SOURCE: Callidus Software Inc.

Callidus Software Inc.

July 31, 2014 16:05 ET

CallidusCloud Reports Record Q2 Revenue of $32.5 Million, a 25% Year-Over-Year Increase

Record SaaS Revenue of $19.6 Million, a 24% Year-Over-Year Increase

PLEASANTON, CA--(Marketwired - Jul 31, 2014) - Callidus Software Inc. (NASDAQ: CALD), a leading provider of Cloud sales and marketing effectiveness software, today announced financial results for the second quarter ended June 30, 2014.

"I was pleased with our performance in Q2, and in particular the acceleration of our SaaS revenue. We had record total revenue, record recurring revenue, our margins expanded again and we also significantly strengthened our balance sheet," said Leslie Stretch president and CEO of CallidusCloud. "We held our largest and most successful user conference to date, we expanded our international presence in Japan and Mexico and we added to our partner channel. As a result I believe we are well positioned for continued future success."

Financial Highlights for the Second Quarter 2014
Total revenue was $32.5 million for the second quarter, an increase of 25%. Total recurring revenue was $23.7 million, which includes SaaS revenue of $19.6 million and maintenance revenue of $4.1 million. SaaS revenue increased 24% over the same quarter in the prior year. Services and license revenue of $8.8 million, consisting of $7.6 million in services revenue and $1.2 million in license revenue, increased 40% compared to the same quarter in the prior year. Cash and short-term investments were nearly $42 million, a 22% increase from the prior quarter.

GAAP Performance

  • Recurring revenue gross margin was 68% compared to 65% in the same quarter in the prior year.

  • Operating loss was $3.0 million compared to $4.3 million in the same quarter in the prior year.

  • During the quarter a gain of $3.9 million was recognized as other income on the sale of select domain names and trademarks.

  • Net income was $250,000, or breakeven on a per share basis, compared to a net loss of $6.4 million, or ($0.17) per share, for the same quarter in the prior year.

  • Cash generated from operations was $1.0 million in the current quarter compared to $5.2 million in the same quarter in the prior year.

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

  • Recurring revenue gross margin was 72% compared to 68% for the same quarter in the prior year.

  • Operating income was $1.4 million compared to $0.4 million for the same quarter in the prior year.

  • Net income was $1.0 million, or $0.02 per fully diluted share, compared to a net loss of $0.9 million, or ($0.02) per fully diluted share for the same quarter in the prior year.

Business Highlights for the Second Quarter 2014

  • Registrations nearly doubled compared to the prior year at C3, CallidusCloud's annual user conference in May. There were over 70 breakout sessions covering all aspects of sales, marketing and learning featuring customer stories, product deep dives, and industry thought leaders. Due to the growth in attendees C3 North America will be held at the Wynn Resort May 11th-13th 2015.

  • CallidusCloud sponsored key industry events including SAP Insider CRM 2014, NetSuite's Suite World, the Gartner 360 Summit, Sirius Decisions Summit 2014, Forrester Forum for Marketing Leaders in EMEA, Salesforce 1 world tour in Atlanta, Boston, Chicago and London, and DocuSign Momentum in the UK.

  • CallidusCloud further expanded its partner ecosystem with 9 new resellers and alliance partners including Appirio, a leading global Cloud services company.

Financial Outlook for 2014 - Third Quarter and Full Year
For the third quarter of 2014, the Company expects total revenue to be between $33.0 million and $34.0 million. GAAP operating loss is expected to be between $1.9 million and $2.7 million with ($0.04) to ($0.07) GAAP loss per share. Non-GAAP operating income is expected to be between $2.0 million and $2.5 million with non-GAAP fully diluted earnings per share between $0.03 and $0.05.

For the full year of 2014, the Company is raising the lower end of previous guidance to $129.0 million and maintaining the higher end at $132.5 million. GAAP operating loss is expected to be between $8.6 million and $11.6 million with ($0.12) to ($0.18) GAAP loss per share. Non-GAAP operating income is expected to be between $7.0 million and $9.0 million with non-GAAP fully diluted earnings per share between $0.12 and $0.16.

