Exhibit 99.2
Index to Unaudited Pro Forma Consolidating Financial Information
Page | ||
| Kenexa Corporation and Subsidiaries Pro Forma Consolidating Financial Statements (unaudited) | P-2 | |
| Pro Forma Consolidating Balance Sheet as of December 31, 2011 (unaudited) | P-3 | |
| Pro Forma Consolidating Statement of Operations for the year ended December 31, 2011 (unaudited) | P-4 | |
| Pro Forma Consolidating Statement of Operations for the year ended December 31, 2010 (unaudited) | P-5 | |
| Notes to Pro Forma Consolidating Financial Statements (unaudited) | P-6 | |
Pro Forma Consolidating Financial Statements
(Unaudited)
The unaudited pro forma consolidating balance sheet of the Company as of December 31, 2011, has been prepared as if the Company's acquisition of OutStart had been consummated on December 31, 2011. The unaudited pro forma consolidating statements of operations for the years ended December 31, 2010 and 2011 are presented as if the Company's acquisition of OutStart had occurred on January 1, 2010.
The pro forma consolidating financial statements do not purport to represent what the Company's financial position or results of operations would have been assuming the completion of the Company's acquisition of OutStart, nor do they purport to project the Company's financial position or results of operations at any future date or for any future period.
These pro forma consolidating financial statements should be read in conjunction with:
| (a) | the Company's Form 10-K for the period ended December 31, 2011 filed on March 15, 2012, and | |
| (b) | the Company's Form 8-K filed on February 6, 2012. | |
P-2
Pro Forma Consolidating Balance Sheet
As of December 31, 2011
(In thousands)
(Unaudited)
OutStart (A) | Kenexa (B) | Pro Forma Adjustments | F/N | Pro Forma | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 5,070 | $ | 67,459 | $ | (46,227 | ) | C | $ | 26,302 | ||||||||||
| Short-term investments | — | 51,807 | 51,807 | |||||||||||||||||
| Accounts receivable, net of allowance for doubtful accounts | 4,342 | 52,664 | 57,006 | |||||||||||||||||
| Unbilled receivables | — | 3,385 | 3,385 | |||||||||||||||||
| Income tax receivable | — | 196 | 196 | |||||||||||||||||
| Deferred income taxes | 366 | 5,477 | (366 | ) | C | 5,477 | ||||||||||||||
| Prepaid expenses and other current assets | 161 | 9,555 | 9,716 | |||||||||||||||||
| Total Current Assets | 9,939 | 190,543 | (46,593 | ) | 153,889 | |||||||||||||||
| Long-term investments | — | 9,710 | 9,710 | |||||||||||||||||
| Property and equipment, net of accumulated depreciation | 137 | 18,632 | 18,769 | |||||||||||||||||
| Software, net of accumulated amortization | — | 27,179 | 27,179 | |||||||||||||||||
| Goodwill | 14,181 | 43,265 | 16,112 | C | 73,558 | |||||||||||||||
| Intangible assets, net of accumulated amortization | 2,268 | 73,074 | 19,432 | C | 94,774 | |||||||||||||||
| Deferred income taxes, non-current | 4,778 | 35,092 | (4,778 | ) | C | 35,092 | ||||||||||||||
| Deferred financing costs, net of accumulated amortization | — | 354 | 354 | |||||||||||||||||
| Other long-term assets | 252 | 7,795 | 8,047 | |||||||||||||||||
| Total assets | $ | 31,555 | $ | 405,644 | $ | (15,827 | ) | $ | 421,372 | |||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Term loan | $ | 15 | $ | 5,000 | $ | 5,015 | ||||||||||||||
| Accounts payable | 203 | 7,909 | 8,112 | |||||||||||||||||
| Notes payable, current | — | 11 | 11 | |||||||||||||||||
| Commissions payable | — | 3,673 | 3,673 | |||||||||||||||||
| Accrued compensation and benefits | — | 18,061 | 18,061 | |||||||||||||||||
| Other accrued liabilities | 1,837 | 13,970 | 749 | C | 16,556 | |||||||||||||||
| Deferred revenue | 7,324 | 81,795 | (2,941 | ) | C | 86,178 | ||||||||||||||
| Capital lease obligations | — | 282 | 282 | |||||||||||||||||
| Total current liabilities | 9,379 | 130,701 | (2,192 | ) | 137,888 | |||||||||||||||
| Capital lease obligations, less current portion | — | 218 | 218 | |||||||||||||||||
| Revolving credit loan | — | 25,000 | 25,000 | |||||||||||||||||
| Long term debt, less current portion | 58 | — | 58 | |||||||||||||||||
| Deferred income taxes | — | 1,823 | 8,300 | C | 10,123 | |||||||||||||||
| Deferred revenue | 79 | 7,042 | (79 | ) | C | 7,042 | ||||||||||||||
| Redeemable warrants | 8 | — | 8 | |||||||||||||||||
