Callidus Software Announces Third Quarter 2010 ResultsRevenues of $18.5 Million; Recurring Revenues Up 18% Year on Year; Signed 21 On Demand Deals in the Quarter
PLEASANTON, CA -- (Marketwire - October 28, 2010) - Callidus Software Inc. (NASDAQ: CALD), the leader in Sales Performance Management (SPM), today announced financial results for the third quarter ended September 30, 2010.
"I was pleased with our profitable growth in Q3," said Leslie Stretch, president and CEO, Callidus Software. "We signed 21 On Demand deals in the quarter and several license transactions in emerging markets, reflecting improving demand and a better business climate in key regions. We added to our SaaS Sales Talent Lifecycle Management suite with the addition of Callidus Onboarding for the Extended Enterprise and we continued to strengthen the performance of our services business. We again managed operating expenses carefully. We believe our control of costs and focus on recurring revenues together with our broadened solution portfolio sets us up for sustained growth and profitability going forward."
Total third quarter revenues of $18.5 million represented an increase of 6% compared to the same quarter last year. In addition, revenues were up 8% compared to the second quarter this year. Recurring revenues, which include subscription and support, were $13.2 million, an increase of 18% compared to the same quarter last year. Recurring revenues now contribute 72% of total revenues, up from 64% in the same quarter last year.
Third quarter services revenues were $3.6 million, down 33% from the same quarter last year, and up 3% from the second quarter of 2010. The services business returned to gross margin profitability in Q3. Third quarter license revenues were $1.6 million, up from both the third quarter of 2009 and second quarter of 2010, reflecting ratable recognition of licenses signed earlier in the year as well as solid results in our Latin America and Asia Pacific business, which is based on a perpetual license model.
Progress in our Services business gross margin combined with the high license gross margins helped drive an overall third quarter gross margin of 46%, up from 37% for the third quarter of 2009 and 40% for the second quarter of 2010. GAAP Operating expenses of $10.0 million for the quarter were down $3.0 million or 23% from the same quarter in 2009 and down $0.5 million or 5% from the prior quarter.
Third quarter GAAP net loss was $1.6 million, or ($0.05) per share, which included $0.5 million of restructuring expense, $1.4 million of stock-based compensation expense, and $0.2 million of amortization of acquired intangible assets. This compares to GAAP net loss of $6.7 million, or ($0.22) per share, for the third quarter of 2009, which included $2.0 million of restructuring expense, $1.0 million of stock-based compensation expense and $0.1 million of amortization of acquired intangible assets.
Third quarter non-GAAP net income was $0.4 million or $0.01 per share, compared to a non-GAAP net loss of $3.6 million, or ($0.12) per share, for the same period last year and a non-GAAP loss of $1.2 million or ($0.04) per share in the prior quarter. Non-GAAP net income and loss excludes restructuring expense, stock-based compensation expense, and amortization of acquired intangible assets. Non-GAAP operating expenses for the third quarter of $8.3 million were down $1.9 million or approximately 18% from the same quarter in 2009 and flat compared to the prior quarter. Non-GAAP operating expenses exclude restructuring expense, stock-based compensation expense, and amortization of acquired intangible assets.
Cash and investments totaled $27.8 million at September 30, 2010, a decrease of $1.9 million from June 30, 2010. Cash generated from operations was $0.1 million for the 9 months ended September 30, 2010 as compared to cash used in operations of $2.2 million in the same 9 months of 2009. Total deferred revenue of $28.8 million is up $6.7 million since year end and down $0.5 million from the prior quarter.
Recent Business Highlights
- Solutions: Callidus launched the newest addition to its On Demand SPM suite with Callidus Onboarding. With this new SaaS solution, Callidus now enables businesses to target, communicate with, and rapidly onboard sales professionals and independent channel partners as part of a comprehensive sales talent management solution that includes licensing and appointing, goal setting, pay for performance, and coaching. The new solution has already been successfully implemented at one of the nation's largest providers of healthcare insurance programs.
