SOURCE: Salary.com

Salary.com

August 06, 2009 16:05 ET

Salary.com™ Announces First Quarter 2010 Financial Results

Reports 33rd Consecutive Quarter of Revenue Growth; Achieves Positive Operating Cash Flow

WALTHAM, MA--(Marketwire - August 6, 2009) - Salary.com, Inc. (NASDAQ: SLRY), a leading provider of on-demand HRMS/payroll, compensation and talent management solutions, today announced financial results for its first quarter of fiscal 2010, which ended June 30, 2009.

Revenue in the first quarter of 2010 was $11.4 million, an increase of 18% over the first quarter of fiscal 2009. Bookings were $12.4 million, an increase of 14% over the first quarter of fiscal 2009. Non-GAAP operating cash flow, which excludes cash payments for severance, was positive with a cash inflow of $0.4 million in the first quarter of 2010. GAAP operating cash flow was an inflow of $0.1 million in the first quarter of 2010.

Kent Plunkett, founder and chief executive officer, stated, "We are pleased to have completed our 33rd consecutive quarter of revenue growth. We delivered solid bookings growth and returned Salary.com to a cash flow generating position in the first quarter of 2010. Our customers continue to see value in our suite of integrated software and data solutions for human resources professionals. Our vision of this broad on-demand TotalHR offering is continuing to resonate with buyers, and reinforces our position as a human capital management leader."

First Quarter 2010 Financial Summary

--  First quarter revenue was $11.4 million, an increase of 18% over the
    first quarter of fiscal 2009.
    
--  On a GAAP basis, for the first quarter of fiscal 2010, Salary.com
    reported a net loss of $5.1 million, or ($0.32) per diluted share, compared
    to a net loss of $6.2 million, or ($0.39) per diluted share, in the first
    quarter of fiscal 2009.
    
--  On a non-GAAP basis, excluding stock-based compensation expense and
    amortization of intangibles, Salary.com reported a net loss of $2.5
    million, or ($0.16) per diluted share, for the first quarter of fiscal
    2010, compared to a net loss of $3.4 million, or ($0.22) per diluted share,
    in the first quarter of fiscal 2009.
    
--  Cash and cash equivalents as of June 30, 2009 were $17.0 million,
    compared to $21.1 million as of March 31, 2009.
    
--  Current deferred revenue grew to $27.4 million as of June 30, 2009, an
    increase from $26.5 million as of March 31, 2009.  Total deferred revenue
    was $29.3 million as of June 30, 2009, an increase from $28.3 million as of
    March 31, 2009.
    
--  Excluding non-recurring cash payments for severance, non-GAAP cash
    flow from operations was a net inflow of $0.4 million in the first quarter
    of fiscal 2010. Including the non-recurring payments, GAAP cash flow from
    operations was a net inflow of $0.1 million, a $2.2 million improvement
    compared to the same period a year ago.
    

Additional First Quarter Business Highlights

--  Salary.com ended the first quarter with approximately 3500 enterprise
    customers, an increase of over 20% from the first quarter of fiscal 2009.
    
--  New customer additions in the first quarter of fiscal 2010 included
    Avery Dennison, CVS Pharmacy, Inc., Eaton Corporation, Kent State
    University, In-n-Out Burger, and Great Lakes Synergy Corporation.
    
--  During the first quarter, Salary.com repurchased approximately 862,000
    shares at an average purchase price of $1.79 per share.  To date, the
    Company has repurchased approximately 1.2 million shares at an average
    price of $1.92 per share.
    

Bryce Chicoyne, Salary.com's chief financial officer, said, "I am pleased with the company's execution in the first quarter, which resulted in our return to positive operating cash flow. We remain committed to generating positive cash flow on a full-year basis. Additionally, we had a successful quarter in our share repurchase program. We are encouraged by the trends we are seeing in our sales pipeline and believe customers are recognizing the value of our on-demand compensation management, payroll/HRIS and talent management products."

Business Outlook

For the second quarter of fiscal 2010, Salary.com expects total revenue in the range of $11.4 million to $11.9 million. Non-GAAP net loss, which excludes non-cash stock-based compensation expenses of approximately $1.7 million, and amortization of intangibles of approximately $1.2 million, is expected to be in the range of $1.9 million to $2.4 million. GAAP net loss for the second quarter of fiscal 2010 is expected to be in the range of $4.8 million to $5.3 million. Weighted average diluted shares for the quarter are estimated to be approximately 16.3 million shares.