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 second quarter 2014 results and outlook for the third quarter 2014 and full year 2014. 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: 866-510-0707 (International callers: 617-597-5376)
Passcode: 82138553
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®, the leading provider of sales and marketing effectiveness software. CallidusCloud enables organizations to accelerate and maximize their lead to money process with a complete suite of solutions that identify the right leads, ensure proper territory and quota distribution, enable sales forces, automate configure price quote, and streamline sales compensation -- driving bigger deals, faster. Over 2500 leading organizations, across all industries, rely on CallidusCloud to optimize the lead to money process to close more deals for more money in record time.

For more information, please visit www.calliduscloud.com.

Non-GAAP Financial Measures
In this release, CallidusCloud has provided additional 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 operating loss, 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 CallidusCloud's industry, many of which present non-GAAP financial measures that may resemble our non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Our non-GAAP measures reflect adjustments based on the following items:

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP gross profit, recurring revenue gross profit, operating expenses and net income (loss). We believe the exclusion of stock-based compensation expenses provides a useful comparison of our operating results to our peers.

Restructuring and other expenses: We have excluded the effect of restructuring and other expenses from our non-GAAP operating expenses and net income (loss). Restructuring and other expenses consist of employee severance, facility exit costs and incremental depreciation expense as a result of the change in the estimated useful life of assets to be abandoned and are not a component of ongoing operations. We feel it is useful to investors to understand the effects of these items on our total operating profit and expense.

Patent litigation costs: We have excluded the effect of patent infringement and litigation defense costs from our non-GAAP operating expenses and net income (loss). We believe patent defense costs are not indicative of our ongoing business operations, and are inconsistent in amount and frequency; as such we exclude patent litigation defense costs during our evaluation of our business performance.

Convertible note interest expense and amortization of convertible note issuance costs: We have excluded the costs of convertible note interest expense, redemption inducement and issuance costs from our non-GAAP operating expenses and net income (loss). We believe that these costs are not indicative of our continuing operations or meaningful in evaluating current versus past business results.

Amortization or sale of acquired intangible assets: We have excluded the effect of amortization or sale of acquired intangibles which include developed technology, customer relationships, trade names, domain names, patents and licenses from our non-GAAP gross profit, recurring revenue gross profit, operating expenses, other income and expense and net income (loss). Amortization or sale of acquired intangibles is significantly affected by timing, and as such, can be inconsistent in amount and nature.

Note on Forward-Looking Statements

The forward-looking statements included in this press release, including for example discussion of our commercial prospects, estimates of future revenues, operating income/loss and expenses, earnings per share, stock-based compensation expenses, amortization of acquired intangible assets, restructuring expenses, and patent litigation 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, changes in staffing levels, and other risks detailed in periodic 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 415-445-3238, or from the Investor Relations section of CallidusCloud's website (http://www.calliduscloud.com/about-us/investor-relations/). Actual results may differ materially from those presently reported. We assume no obligation to update the information contained in this release.

©2014. Callidus Software Inc. All rights reserved. Callidus, Callidus Software, the Callidus Software logo, CallidusCloud, the CallidusCloud logo, TrueComp Manager, ActekSoft, ACom3, iCentera, Webcom, Litmos, the Litmos logo, LeadFormix, Rapid Intake, 6FigureJobs and LeadRocket 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 June 30,     Six Months Ended June 30,  
    2014     2013     2014     2013  
Revenue:                                
  Recurring   $ 23,684     $ 19,616     $ 45,934     $ 39,240  
  Services and license     8,831       6,314       17,558       12,232  
    Total revenue     32,515       25,930       63,492       51,472  
Cost of revenue:                                
  Recurring     7,502       6,931       14,790       14,384  
  Services and license     5,628       4,739       10,738       9,961  
    Total cost of revenue     13,130       11,670       25,528       24,345  
Gross profit     19,385       14,260       37,964       27,127  
                                 
Operating expenses:                                
  Sales and marketing     11,808       7,891       22,535       15,535  
  Research and development     5,045       4,409       9,918       8,838  
  General and administrative     5,135       5,946       10,221       11,132  
  Restructuring and other     404       315       404       1,558  
    Total operating expenses     22,392       18,561       43,078       37,063  
                                 