| Other non-current liabilities | 175 | 5,330 | 5,505 | |||||||||||||||||
| Total liabilities | 9,699 | 170,114 | 6,029 | 185,842 | ||||||||||||||||
| Commitments and Contingencies | ||||||||||||||||||||
| Temporary Equity | ||||||||||||||||||||
| Noncontrolling interest | — | 4,990 | 4,990 | |||||||||||||||||
| Redeemable Preferred Stock | 35,786 | — | (35,786 | ) | E | — | ||||||||||||||
| Shareholders’ (Deficit) Equity | ||||||||||||||||||||
| Series C and E Preferred stock | 1,911 | — | (1,911 | ) | D | — | ||||||||||||||
| Common stock | 5 | 271 | (5 | ) | D | 271 | ||||||||||||||
| Additional paid-in-capital | 2,061 | 385,511 | (2,061 | ) | D | 385,511 | ||||||||||||||
| Notes receivable-stockholders | (142 | ) | — | 142 | D | — | ||||||||||||||
| Accumulated deficit | (17,474 | ) | (149,376 | ) | 17,474 | D | (149,376 | ) | ||||||||||||
| Accumulated other comprehensive loss | (291 | ) | (5,866 | ) | 291 | D | (5,8 66 | Tot | ||||||||||||
| Total shareholders’ (deficit) equity | (13,930 | ) | 230,540 | 13,930 | 230,540 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 31,555 | $ | 405,644 | $ | (15,827 | ) | $ | 421,372 | |||||||||||
P-3
Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Statement of Operations
For the year ended December 31, 2011
(In thousands, except share and per share data)
(Unaudited)
OutStart (A) | Kenexa (B) | Pro Forma Adjustments | F/N | Pro Forma | ||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Subscription | $ | 14,763 | $ | 204,230 | $ | 218,993 | ||||||||||||||
| Other | 7,825 | 78,709 | 86,534 | |||||||||||||||||
| Total revenues | 22,588 | 282,939 | 305,527 | |||||||||||||||||
| Cost of revenues | 3,856 | 112,173 | 116,029 | |||||||||||||||||
| Gross profit | 18,732 | 170,766 | 189,498 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing | 6,850 | 63,394 | 70,244 | |||||||||||||||||
| General and administrative | 1,812 | 53,933 | (189 | ) | D | 55,556 | ||||||||||||||
| Research and development | 4,216 | 19,089 | 23,305 | |||||||||||||||||
| Depreciation and amortization | 1,170 | 32,447 | 2,148 | C | 35,765 | |||||||||||||||
| Total operating expenses | 14,048 | 168,863 | 1,959 | 184,870 | ||||||||||||||||
| Income from operations | 4,684 | 1,903 | (1,959 | ) | 4,628 | |||||||||||||||
| Interest expense | (39 | ) | (1,575 | ) | (1,614 | ) | ||||||||||||||
| Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds | — | (244 | ) | (244 | ) | |||||||||||||||
| Other expense | (15 | ) | — | (15 | ) | |||||||||||||||
| Income (loss) before income tax | 4,630 | 84 | (1,959 | ) | 2,755 | |||||||||||||||
| Income tax expense | 1,957 | 3,955 | 5,912 | |||||||||||||||||
| Net income (loss) | $ | 2,673 | $ | (3,871 | ) | $ | (1,959 | ) | $ | (3,157 | ) | |||||||||
| Income allocated to noncontrolling interests | — | (234 | ) | (234 | ) | |||||||||||||||
| Accretion associated with variable interest entity | — | (3,159 | ) | (3,159 | ) | |||||||||||||||
| Net income (loss) allocable to common shareholders | $ | 2,673 | $ | (7,264 | ) | $ | (1,959 | ) | $ | (6,550 | ) | |||||||||
| Net loss per share- basic and diluted | $ | (0.28 | ) | $ | (0.26 | ) | ||||||||||||||
| Weighted average shares used to compute net income (loss) allocable to common shareholders per share – basic and diluted | 25,524,227 | 25,524,227 | ||||||||||||||||||
P-4
Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Statement of Operations
For the year ended December 31, 2010
(In thousands, except share and per share data)
(Unaudited)
OutStart (A) | Kenexa (B) | Pro Forma Adjustments | F/N | Pro Forma | ||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Subscription | $ | 14,050 | $ | 154,689 | 168,739 | |||||||||||||||
| Other | 7,192 | 41,664 | 48,856 | |||||||||||||||||
| Total revenues | 21,242 | 196,353 | 217,595 | |||||||||||||||||
| Cost of revenues | 3,975 | 68,433 | 72,408 | |||||||||||||||||
| Gross profit | 17,267 | 127,920 | 145,187 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing | 7,835 | 48,177 | 56,012 | |||||||||||||||||
| General and administrative | 2,046 | 48,481 | 50,527 | |||||||||||||||||
| Research and development | 4,390 | 11,901 | 16,291 | |||||||||||||||||
| Depreciation and amortization | 1,365 | 19,661 | 3,692 | C | 24,718 | |||||||||||||||
| Total operating expenses | 15,636 | 128,220 | 3,692 | 147,548 | ||||||||||||||||
