Exhibit 99.4
RightNow Technologies, Inc.
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
The following unaudited pro forma condensed combined consolidated financial statements give effect to the acquisition of HiveLive, Inc. (HiveLive) by RightNow Technologies, Inc. (RightNow). These pro forma condensed combined consolidated statements are presented for illustrative purposes only. The pro forma adjustments described in the notes accompanying the statements are based upon available information and assumptions that we believe are reasonable. These unaudited pro forma condensed combined consolidated financial statements do not give effect to any potential cost savings or other operating efficiencies that could result from the acquisition. The pro forma condensed combined consolidated financial statements do not purport to represent what the consolidated results of operations of RightNow would actually have been if the acquisition had in fact occurred on the date we refer to below, nor do they purport to project the results of operations of RightNow for any future period or as of any historical dates.
Under the purchase method of accounting prescribed byTopic 805, Business Combinations,tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair market values. The excess of the purchase price over the net assets acquired is allocated to goodwill. The purchase price allocation is preliminary, subject to future adjustment and has been made solely for the purpose of providing the unaudited condensed combined consolidated financial information discussed below.
The unaudited pro forma condensed combined balance sheet as of June 30, 2009, was prepared by combining the historical consolidated balance sheet of RightNow and the historical balance sheet of HiveLive as of June 30, 2009, giving effect to the acquisition as if it occurred on June 30, 2009. The unaudited pro forma condensed combined consolidated statement of operations for the year ended December 31, 2008 and the six month period ended June 30, 2009 were prepared by combining the historical consolidated statement of operations of RightNow for the year ended December 31, 2008 and the six month period ended June 30, 2009 and the historical statement of operations of HiveLive for the respective periods, giving effect for the acquisition as if it had occurred on January 1, 2008.
The operating results of HiveLive are included in RightNow’s statement of operations beginning on the date of acquisition, September 15, 2009. The acquisition is being accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of fair values. Our preliminary evaluation resulted in an allocation of $5.7 million to goodwill and identifiable intangible assets (See Note 1 for further details).
These unaudited pro forma condensed combined consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto of (a) RightNow Technologies, Inc. included on Form 10-Q as of and for the three and six month period ended June 30, 2009 (filed August 7, 2009), (b) RightNow Technologies, Inc. included in Form 10-K for the year ended December 31, 2008 (filed March 6, 2009), and (c) HiveLive, Inc. included elsewhere herein.
RightNow Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated
Combined Balance Sheet
as of June 30, 2009
(In thousands)
| | | | | | | | | | | | | | | | |
| | RightNow | | | HiveLive | | | | | | | |
| | June 30, | | | June 30, | | | Pro Forma | | | Pro Forma | |
| | 2009 | | | 2009 | | | Adjustments | | | Combined | |
Assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 46,987 | | | $ | 1,251 | | | $ | (5,906 | ) A | | $ | 42,332 | |
Short-term investments | | | 42,808 | | | | — | | | | | | | | 42,808 | |
Accounts receivable | | | 31,670 | | | | 255 | | | | | | | | 31,925 | |
Term receivables, current | | | 4,107 | | | | — | | | | | | | | 4,107 | |
Allowance for doubtful accounts | | | (1,910 | ) | | | — | | | | | | | | (1,910 | ) |
| | | | | | | | | | | | | |
Receivables, net | | | 33,867 | | | | 255 | | | | | | | | 34,122 | |
Deferred commissions | | | 5,663 | | | | 139 | | | | (82 | ) B | | | 5,720 | |