Operating loss     (3,007 )     (4,301 )     (5,114 )     (9,936 )
Interest income and other income (expense)     3,787       (995 )     3,577       (1,839 )
                                 
Income (loss) before provision for income taxes     780       (5,296 )     (1,537 )     (11,775 )
Provision for income taxes     530       1,119       680       1,243  
                                 
Net income (loss)   $ 250     $ (6,415 )   $ (2,217 )   $ (13,018 )
                                 
Net income (loss) per share                                
  Basic   $ 0.00     $ (0.17 )   $ (0.05 )   $ (0.35 )
  Diluted   $ 0.00     $ (0.17 )   $ (0.05 )   $ (0.35 )
                                 
Weighted average shares used in computing net income (loss) per share                                
  Basic     46,648       37,813       46,298       37,478  
  Diluted     48,061       37,813       46,298       37,478  
                                   

Includes stock-based compensation, amortization of acquired intangible assets, patent litigation costs, interest expense on convertible notes, amortization of convertible note issuance costs, restrucuring and other expenses and gain on sale of domain names and trademarks as follows:

 
    Three Months Ended June 30,   Six Months Ended June 30,
    2014     2013   2014     2013
Cost of revenues:                            
  Recurring   $ 769     $ 719   $ 1,498     $ 1,405
  Services and license     270       249     496       667
Operating expenses:                            
  Sales and marketing     1,054       813     1,883       1,614
  Research and development     474       467     912       933
  General and administrative     1,473       2,127     2,855       3,471
  Restructuring and other     404       315     404       1,558
Interest income and other income (expense)     (3,728 )     837     (3,527 )     1,674
    Total   $ 716     $ 5,527   $ 4,521     $ 11,322
                             
                             
   
   
CALLIDUS SOFTWARE INC.  
CONSOLIDATED BALANCE SHEETS  
   
(In thousands)  
   
    June 30,     December 31,  
    2014     2013  
ASSETS            
Current assets:                
  Cash and cash equivalents   $ 37,914     $ 28,295  
  Short-term investments     4,008       7,866  
  Accounts receivable, net     29,366       29,216  
  Deferred income taxes     187       -  
  Prepaid and other current assets     6,523       6,232  
    Total current assets     77,998       71,609  
                 
Property and equipment, net     13,637       11,351  
Goodwill     32,791       31,207  
Intangible assets, net     17,066       16,995  
Deferred income taxes, noncurrent     498       405  
Deposits and noncurrent assets     1,913       2,626  
  Total assets   $ 143,903     $ 134,193  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 2,250     $ 2,987  
  Accrued payroll and related expenses     6,218       7,377  
  Accrued expenses     8,266       5,395  
  Deferred income taxes     1,159       1,159  
  Deferred revenue     49,066       46,222  
  Capital lease obligations     1,211       1,308  
    Total current liabilities     68,170       64,448  
                 
Deferred revenue, noncurrent     11,100       10,432  
Deferred income taxes, noncurrent     196       155  
Capital lease obligations, noncurrent     668       987  
Convertible notes     -       14,197  
Revolving line of credit     2,982       -  
Other noncurrent liabilities     1,532       1,921  
    Total liabilities     84,648       92,140  
                 
Stockholders' equity:                
  Common stock     48       45  
  Additional paid-in capital     334,831       315,430  
  Treasury stock     (14,430 )     (14,430 )
  Accumulated other comprehensive income     180       165  
  Accumulated deficit     (261,374 )     (259,157 )
    Total stockholders' equity     59,255       42,053  
    Total liabilities and stockholders' equity   $ 143,903     $ 134,193  
                 
                 
   