Salary.com is raising its prior guidance for fiscal 2010. We expect revenue to be in the range of $46.5 million to $50.5 million and cash flow from operations is expected to be a positive $1.2 million to $2.2 million. Non-GAAP net loss, which excludes non-cash impact of stock-based compensation expense of approximately $10.0 million, and amortization of intangibles of approximately $4.5 million, is expected to be in the range of $4.8 million to $8.8 million. On a GAAP basis, net loss for fiscal 2010 is expected to be in the range of $19.3 million to $23.3 million. Weighted average diluted shares for the year are estimated to be approximately 16.5 million shares.

Conference call

What:       Salary.com first quarter financial results and business
            overview conference call and webcast
When:       Thursday, August 6, 2009
Time:       5:00 PM ET
Live Call:  (888) 287-5536, domestic
            (719) 785-9444, international

Replay:     (888) 203-1112, conference ID 4960911, domestic
            (719) 457-0820, conference ID 4960911, international

Webcast:    http://investor.salary.com/events.cfm (live and replay)

NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures in the text of this press release and accompanying non-GAAP supplemental information represent financial measures used by Salary.com's management to evaluate the operating performance of the Company and to conduct its business operations. Non-GAAP financial measures discussed in the press release relate to the Company's net income and operating expenses and exclude amortization of intangible assets, stock-based compensation, and restructuring charges. This press release also discusses operating cash flows excluding non-recurring severance costs as well. By excluding these items and by providing information on the Company's bookings in addition to its GAAP revenues, Salary.com can evaluate its operations and can compare its results on a more consistent basis to the results of other companies in the industry. Management uses the non-GAAP financial measures for planning purposes, including the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company's financial and operational performance and in assisting investors in comparing the Company's financial performance to those of other companies in the Company's industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures are not intended to be an alternative to financial measures prepared in accordance with GAAP and should not be considered in isolation from our GAAP results of operations. Pursuant to the requirements of the SEC rules under Regulation G, a detailed reconciliation between the Company's GAAP and non-GAAP financial results is provided in this press release and investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company's SEC filings.

About Salary.com, Inc.

Salary.com is a leading provider of on-demand HRMS/payroll compensation and talent management solutions helping businesses and individuals manage pay and performance. Salary.com's highly configurable software applications, proprietary data and consulting services help HR and compensation professionals automate, streamline and optimize critical talent management processes including: market pricing, compensation planning, performance management, competency management, learning and development, payroll, and succession planning. Built with compensation and competency data at the core, Salary.com solutions provide businesses of all sizes with the most productive and cost-effective way to manage and inspire their most important asset -- their people. For more information, visit www.salary.com.

Safe Harbor Statement

This release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "may," "will," "expects," "projects," "anticipates," "estimates," "believes," "intends," "plans," "should," "seeks," and similar expressions. This press release contains forward-looking statements relating to, among other things, Salary.com's expectations and assumptions concerning future performance and growth, including expectations of financial performance in the second quarter of 2010 and the full fiscal year 2010. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. The risks and uncertainties referred to above include, but are not limited to, the impact of a global economic recession and uncertainty in the information technology spending environment, risks associated with possible fluctuations in our operating results and rate of growth, integration and performance of acquired businesses, our history of operating losses, the possibility that we will not achieve GAAP profitability or our expectations for Non-GAAP net loss, our ability maintain and expand our customer base and product and service offerings, interruptions or delays in our service or our Web hosting, our business model, our ability to continue to obtain compensation data, breach of our security measures, the emerging market in which we operate, our ability to hire, retain and motivate our employees and manage our growth, our ability to generate additional revenues from our investments in sales and marketing, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, successful customer deployment and utilization of our services, our ability to effectively protect our intellectual property and not infringe on the intellectual property of others, fluctuations in the number of shares outstanding and general economic factors, as well as those risks and uncertainties described in Salary.com's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended March 31, 2008. Salary.com expressly disclaims any obligation to update any forward-looking statements.