- Industry Recognition: Callidus announced a new research study conducted by the Aberdeen Group. The study, derived from Aberdeen's "Sales Performance Management: Getting Everyone on the Same Page" August 2010 report, finds that Callidus customers significantly outperform the best-in-class sales organizations on specific key sales effectiveness metrics. In the quarter, Callidus also received a "leader" rating in a new Forrester Research study "HRM Solutions: Traditional Models Clash with Next-Generation Processes and Technology." Callidus also ranked in the Software Magazine's Software 500 ranking of the world's largest software and service providers for the sixth consecutive year, and was named among an elite group of 40 vendors to watch during 2010 by Information Management Magazine.
- Events: Callidus hosted its first European Sales Performance Management conference in London, UK, and hosted its annual High Technology customer conference in the quarter.
Financial Outlook
- Total revenues for the fourth quarter of 2010 are expected to be between $18 million and $19 million representing between 17% and 23% Year on Year growth.
- GAAP operating expenses, including stock-based compensation expenses of approximately $1.7 million, are expected to be between $9.9 million and $10.9 million in the fourth quarter of 2010.
Conference Call
A conference call to discuss the third quarter 2010 results and outlook is scheduled for 1:30 p.m. Pacific Time (PT) today. The conference call will be available via live webcast at the Investor Relations section of Callidus Software's website at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=146634&eventID=3409081. To participate in the call via telephone, the dial-in number will be: (800) 591-6942(international: +1 (617) 614-4909, passcode 29975139.
A webcast replay will be available after 3:30 p.m. PT on October 28, 2010 through November 5, 2010. The webcast replay will be available at the Investor Relations section of our website under Calendar of Events.
About Callidus Software®
Callidus Software (NASDAQ: CALD) is the market and technology leader in Sales Performance Management (SPM). Callidus customers gain a competitive advantage by maximizing sales cost efficiencies and driving improvements in sales effectiveness. Our award-winning Software-as-a-Service (SaaS) applications set the standard for performance management of a company's sales force and channel partners. Over 2 million employees and channel partners have their performance managed by Callidus Software. For more information, please visit www.callidussoftware.com
Note on Forward-Looking Statements
The forward-looking statements included in this press release, including estimates of fourth quarter 2010 total revenues, operating expenses and stock-based compensation expense 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, increased legal expense related to pending litigation, 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 2009 and Form 10-Q for the first and second quarters of 2010, copies of 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 (www.callidussoftware.com). 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 operating expense, income (loss) from operations, net loss and 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 pursuant to SFAS 123(R), restructuring expense 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.
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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,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues:
Recurring $ 13,231 $ 11,170 $ 38,783 $ 34,669
Services 3,600 5,349 10,734 25,958
License 1,638 872 2,254 5,034
--------- --------- --------- ---------
Total revenues 18,469 17,391 51,771 65,661
Cost of revenues:
Recurring (1) 6,664 5,711 19,198 16,912
Services (1) (2) 3,306 5,054 11,763 22,034
License 92 214 290 656
--------- --------- --------- ---------
Total cost of revenues 10,062 10,979 31,251 39,602
--------- --------- --------- ---------