   
CALLIDUS SOFTWARE INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
    Six Months Ended June 30,  
    2014     2013  
Cash flows from operating activities:                
  Net loss   $ (2,217 )   $ (13,018 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
    Depreciation expense     2,564       2,109  
    Amortization of intangible assets     2,525       2,414  
    Gain on sale of intangible assets     (3,862 )     -  
    Provision for doubtful accounts     480       314  
    Stock-based compensation     4,924       5,801  
    Release of valuation allowance     (149 )     -  
    Loss on disposal of property and equipment     -       3  
    Amortization of convertible notes issuance cost     58       268  
    Net amortization on investments     15       46  
    Changes in operating assets and liabilities:                
      Accounts receivable     (243 )     86  
      Prepaid and other current assets     (291 )     (272 )
      Other noncurrent assets     401       (472 )
      Accounts payable     (706 )     (3,201 )
      Accrued expenses     1,553       986  
      Accrued payroll and related expenses     (1,149 )     (431 )
      Accrued restructuring and other expenses     (50 )     (578 )
      Deferred revenue     2,832       8,203  
      Deferred income taxes     (239 )     118  
Net cash provided by operating activities     6,446       2,376  
                 
Cash flows from investing activities:                
  Purchases of investments     (1,209 )     (5,634 )
  Proceeds from maturities and sale of investments     5,050       9,450  
  Purchases of property and equipment     (4,018 )     (1,356 )
  Purchases of intangible assets     (743 )     (364 )
  Proceeds from sales of intangible assets, net of expenses     4,651       -  
  Acquisitions, net of cash acquired     (2,402 )     -  
Net cash provided by investing activities     1,329       2,096  
                 
Cash flows from financing activities:                
  Proceeds from issuance of common stock     1,975       2,168  
  Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units     (1,439 )     (490 )
  Proceeds from line of credit     2,982       -  
  Payment of consideration related to acquisitions     (630 )     (3,078 )
  Repayment of debt     (645 )     -  
  Payment of principal under capital leases     (416 )     (1,047 )
Net cash provided by (used in) financing activities     1,827       (2,447 )
Effect of exchange rates on cash and cash equivalents     17       (126 )
Net increase in cash and cash equivalents     9,619       1,899  
Cash and cash equivalents at beginning of period     28,295       16,400  
Cash and cash equivalents at end of period   $ 37,914     $ 18,299  
                 
                 
   
   
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,  
    2014     2013     2014     2013  
                                 
Non-GAAP gross profit reconciliation                                
                                 
Gross profit   $ 19,385     $ 14,260     $ 37,964     $ 27,127  
                                 
  Gross margin     60 %     55 %     60 %     53 %
Add back:                                
  Non-cash stock-based compensation     448       440       844       1,020  
  Non-cash amortization of acquired intangible assets     591       528       1,150       1,052  
Non-GAAP gross profit   $ 20,424     $ 15,228     $ 39,958     $ 29,199  
                                 
  Gross margin     63 %     59 %     63 %     57 %
                                 
                                 
Non-GAAP recurring revenue gross profit reconciliation                                
                                 
Recurring revenue gross profit   $ 16,182     $ 12,685     $ 31,144       24,856  
                                 
  Recurring revenue gross margin     68 %     65 %     68 %     63 %
Add back:                                
  Non-cash stock-based compensation     192       204       374       378  
  Non-cash amortization of acquired intangible assets     577       515       1,124       1,027  
Non-GAAP Recurring revenue gross profit   $ 16,951     $ 13,404     $ 32,642     $ 26,261  
                                 
  Recurring revenue gross margin     72 %     68 %     71 %     67 %
                                 
Non-GAAP operating expense reconciliation                                
                                 
Operating expenses   $ 22,392     $ 18,561     $ 43,078       37,063  
Add back:                                
  Non-cash stock-based compensation     (2,184 )     (2,770 )     (4,080 )     (4,781 )
  Non-cash amortization of acquired intangible assets     (326 )     (290 )     (636 )     (576 )
  Patent litigation and settlement costs     (491 )     (347 )     (934 )     (661 )
  Restructuring and other     (404 )     (315 )     (404 )     (1,558 )
Non-GAAP Operating Expenses   $ 18,987     $ 14,839     $ 37,024     $ 29,487  
                                 
                                 
Non-GAAP operating income (loss) reconciliation:                                
                                 