(SLRY-F)


Exhibit 1
                             Salary.com, Inc.
                  Condensed Consolidated Balance Sheets
                        (in thousands, unaudited)


                                                         June 30, March 31,
ASSETS                                                     2009     2009
                                                         -------- ---------
Current assets:
  Cash and cash equivalents                              $ 17,018 $  21,085
  Accounts receivable, net of allowance for doubtful
   accounts                                                 5,939     6,040
  Prepaid expenses and other current assets                 1,669     1,558
                                                         -------- ---------
Total current assets before funds held for clients         24,626    28,683
  Funds held for clients                                    2,345    12,964
                                                         -------- ---------
    Total current assets                                   26,971    41,647
                                                         -------- ---------

Property, equipment and software, net                       2,697     3,025
Goodwill and intangible assets, net                        34,216    32,350
Other assets                                                1,381     1,679
                                                         -------- ---------
    Total assets                                         $ 65,265 $  78,701
                                                         ======== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued compensation              $  2,971 $   2,342
  Accrued expenses and other current liabilities            5,489     3,300
  Long term debt                                            6,025     8,125
  Deferred revenue, current portion                        27,415    26,556
                                                         -------- ---------
Total current liabilities before client funds
 obligations                                               41,900    40,323
  Client funds obligations                                  2,345    12,964
                                                         -------- ---------
    Total current liabilities                              44,245    53,287
                                                         -------- ---------

  Deferred revenue, net of current portion                  1,881     1,729
  Long term liabilities                                     1,853     1,742
                                                         -------- ---------
    Total liabilities                                      47,979    56,758
                                                         -------- ---------

Total stockholders' equity
  Total stockholders' equity                               17,286    21,943
                                                         -------- ---------
    Total liabilities and stockholders' equity           $ 65,265 $  78,701
                                                         ======== =========



Exhibit 2
                             Salary.com, Inc.
                  Consolidated Statements of Operations
                        (in thousands, unaudited)


                                                       Three Months Ended
                                                            June 30,
                                                      --------------------
                                                        2009       2008
                                                      ---------  ---------
Revenues:
 Subscription revenues                                $  10,444  $   8,989
 Advertising revenues                                       913        625
                                                      ---------  ---------
Total revenues                                           11,357      9,614
 Cost of revenues (1)                                     3,633      3,240
                                                      ---------  ---------
Gross profit                                              7,724      6,374
                                                      ---------  ---------
Operating expenses:
 Research and development (1)                             2,263      1,809
 Sales and marketing (1)                                  5,716      6,490
 General and administrative (1)                           4,035      3,995
 Amortization of intangible assets                          738        379
                                                      ---------  ---------
Total operating expenses                                 12,752     12,673
                                                      ---------  ---------
Loss from operations                                     (5,028)    (6,299)
                                                      ---------  ---------
Other income:
 Interest income                                              7        250
 Other income (expense)                                    (101)       (27)
                                                      ---------  ---------
Total other income                                          (94)       223
                                                      ---------  ---------
Loss before provision for income taxes                   (5,122)    (6,076)
Provision for income taxes                                   26         86
                                                      ---------  ---------
Net loss                                              $  (5,148) $  (6,162)
                                                      =========  =========
Net loss per share - basic and diluted                $   (0.32) $   (0.39)
                                                      =========  =========
Weighted average shares outstanding - basic and
 diluted                                                 16,175     15,773

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


                                                       Three Months Ended
                                                            June 30,
                                                      ---------  ---------
                                                         2009      2008
                                                      ---------  ---------

 Cost of revenues                                     $     225  $     400
 Research and development                                   260        266
 Sales and marketing                                        581        717
 General and administrative                                 419        604
                                                      ---------  ---------
                                                      $   1,485  $   1,987
                                                      =========  =========


Exhibit 3
                             Salary.com, Inc.
              Condensed Consolidated Statements of Cash Flows
                        (in thousands, unaudited)


                                                        Three Months Ended
                                                             June 30,
                                                        ------------------
                                                          2009      2008
                                                        --------  --------

Cash flows from operating activities:
 Net loss                                               $ (5,148) $ (6,162)
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
   Depreciation and amortization                           1,619     1,017
   Stock-based compensation                                1,485     1,987
   Other non-cash items                                      408        55
   Change in operating assets and liabilities              1,724     1,008
                                                        --------  --------
       Net cash provided by (used in) operating
        activities                                            88    (2,095)
                                                        --------  --------

Cash flows from investing activities:
 Cash paid for acquisition of business                         -      (250)
 Cash paid for intangible assets                             (42)      (30)
 Increase in restricted cash                                  (1)     (372)
 Purchases of property and equipment                         (64)     (327)
 Capitalization of software development costs                (39)      (45)
 Proceeds on sale of property and equipment                    1         -
 Net increase in assets held to satisfy client funds
  obligations                                             10,619         -
                                                        --------  --------
       Net cash provided by (used in) investing
        activities                                        10,474    (1,024)
                                                        --------  --------