Prepaid and other current assets | | | 2,152 | | | | 40 | | | | | | | | 2,192 | |
| | | | | | | | | | | | |
Total current assets | | | 131,477 | | | | 1,685 | | | | (5,988 | ) | | | 127,174 | |
Long-term investments | | | 4,792 | | | | — | | | | | | | | 4,792 | |
Property and equipment, net | | | 9,775 | | | | 194 | | | | | | | | 9,969 | |
Term receivables, non-current | | | 2,159 | | | | — | | | | | | | | 2,159 | |
Intangible assets, net | | | 1,380 | | | | — | | | | 2,100 | C | | | 3,480 | |
Goodwill | | | 4,358 | | | | — | | | | 3,208 | C | | | 7,566 | |
Deferred commissions, non-current | | | 2,830 | | | | 77 | | | | (45 | ) B | | | 2,862 | |
Other | | | 811 | | | | 24 | | | | | | | | 835 | |
| | | | | | | | | | | | |
Total Assets | | $ | 157,582 | | | $ | 1,980 | | | $ | (725 | ) | | $ | 158,837 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 5,952 | | | $ | 65 | | | | | | | $ | 6,017 | |
Commissions and bonuses payable | | | 4,958 | | | | — | | | | | | | | 4,958 | |
Other accrued liabilities | | | 11,895 | | | | — | | | | | | | | 11,895 | |
Current portion of long-term debt | | | 45 | | | | 989 | | | | | | | | 1,034 | |
Current portion of deferred revenue | | | 75,972 | | | | 490 | | | | (289 | ) B | | | 76,173 | |
| | | | | | | | | | | | |
Total current liabilities | | | 98,822 | | | | 1,544 | | | | (289 | ) | | | 100,077 | |
Long-term debt, less current portion | | | — | | | | — | | | | | | | | — | |
Deferred revenue, net of current portion | | | 28,112 | | | | — | | | | | | | | 28,112 | |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Preferred Series A Stock | | | — | | | | 2,172 | | | | (2,172 | ) A | | | — | |
Preferred Series B Stock | | | — | | | | 5,527 | | | | (5,527 | ) A | | | — | |
Common Stock | | | 34 | | | | 12 | | | | (12 | ) A | | | 34 | |
Additional paid-in capital | | | 107,282 | | | | 51 | | | | (51 | ) D | | | 107,282 | |
Treasury stock | | | (15,007 | ) | | | — | | | | | | | | (15,007 | ) |
Accumulated other comprehensive income | | | 1,260 | | | | — | | | | | | | | 1,260 | |
Accumulated deficit | | | (62,921 | ) | | | (7,326 | ) | | | 7,326 | D | | | (62,921 | ) |
| | | | | | | | | | | | |
Total Stockholders’ Equity | | | 30,648 | | | | 436 | | | | (436 | ) | | | 30,648 | |
| | | | | | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 157,582 | | | $ | 1,980 | | | $ | (725 | ) | | $ | 158,837 | |
| | | | | | | | | | | | |
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements
RightNow Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated
Combined Statement of Operations
for the six months ended June 30, 2009
(In thousands)
| | | | | | | | | | | | | | | | |
| | RightNow | | | HiveLive | | | | | | | |
| | Six Months | | | Six Months | | | | | | | |
| | Ended | | | Ended | | | | | | | |
| | June 30, | | | June 30, | | | Pro Forma | | | Pro Forma | |
| | 2009 | | | 2009 | | | Adjustments | | | Combined | |
Revenue: | | | | | | | | | | | | | | | | |
Software, hosting and support | | $ | 53,469 | | | $ | 553 | | | | | B | | $ | 54,022 | |
Professional services | | | 18,908 | | | | — | | | | | | | | 18,908 | |
| | | | | | | | | | | | | |
Total revenue | | | 72,377 | | | | 553 | | | | | | | | 72,930 | |
Cost of revenue: | | | | | | | | | | | | | | | | |
Software, hosting and support | | | 9,903 | | | | — | | | | 225 | A | | | 10,128 | |
Professional services | | | 13,354 | | | | — | | | | | | | | 13,354 | |
| | | | | | | | | | | | | |
Total cost of revenue | | | 23,257 | | | | — | | | | 225 | | | | 23,482 | |
| | | | | | | | | | | | | |
Gross Profit | | $ | 49,120 | | | $ | 553 | | | | (225 | ) | | $ | 49,448 | |
Operating Expenses: | | | | | | | | | | | | | | | | |
Sales and marketing | | | 30,871 | | | | 1,300 | | | | | | | | 32,171 | |
Direct costs and expenses | | | — | | | | 73 | | | | | | | | 73 | |
Research and development | | | 9,807 | | | | 524 | | | | | | | | 10,331 | |
General and administrative | | | 7,653 | | | | 648 | | | | | | | | 8,301 | |
Amortization of intangible assets | | | — | | | | — | | | | 50 | A | | | 50 | |