| Income (loss) from operations | 1,631 | (300 | ) | (3,692 | ) | (2,361 | ) | |||||||||||||
| Interest expense (income) | 127 | (14 | ) | 113 | ||||||||||||||||
| Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds | — | (379 | ) | (379 | ) | |||||||||||||||
| Other expense | (29 | ) | — | (29 | ) | |||||||||||||||
| Income (loss) before income tax | 1,475 | (665 | ) | (3,692 | ) | (2,882 | ) | |||||||||||||
| Income tax expense | 1,078 | 2,344 | 3,422 | |||||||||||||||||
| Net income (loss) | $ | 397 | $ | (3,009 | ) | $ | (3,692 | ) | $ | (6,304 | ) | |||||||||
| Income allocated to noncontrolling interests | (1 | ) | (550 | ) | (551 | ) | ||||||||||||||
| Accretion | — | (2,202 | ) | (2,202 | ) | |||||||||||||||
| Net income (loss) allocable to common shareholders | $ | 396 | $ | (5,761 | ) | $ | (3,692 | ) | $ | (9,057 | ) | |||||||||
| Basic and diluted net loss per share | $ | (0.25 | ) | $ | (0.40 | ) | ||||||||||||||
| Weighted average shares used to compute net loss allocable to common shareholders per share – basic and diluted | 22,645,286 | 22,645,286 | ||||||||||||||||||
P-5
Kenexa Corporation
Notes to Pro Forma Consolidating Financial Statements
(Unaudited)
Notes to Pro Forma Consolidating Balance Sheet as of December 31, 2011
| (A) | To reflect the historical balance sheet of OutStart as of December 31, 2011. | |
| (B) | To reflect the historical balance sheet of the Company as of December 31, 2011. | |
| (C) | To record the consideration of $46.2 million for the purchase of OutStart, financed through existing cash. The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based upon management's best estimate of their fair value with excess cost over the net tangible and intangible assets acquired allocated to goodwill and identified intangible assets as presented below. |
The preliminary estimated fair value determination is allocated as follows and is for illustrative purposes only
| Description | Amount | Amortization period | |||
| Assets Acquired | |||||
| Cash and cash equivalents | $ | 5,131 | |||
| Accounts receivable | 3,920 | ||||
| Prepaid expenses and other current assets | 119 | ||||
| Note receivable | 142 | ||||
| Property plant and equipment | 130 | ||||
| Other assets | 155 | ||||
| Backlog | 2,100 | 1 year | |||
| Customer lists | 8,300 | 15 years | |||
| Software | 11,300 | 12 years | |||
| Goodwill | 30,293 | Indefinite | |||
Less: Liabilities Assumed | |||||
| Term loan | (15 | ) | |||
| Accounts payable | (207 | ) | |||
| Accrued expense | (2,211 | ) | |||
| Deferred taxes | (8,300 | ) | |||
| Deferred Revenue | (4,383 | ) | |||
| Other noncurrent liabilities | (247 | ) | |||
| Total fair value of the acquisition | $ | 46,227 | |||
| (D) | To eliminate OutStart’s shareholders’ deficit as of December 31, 2011. | |
| (E) | To reflect the settlement of certain equity obligations by the former shareholders’ of OutStart prior to the acquisition. |
P-6
Kenexa Corporation
Notes to Pro Forma Consolidating Financial Statements (continued)
(Unaudited)
Notes to Pro Forma Consolidating Statement of Operations for the year ended December 31, 2011.
| (A) | To reflect the consolidated historical statement of operations of OutStart for the twelve months ended December 31, 2011. | |
| (B) | To reflect the consolidated historical statement of operations of the Company for the twelve months ended December 31, 2011, as reported. | |
| (C) | To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of one to fifteen years. The amortization is subject to revision based upon the completion of the purchase price allocation study. | |
| (D) | To adjust for professional fees incurred in the year of the presented pro forma acquisition. | |
Notes to Pro Forma Consolidating Statement of Operations for the year ended December 31, 2010.
| (A) | To reflect the consolidated historical statement of operations of OutStart for the twelve months ended December 31, 2010. | |
| (B) | To reflect the consolidated historical statement of operations of the Company for the twelve months ended December 31, 2010, as reported. | |
| (C) | To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of one to fifteen years. The amortization is subject to revision based upon the completion of the purchase price allocation study. |
P-7