Cash flows from financing activities:
 Net proceeds from exercise (buyback) of common stock
  options and warrants                                    (1,672)      100
  Net proceeds from line of credit and notes payable      (2,172)        -
  Net increase in client funds obligation                (10,619)        -
                                                        --------  --------
       Net cash (used in) provided by financing
        activities                                       (14,463)      100
                                                        --------  --------

Effect of exchange rate changes on cash and cash
 equivalents                                                (166)       (1)
                                                        --------  --------
Decrease in cash and cash equivalents                     (4,067)   (3,020)
Cash and cash equivalents, beginning of period            21,085    37,727
                                                        --------  --------
Cash and cash equivalents, end of period                $ 17,018  $ 34,707
                                                        ========  ========



Exhibit 4
                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                                        Three Months Ended
                                                             June 30,
                                                        ------------------
                                                          2009      2008
                                                        --------  --------
Reconciliation of GAAP loss from operations to
non-GAAP loss from operations:
 Loss from operations                                   $ (5,028) $ (6,299)
 Amortization of intangible assets                           738       379
 Amortization of intangible assets (included in cost of
  revenues)                                                  414       398
 Stock-based compensation                                  1,485     1,987
                                                        --------  --------
Non-GAAP loss from operations                           $ (2,391) $ (3,535)
                                                        ========  ========

Reconciliation of GAAP net loss to non-GAAP
net loss:
 GAAP net loss                                          $ (5,148) $ (6,162)
 Amortization of intangible assets                           738       379
 Amortization of intangible assets (included in cost of
  revenues)                                                  414       398
 Stock-based compensation                                  1,485     1,987
                                                        --------  --------
 Non-GAAP net loss                                      $ (2,511) $ (3,398)
                                                        ========  ========
Non-GAAP net loss per share                             $  (0.16) $  (0.22)
                                                        ========  ========

Weighted average shares outstanding - basic and diluted   16,175    15,773
                                                        --------  --------



Exhibit 5
                             Salary.com, Inc.
      Reconciliation of Certain GAAP to Non-GAAP Financial Measures
                        (In thousands, unaudited)


                                 Three months ended June 30, 2009
                        ---------------------------------------------------
                                   Amortization     Stock-based
                        US GAAP   of Intangible    Compensation   Non-GAAP
                        Results       Assets          Expense     Results
                        --------- --------------  --------------  ---------

Cost of revenues        $   3,633 $         (414) $         (225) $   2,994

Research and
 development expenses       2,263              -            (260)     2,003
Sales and marketing
 expenses                   5,716              -            (581)     5,135
General and
 administrative
 expenses                   4,035              -            (419)     3,616
Amortization of
 intangible assets            738           (738)              -          -
                        --------- --------------  --------------  ---------
   Total operating
    expenses            $  12,752 $         (738) $       (1,260) $  10,754
                        ========= ==============  ==============  =========

                                  Three months ended June 30, 2008
                        ---------------------------------------------------
                                   Amortization     Stock-based
                        US GAAP   of Intangible    Compensation   Non-GAAP
                        Results       Assets          Expense     Results
                        --------- --------------  --------------  ---------

Cost of revenues        $   3,240 $         (398) $         (400) $   2,442

Research and
 development expenses       1,809              -            (266)     1,543
Sales and marketing
 expenses                   6,490              -            (717)     5,773
General and
 administrative
 expenses                   3,995              -            (604)     3,391
Amortization of
 intangible assets            379           (379)              -          -
                        --------- --------------  --------------  ---------
   Total operating
    expenses            $  12,673 $         (379) $       (1,587) $  10,707
                        ========= ==============  ==============  =========


Exhibit 6
                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                    Three Months Ended
                                        June 30,
                                    ------------------
                                      2009      2008
                                    --------  --------
Calculated bookings:
 Revenue                            $ 11,357  $  9,614
 Change in deferred revenue            1,011     1,235
                                    --------  --------
   Calculated bookings              $ 12,368  $ 10,849
                                    ========  ========




Exhibit 7
                             Salary.com, Inc.
                    Reconciliation of Non-GAAP Measures
                        (in thousands, unaudited)


                                                   Three Months
                                                       Ended
                                                     June 30,
                                                   -------------
                                                       2009
                                                   -------------

 Net cash provided by operating activities         $          88
 Payments of severance related payments                      287
                                                   -------------
 Non-GAAP cash provided by operating activities    $         375
                                                   =============