| | | | | | | | | | | | |
Total operating expenses | | | 48,331 | | | | 2,545 | | | | 50 | | | | 50,926 | |
| | | | | | | | | | | | |
Income (loss) from operations | | | 789 | | | | (1,992 | ) | | | (275 | ) | | | (1,478 | ) |
Interest and other income, net | | | 752 | | | | (7 | ) | | | | | | | 745 | |
| | | | | | | | | | | | | |
Income (loss) before income taxes | | | 1,541 | | | | (1,999 | ) | | | (275 | ) | | | (733 | ) |
(Provision) benefit for income taxes | | | (242 | ) | | | — | | | | | | | | (242 | ) |
| | | | | | | | | | | | |
Net income (loss) | | $ | 1,299 | | | $ | (1,999 | ) | | $ | (275 | ) | | $ | (975 | ) |
| | | | | | | | | | | | |
Net income (loss) per share | | | | | | | | | | | | | | | | |
Basic | | $ | 0.04 | | | | | | | | | | | $ | (0.03 | ) |
Diluted | | $ | 0.04 | | | | | | | | | | | $ | (0.03 | ) |
Shares used in the computation: | | | | | | | | | | | | | | | | |
Basic | | | 31,730 | | | | | | | | | | | | 31,730 | |
Diluted | | | 32,207 | | | | | | | | | | | | 31,730 | |
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements
RightNow Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated
Combined Statement of Operations
for the year ended December 31, 2008
(In thousands)
| | | | | | | | | | | | | | | | |
| | RightNow | | | HiveLive | | | | | | | |
| | Year Ended | | | Year Ended | | | | | | | |
| | December | | | December | | | Pro Forma | | | Pro Forma | |
| | 31, 2008 | | | 31, 2008 | | | Adjustments | | | Combined | |
Revenue: | | | | | | | | | | | | | | | | |
Software, hosting and support | | $ | 102,576 | | | $ | 364 | | | | | B | | $ | 102,940 | |
Professional services | | | 37,859 | | | | — | | | | | | | | 37,859 | |
| | | | | | | | | | | | | |
Total revenue | | | 140,435 | | | | 364 | | | | | | | | 140,799 | |
Cost of revenue: | | | | | | | | | | | | | | | | |
Software, hosting and support | | | 20,397 | | | | — | | | | 450 | A | | | 20,847 | |
Professional services | | | 30,440 | | | | — | | | | | | | | 30,440 | |
| | | | | | | | | | | | |
Total cost of revenue | | | 50,837 | | | | — | | | | 450 | | | | 51,287 | |
| | | | | | | | | | | | |
Gross Profit | | $ | 89,598 | | | $ | 364 | | | | (450 | ) | | $ | 89,512 | |
Operating Expenses: | | | | | | | | | | | | | | | | |
Sales and marketing | | | 67,628 | | | | 2,184 | | | | | | | | 69,812 | |
Direct costs and expenses | | | — | | | | 93 | | | | | | | | 93 | |
Research and development | | | 18,292 | | | | 870 | | | | | | | | 19,162 | |
General and administrative | | | 13,615 | | | | 924 | | | | | | | | 14,539 | |
Amortization of intangible assets | | | — | | | | — | | | | 100 | A | | | 100 | |
| | | | | | | | | | | | |
Total operating expenses | | | 99,535 | | | | 4,071 | | | | 100 | | | | 103,706 | |
| | | | | | | | | | | | |
Income (loss) from operations | | | (9,937 | ) | | | (3,707 | ) | | | (550 | ) | | | (14,194 | ) |
Interest and other income, net | | | 2,696 | | | | 31 | | | | | | | | 2,727 | |
| | | | | | | | | | | | |
Income (loss) before income taxes | | | (7,241 | ) | | | (3,676 | ) | | | (550 | ) | | | (11,467 | ) |
(Provision) benefit for income taxes | | | (42 | ) | | | — | | | | | | | | (42 | ) |
| | | | | | | | | | | | |
Net income (loss) | | $ | (7,283 | ) | | $ | (3,676 | ) | | $ | (550 | ) | | $ | (11,509 | ) |
| | | | | | | | | | | | |
Net income (loss) per share | | | | | | | | | | | | | | | | |
Basic and diluted | | $ | (0.22 | ) | | | | | | | | | | $ | (0.34 | ) |
Shares used in the computation: | | | | | | | | | | | | | | | | |
Basic and diluted | | | 33,362 | | | | | | | | | | | | 33,362 | |
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements
Note 1: ACQUISITION
On September 15, 2009, the Company acquired the outstanding common and preferred stock of HiveLive, Inc. (“HiveLive”), for $5.9 million in net cash paid at closing. HiveLive is an enterprise-class social platform provider with an innovative platform for customer support, engagement and loyalty, and ideation communities to help organizations maximize every opportunity to deliver great customer experiences.