Gross profit 8,407 6,412 20,520 26,059
Operating expenses:
Sales and marketing (1) (2) 3,537 4,586 12,174 15,892
Research and development (1) 2,524 3,397 8,088 10,871
General and administrative
(1) 3,511 3,072 10,371 9,322
Restructuring 450 1,973 1,620 2,778
--------- --------- --------- ---------
Total operating expenses 10,022 13,028 32,253 38,863
--------- --------- --------- ---------
Operating loss (1,615) (6,616) (11,733) (12,804)
Interest and other income
(expense), net 79 49 (14) 239
--------- --------- --------- ---------
Loss before provision (benefit)
for income taxes (1,536) (6,567) (11,747) (12,565)
Provision (benefit) for income
taxes 51 173 (462) 319
--------- --------- --------- ---------
Net loss $ (1,587) $ (6,740) $ (11,285) $ (12,884)
========= ========= ========= =========
Basic and diluted net loss per
share $ (0.05) $ (0.22) $ (0.36) $ (0.43)
========= ========= ========= =========
Shares used in basic and
diluted per share computation 31,546 30,205 31,267 29,901
========= ========= ========= =========
(1) Stock-based compensation
included in amounts above by
category:
Cost of recurring revenues 157 108 394 402
Cost of services revenues 157 185 599 441
Sales and marketing 180 221 760 795
Research and development 245 181 712 590
General and administrative 661 310 2,190 989
--------- --------- --------- ---------
Total stock-based
compensation $ 1,400 $ 1,005 $ 4,655 $ 3,217
========= ========= ========= =========
(2) Acquisition related asset
amortization $ 157 $ 125 $ 473 $ 438
CALLIDUS SOFTWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
September 30, December 31,
2010 2009
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 10,729 $ 11,565
Short-term investments 16,168 21,985
Accounts receivable, net 16,748 12,715
Deferred income taxes 170 170
Prepaid and other current assets 5,044 3,872
------------- -------------
Total current assets 48,859 50,307
Long-term investments 945 1,142
Property and equipment, net 6,566 4,355
Goodwill 8,054 5,528
Intangible assets, net 5,067 2,993
Deferred income taxes, noncurrent 1,255 1,255
Deposits and other assets 1,947 679
------------- -------------
Total assets $ 72,693 $ 66,259
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,405 $ 3,407
Accrued payroll and related expenses 3,380 3,929
Accrued expenses 6,946 3,219
Deferred income taxes 1,229 1,229
Deferred revenue 24,482 21,440
Capital lease obligations, short-term 526 -
------------- -------------
Total current liabilities 39,968 33,224
Long-term deferred revenue 4,305 668
Other liabilities 1,634 1,136
Capital lease obligations, long-term 944 -
------------- -------------
Total liabilities 46,851 35,028
------------- -------------
Stockholders' equity:
Common stock 31 30
Additional paid-in capital 218,256 212,435
Deferred compensation 333 -
Accumulated other comprehensive income (15) 244
Accumulated deficit (192,763) (181,478)
------------- -------------
Total stockholders' equity 25,842 31,231
------------- -------------
Total liabilities and stockholders'
equity $ 72,693 $ 66,259
============= =============
CALLIDUS SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine months ended
September 30,
--------- ---------
2010 2009
--------- ---------
Cash flows from operating activities:
Net loss $ (11,285) $ (12,884)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 1,731 2,184
Amortization of intangible assets 1,916 1,450
Provision for doubtful accounts and service
remediation reserves 137 (128)
Stock-based compensation 4,322 3,217
Stock-based compensation related to acquisition
contingent consideration 333 -
Revaluation of acquisition contingent
consideration 63 -
Release of valuation allowance (614) -
Leasehold improvement allowance 961 -
Net amortization on investments 166 32
Put option loss 52 387
Gain on investments classified as trading
securities (118) (472)
Changes in operating assets and liabilities:
Accounts receivable (3,155) 10,921
Prepaid and other current assets (1,235) 610
Other assets (674) 232
Accounts payable 46 (57)
Accrued expenses 1,076 (2,252)
