EX-99.1 2 e18489ex99-1.txt PRESS RELEASE Exhibit 99.1 Callidus Software Reports Second Quarter 2004 Results Q2 Revenues $13.2 Million; Reducing Cost Structure SAN JOSE, Calif., July 21 /PRNewswire-FirstCall/ -- Callidus Software Inc. (Nasdaq: CALD), a leader in Enterprise Incentive Management (EIM), today announced financial results for the second quarter ended June 30, 2004. Total second quarter revenues declined 20% to $13.2 million compared to $16.6 million in the second quarter of 2003. Second quarter net loss was $13.6 million, or ($0.56) per share, compared to net income of $0.5 million, or $0.03 per share, for the second quarter of 2003. Non-GAAP net loss for the second quarter was $5.6 million, or ($0.23) per share, as compared to non-GAAP net income of $0.8 million, or $0.04 per share in the second quarter of 2003. A reconciliation between GAAP and non-GAAP information is contained in the attached tables. "Second quarter maintenance and service revenues met our expectations; however, product revenues were substantially below our initial expectations for the quarter. We continued to experience longer selling cycles and delays in closing transactions during the quarter," said David Pratt, president and CEO of Callidus Software. "During my short tenure, I have worked closely with the executive team and met with many of our employees, customers, prospective customers and partners. My assessment is that Callidus has great products, happy customers, strong partnerships and a good employee base. Our focus in the near term will be on sales execution efforts and on reducing our cost structure to lower our break- even point," continued Pratt. Callidus also announced the discontinuance of its TruePerformance product. In connection with this decision, Callidus recorded impairment charges totaling $3.8 million on intangible assets in the second quarter. "We believe the TrueComp(R) suite of products has greater return on investment potential than the TruePerformance product. Accordingly, the discontinued investment in TruePerformance will result in quarterly cost savings of approximately $800,000, excluding related shut down costs, while not negatively impacting anticipated 2004 revenues," said Pratt. The TrueComp suite, including TrueResolution(TM), TrueReferral(TM), and TrueInformation(TM), has constituted the vast majority of product revenues since the inception of Callidus. In addition to discontinuing TruePerformance, Callidus expects to implement other cost savings actions and closely monitor discretionary spending. These actions are anticipated to result in additional quarterly cost savings of approximately $1.2 million. The impact of the combined cost savings actions will be partially realized in the third quarter. Accordingly, management anticipates operating expenses for the third quarter of 2004, excluding stock-based compensation and charges related to the cost savings actions, to be between $9.5 million and $10.5 million. Maintenance and service revenues for the third quarter are expected to be between $10.0 million and $11.0 million with a contributing margin of 28% to 30%. Q2 2004 Financial Summary * License revenues were $1.9 million, declining 79% year-over-year. * Maintenance and service revenues were $11.3 million; increasing 46% year-over-year. Excluding an accrual for a TruePerformance related claim, maintenance and service revenues were $12.1 million; increasing 56% year-over-year. * Operating expenses were $16.7 million. Excluding stock-based compensation, amortization and impairment of intangibles and legal settlements, operating expenses were $11.4 million in Q2 2004, an increase of $2.4 million from Q2 2003. The increase is the result of added investments in all areas of the business and the costs of being a public company. * Cash and investments totaled $70.0 million on June 30, 2004. * Days Sales Outstanding (DSO) in accounts receivable at the end of the quarter was 66 days, unchanged from the end of the first quarter of 2004. Conference Call Callidus Software's second quarter 2004 conference call is scheduled for 1:30 p.m. Pacific Daylight Time (PDT), Wednesday, July 21, 2004. The conference call is available via webcast and can be accessed live, and for two weeks after the call, at the Investor Relations section of Callidus Software's website at www.callidussoftware.com. To participate in the call via telephone, the dial in number is 866-800-8651 (international 617-614-2704), passcode 89276832. A replay of the conference call can be accessed after 3:30 p.m. PDT, by calling 888-286-8010 (international 617-801-6888), passcode 88577469. About Callidus Software Founded in 1996, Callidus Software (www.CallidusSoftware.com) is a leading provider of EIM systems to global companies across multiple industries. Callidus' EIM systems allow enterprises to develop and manage competitive incentive compensation linked to the achievement of strategic business objectives. Through its TrueComp Grid(TM) architecture, Callidus delivers the industry's only EIM solution that combines the power and scalability of grid computing with the flexibility of rules-based interface. Customers/Partners include Apple Computer, AT&T Wireless, BMC Software, CUNA Mutual Insurance, DIRECTV, Dun & Bradstreet, IBM, JP Morgan Chase & Co., Pennzoil-Quaker State Company, and SBC Communications. Non-GAAP Financial Measures The non-GAAP information provided in this press release is a supplement to, and not a substitute for, our financial results presented in accordance with generally accepted accounting principles (GAAP) in the United States. The non-GAAP financial results exclude stock-based compensation expense, legal settlements, amortization and impairment of intangible assets and an accrual for claims related to TruePerformance. The non-GAAP financial measures provide what we believe is an additional tool for investors to use in understanding our operational results and trends. These