Operating loss   $ (3,007 )   $ (4,301 )   $ (5,114 )     (9,936 )
Add back:                                
  Non-cash stock-based compensation     2,632       3,210       4,924       5,801  
  Non-cash amortization of acquired intangible assets     917       818       1,786       1,628  
  Patent litigation and settlement costs     491       347       934       661  
  Restructuring and other     404       315       404       1,558  
Non-GAAP Operating income (loss)   $ 1,437     $ 389     $ 2,934     $ (288 )
                                 
                                 
   
   
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,  
    2014     2013     2014     2013  
                                 
Non-GAAP net loss reconciliation:                                
                                 
Net loss   $ 250     $ (6,415 )   $ (2,217 )     (13,018 )
Add back:                                
  Non-cash stock-based compensation     2,632       3,210       4,924       5,801  
  Non-cash amortization of acquired intangible assets     917       818       1,786       1,628  
  Patent litigation and settlement costs     491       347       934       661  
  Restructuring and other     404       315       404       1,558  
  Interest expense on convertible notes     108       703       277       1,406  
  Amortization of convertible note issuance cost     26       134       58       268  
  Sale of domain names and trademarks     (3,862 )     -       (3,862 )     -  
Non-GAAP Net income (loss)   $ 966     $ (888 )   $ 2,304     $ (1,696 )
                                 
Non-GAAP net income (loss) per share reconciliation:                                
                                 
Net loss per basic and diluted share   $ -     $ (0.17 )   $ (0.05 )   $ (0.35 )
Add back:                                
  Non-cash stock-based compensation     0.06       0.08       0.11       0.15  
  Non-cash amortization of acquired intangible assets     0.02       0.02       0.04       0.04  
  Patent litigation and settlement costs     0.01       0.01       0.02       0.02  
  Restructuring and other     0.01       0.01       0.01       0.04  
  Interest expense on convertible notes     -       0.02       0.01       0.04  
  Amorization of convertible note issuance cost     -       0.01       (0.01 )     0.01  
  Sale of domain names and trademarks     (0.08 )     -       (0.08 )     -  
                                 
Non-GAAP net income (loss) per diluted share   $ 0.02     $ (0.02 )   $ 0.05     $ (0.05 )
                                 
                                 
Basic and fully diluted shares reconciliation:                                
                                 
GAAP Basic shares     46,648       37,813       46,298       37,478  
Add back:                                
  Weighted average effect of dilutive securities     1,413       -       1,718       -  
Shares used in calculation of diluted net income per share - GAAP     48,061       37,813       48,016       37,478  
Shares used in calculation of diluted net income per share -Non-GAAP (a)     49,568       37,813       48,016       37,478  
                                 
(a)   Shares used in the per share calculation for reconciling items between GAAP and Non-GAAP financial measures.
     
     

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 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
    September 30, 2014
    GAAP   Non-GAAP
         
Total revenue   $33,000 - $34,000   $33,000 - $34,000
Operating income (a)   ($1,900) - ($2,700)   $2,000 - $2,500
Net income (loss) per diluted share (c)   ($0.04) - ($0.07)   $0.03 - $0.05
         
         
         
    Twelve months ended
    December 31, 2014
    GAAP   Non-GAAP
         
Total revenue   $129,000 - $132,500   $129,000 - $132,500
Operating income (b)   ($8,600) - ($11,600)   $7,000 - $9,000
Net income (loss) per diluted share (c)   ($0.12) - ($0.18)   $0.12 - $0.16
         
         
(a)   Estimated non-GAAP amounts above for the three months ending September 30, 2014 reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $900 - $950 thousand, estimated stock-based compensation expense of approximately $2.8 - $3.1 million, and patent litigation costs of approximately $650 - $700 thousand.
     
(b)   Estimated non-GAAP amounts above for the twelve months ending December 31, 2014 reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $3.6-$3.8 million, estimated stock-based compensation expense of approximately $11.5 - $12.5 million, and patent litigation costs of approximately $2.3 - $2.5 million.
     
(c)   Non-GAAP fully diluted share count is between 49.0 million and 50.1 million. GAAP share count is between 46.0 million to 48.0 million.
     
     

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