Accrued payroll and related expenses (540) (1,640)
Accrued restructuring 251 (417)
Deferred revenue 6,547 (3,542)
Deferred income taxes 128 111
--------- ---------
Net cash provided by (used in) operating
activities 108 (2,248)
--------- ---------
Cash flows from investing activities:
Purchases of investments (13,432) (18,311)
Proceeds from maturities and sale of investments 19,184 9,670
Purchases of property and equipment (2,632) (1,554)
Proceeds from disposal of property and equipment 19 -
Purchases of intangible assets (1,668) (1,487)
Acquisition, net of cash acquired (1,922) (14)
Change in restricted cash (600) 202
--------- ---------
Net cash used in investing activities (1,051) (11,494)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,407 1,719
Repurchases of stock - (742)
Repurchase of common stock from employees for
payment of taxes on vesting of restricted stock
units (363) (372)
Repayment of debt assumed through acquisition (899) -
--------- ---------
Net cash provided by financing activities 145 605
--------- ---------
Effect of exchange rates on cash and cash equivalents (38) 55
--------- ---------
Net decrease in cash and cash equivalents (836) (13,082)
Cash and cash equivalents at beginning of period 11,565 35,390
--------- ---------
Cash and cash equivalents at end of period $ 10,729 $ 22,308
========= =========
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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Non-GAAP operating expense
reconciliation:
Operating expenses $ 10,022 $ 13,028 $ 32,253 $ 38,863
Operating expenses, as
a % of total revenues 54% 75% 62% 59%
Add back:
Non-cash stock-based
compensation $ (1,086) $ (712) $ (3,662) $ (2,374)
Non-cash amortization
of acquired intangible
assets (157) (125) (473) (250)
Restructuring (450) (1,973) (1,620) (2,778)
---------- ---------- ---------- ----------
Non-GAAP Operating Expenses $ 8,329 $ 10,218 $ 26,498 $ 33,461
---------- ---------- ---------- ----------
Non-GAAP Operating
expenses, as a % of
total revenues 45% 59% 51% 51%
Non-GAAP operating income
(loss) reconciliation:
Operating income (loss) $ (1,615) $ (6,616) $ (11,733) $ (12,804)
Operating income
(loss), as a % of
total revenues -9% -38% -23% -20%
Add back:
Non-cash stock-based
compensation $ 1,400 $ 1,005 $ 4,655 $ 3,217
Non-cash amortization
of acquired intangible
assets 157 125 473 438
Restructuring 450 1,973 1,620 2,778
---------- ---------- ---------- ----------
Non-GAAP Operating income
(loss) $ 392 $ (3,513) $ (4,985) $ (6,371)
---------- ---------- ---------- ----------
Non-GAAP Operating
income (loss), as a %
of total revenues 2% -20% -10% -10%
Non-GAAP net income (loss)
reconciliation:
Net income (loss) $ (1,587) $ (6,740) $ (11,285) $ (12,884)
Net income (loss), as a
% of total revenues -9% -39% -22% -20%
Add back:
Non-cash stock-based
compensation $ 1,400 $ 1,005 $ 4,655 $ 3,217
Non-cash amortization
of acquired intangible
assets 157 125 473 438
Restructuring 450 1,973 1,620 2,778
---------- ---------- ---------- ----------
Non-GAAP Net income (loss) $ 420 $ (3,637) $ (4,537) $ (6,451)
---------- ---------- ---------- ----------
Non-GAAP Net income
(loss), as a % of
total revenues 2% -21% -9% -10%
Non-GAAP net income (loss)
per share reconciliation:
Net income (loss) per basic
and diluted share $ (0.05) $ (0.22) $ (0.36) $ (0.43)
Add back:
Non-cash stock-based
compensation 0.04 0.03 0.15 0.12
Non-cash amortization
of acquired intangible
assets 0.01 0.01 0.01 0.01
Restructuring 0.01 0.06 0.05 0.08
Non-GAAP net income (loss)
per basic and diluted ---------- ---------- ---------- ----------
share $ 0.01 $ (0.12) $ (0.15) $ (0.22)
---------- ---------- ---------- ----------
Shares used in calculation
of GAAP and Non-GAAP net
income (loss) per share:
---------- ---------- ---------- ----------
Basic and diluted 31,546 30,205 31,267 29,901
---------- ---------- ---------- ----------
Investor Relations Contact:
Ron Fior
925-251-2205
ir@callidussoftware.com
Press Contact:
Lorna Heynike
925-251-2207
pr@callidussoftware.com