non-GAAP financial results are used internally by management to evaluate our operations, plan and forecast for future periods and to allocate resources within the organization. A reconciliation between GAAP and non-GAAP financial measures is included in the accompanying tables. Note on Forward-Looking Statements The forward looking statements included in this press release, including estimates of operating expenses and maintenance and service revenues for the third quarter of 2004, 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, timing of software license orders, potential material fluctuations in financial results and future growth rates, decreases in customer spending, increased competition or new entrants in the marketplace, litigation and other risks detailed in the company's SEC reports, including its From 10-K and Form 10-Q, copies of which may be obtained by contacting Callidus Software's Investor Relations department at 408-808-6577, or 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. NOTE: Callidus Software, the Callidus Software logo, Everyone Profits, TrueChannel, TrueComp, and TrueInformation, TruePerformance, True Referral, and TrueResolution are trademarks of Callidus Software Inc. All other trademarks are the property of their respective owners. CALLIDUS SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share data) (unaudited) Three months ended Six months ended June 30, June 30, 2004 2003 2004 2003 Revenues: License revenues $1,889 $8,895 $6,428 $16,603 Maintenance and service revenues 11,345 7,748 23,268 13,175 Total revenues 13,234 16,643 29,696 29,778 Cost of revenues: License revenues 189 513 452 1,011 Maintenance and service revenues 8,384 5,999 16,994 10,270 Impairment of intangible asset 1,800 -- 1,800 -- Total cost of revenues 10,373 6,512 19,246 11,281 Gross profit 2,861 10,131 10,450 18,497 Operating expenses: Sales and marketing 5,345 5,210 11,745 8,764 Research and development 3,876 2,563 7,586 5,266 General and administrative 2,775 1,243 4,747 2,525 Impairment of intangible asset 1,994 -- 1,994 -- Stock-based compensation 2,721 272 4,465 1,392 Total operating expenses 16,711 9,288 30,537 17,947 Operating income (loss) (13,850) 843 (20,087) 550 Interest expense (16) (161) (95) (257) Interest and other income, net 272 27 544 47 Income (loss) before provision for income taxes (13,594) 709 (19,638) 340 Provision for income taxes 25 172 50 172 Net income (loss) $(13,619) $537 $(19,688) $168 Basic income (loss) per share attributable to common stockholders $(0.56) $0.03 $(0.82) $0.01 Diluted income (loss) per share $(0.56) $0.03 $(0.82) $0.01 Shares used in basic per share computation 24,204 1,443 24,095 1,422 Shares used in diluted per share computation 24,204 20,809 24,095 20,423 CALLIDUS SOFTWARE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited) June 30, December 31, Assets 2004 2003 Current assets: Cash and cash equivalents $27,907 $56,330 Short-term investments 42,070 23,936 Accounts receivable, net 10,107 14,850 Prepaid and other current assets 1,750 1,511 Total current assets 81,834 96,627 Property and equipment, net 3,612 2,721 Intangible asset -- 2,000 Other assets 1,520 851 Total assets $86,966 $102,199 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $612 $694 Accounts payable 2,256 3,504 Accrued payroll and related expenses 5,066 3,638 Accrued expenses 5,248 3,542 Deferred revenue 6,805 7,930 Total current liabilities 19,987 19,308 Long-term debt, less current portion 221 520 Deferred rent 212 180 Long-term deferred revenue 297 693 Total liabilities 20,717 20,701 Stockholders' equity Common stock 24 24 Additional paid-in capital 184,129 184,343 Deferred stock-based compensation (4,372) (9,328) Notes receivable from stockholders (83) (83) Other comprehensive income (15) 288 Accumulated deficit (113,434) (93,746) Total stockholders' equity 66,249 81,498 Total liabilities and stockholders' equity $86,966 $102,199 CALLIDUS SOFTWARE INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except for per share data) (unaudited) Three months ended Three months ended June 30, 2004 June 30, 2003 Non-GAAP Non-GAAP GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Revenues: License revenues $1,889 $1,889 $8,895 $8,895 Maintenance and service revenues 11,345(a) 775 12,120 7,748 7,748 Total revenues 13,234 14,009 16,643 16,643 Cost of revenues: License revenues 189(b) (100) 89 513 513 Maintenance and service revenues 8,384 8,384 5,999 5,999 Impairment of intangible asset 1,800(c) (1,800) -- -- -- Total cost of revenues 10,373 8,473 6,512 6,512 Gross profit 2,861 5,536 10,131 10,131 Operating expenses: Sales and marketing 5,345 5,345 5,210 5,210 Research and development 3,876(b) (158) 3,718 2,563 2,563 General and administrative 2,775(d) (450) 2,325 1,243 1,243 Impairment of intangible asset 1,994(c) (1,994) -- -- -- Stock-based compensation 2,721(e) (2,721) -- 272(e) (272) -- Total operating expenses 16,711 11,388 9,288 9,016 Operating income (loss) (13,850) (5,852) 843 1,115 Interest expense (16) (16) (161) (161) Interest and other income, net 272 272 27 27 Income (loss) before provision for income taxes (13,594) (5,596) 709 981 Provision for income taxes 25 25 172 172 Net income (loss) $(13,619) $(5,621) $537 $809 Diluted income (loss) per share $(0.56) $(0.23) $0.03 $0.04 Shares used in diluted per share computation 24,204 24,204 20,809 20,809 (a) Accrual for a claim related to TruePerformance (b) Amortization of purchased intangible assets (c) Impairment of purchased intangible assets (d) Legal settlement with Gordon Food Service (e) Non-cash stock based compensation SOURCE Callidus Software Inc. -0- 07/21/2004 /CONTACT: Investor Relations, Jon Pexton, +1-408-808-6577, or ir@callidussoftware.com, or Press, Jane Le Fevre, +1-408-808-6511, or pr@callidussoftware.com, both of Callidus Software Inc. /Web site: http://www.callidussoftware.com / (CALD) CO: Callidus Software Inc. ST: California IN: CPR STW SU: ERN CCA