Non-GAAP
     
Total Revenue $28,000 - $29,000 $28,000 - $29,000
Operating Income (a) ($2,300) - ($1,900) $1,600 - $2,200
Net income (loss) per diluted share (c) ($0.11) - ($0.10) $0.03 - $0.04
     
     
     
  Twelve months ended
  December 31, 2013
  GAAP Non-GAAP
     
Total Revenue $110,200 - $111,200 $110,200 - $111,200
Operating Income (b) ($12,400) - ($12,000) $5,000 - $5,600
Net income (loss) per diluted share (c) ($0.49) - ($0.48) $0.06 - $0.07
   
(a) Estimated non-GAAP amounts above for the three months ending December 31, 2013, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $825 - $875 thousand, estimated stock-based compensation expense of approximately $2.7 - $2.9 million, patent litigation and settlement costs of approximately $350 - $390 thousand.
   
(b) Estimated non-GAAP amounts above for the twelve months ending December 31, 2013, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $3.3 - $3.4 million, estimated stock-based compensation expense of approximately $11.0 - $11.3 million, patent litigation and settlement costs of approximately $1.35 - $1.45 million, and restructuring expense of approximately $1.7 - $1.9 million.
   
(c) Non-GAAP EPS is on a fully diluted basis.

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