The acquisition is being accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of fair values. The excess of purchase price over the fair value of net assets acquired reflects the expected benefits from expansion of market opportunities and customer relationships. Our estimates and assumptions are subject to change. Certain items may impact the final purchase price allocation. Our preliminary evaluation is based on the following as estimated on the date of acquisition:
| | | | | | | | |
Purchase price: | | | | | | | | |
Cash consideration | | | | | | $ | 5,906 | |
| | | | | | | |
Total consideration | | | | | | | 5,906 | |
| | | | | | | | |
Allocated to: | | | | | | | | |
Fair value of net assets acquired | | | | | | | 189 | |
| | | | | | | | |
Allocated to: | | | | | | | | |
Identifiable intangibles assets: | | | | | | | | |
Developed technology | | | 1,800 | | | | | |
Customer relationships | | | 200 | | | | | |
Trade name and Trademarks | | | 100 | | | | 2,100 | |
| | | | | | | |
Excess purchase price allocated to goodwill | | | | | | $ | 3,617 | |
NOTE 2: PRO FORMA ADJUSTMENTS TO THE CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
The following adjustments have been reflected in the unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2009 as if the acquisition occurred on June 30 2009:
| (A) | | Adjustment to record the purchase of all of the outstanding stock of HiveLive. |
|
| (B) | | Adjustment to record the fair value of deferred commissions and deferred revenue of HiveLive. The fair value of deferred revenue represents an amount equivalent to the estimated cost to fulfill the service obligation assumed plus an appropriate profit margin. |
|
| (C) | | Adjustment to record the goodwill and estimated fair value of identifiable intangible assets acquired. Identifiable intangible assets consist of developed technology, customer relationships, and trade name and trademarks, which will be amortizable over their useful lives of four, four, and two years, respectively. The fair value and useful life estimates of these assets is preliminary and subject to change. |
| (D) | | Adjustment to record the elimination of HiveLive’s equity. |
Income Taxes
Both RightNow and HiveLive have substantial gross deferred tax assets primarily associated with net operating loss carryforwards, which both companies have historically offset by a full valuation allowance. The pro forma condensed combined financial statements were prepared with an assumption that the combined entity would maintain a full valuation allowance. Accordingly, no adjustments are reflected for pro forma net deferred tax assets or liabilities in the pro forma condensed combined balance sheet.
NOTE 3: PRO FORMA ADJUSTMENTS TO COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The following adjustments have been reflected in the pro forma combined condensed consolidated statement of operations for the year ended December 31, 2008 and the six month period ended June 30, 2009 as if the acquisition had occurred on January 1, 2008.
(A) | | Adjustment to record the amortization expense related to the identifiable assets acquired. Identifiable intangible assets consist of developed technology, customer relationships, and trade name and trademarks, which will be amortizable over their useful lives of four, four, and two years, respectively. The fair value and useful life estimates of these assets is preliminary and subject to change. |
(B) | | There are no adjustments to revenue recognized as the Company had no significant amounts of deferred revenue as of January 1, 2008. |