EX-99.1 2 knxa_ex991.htm PRESS RELEASE Kenexa Corporation

EXHIBIT 99.1


Kenexa Announces Financial Results for Third Quarter 2009

WAYNE, Pa. – November 3, 2009 – Kenexa (Nasdaq: KNXA), a global provider of business solutions for human resources, today announced operating results for the third quarter ended September 30, 2009.  

For the third quarter of 2009, Kenexa reported total revenues of $40.3 million, a sequential increase compared to $39.5 million for the second quarter of 2009 and compared to $54.0 million for the third quarter of 2008.  Subscription revenue was $33.2 million for the third quarter of 2009, compared to $43.0 million for the third quarter of 2008, while professional services and other revenue was $7.1 million for the third quarter of 2009, compared to $11.0 million for the third quarter of 2008.    

Rudy Karsan, Chief Executive Officer of Kenexa, stated, “We are pleased with the company’s financial results for the third quarter, which were consistent with or better than our expectations.  We are encouraged that our total revenue grew slightly on a sequential basis, deferred revenue grew 20% on a year-over-year basis and cash flows from operations were again solid with $6 million generated in the quarter.”  

Karsan added, “From a macro perspective, we expect to continue facing headwinds until the unemployment rate stabilizes.  We believe that Kenexa has weathered the most difficult stage of the economic challenges, and the company is well positioned when the spending environment ultimately improves.  Customers are increasingly engaging in strategic evaluations, and the power of Kenexa’s end-to-end value proposition is evidenced by a number of highly competitive wins for global, multi-element solutions during the third quarter.”  

Non-GAAP income from operations, which excludes share-based compensation expense and amortization of intangibles associated with previous acquisitions, was $4.3 million for the three months ended September 30, 2009, compared to $10.3 million for the three months ended September 30, 2008.  Non-GAAP net income, which excludes the above mentioned items, was $4.0 million.  Non-GAAP net income was $0.18 per basic and diluted share for the quarter ended September 30, 2009, which was above the company’s guidance of $0.13 to $0.16 as a result of a $0.02 per share contribution from a lower-than-expected tax rate.  Non-GAAP net income was $0.36 per basic and diluted share in the third quarter of 2008.

Kenexa’s income from operations for the three months ended September 30, 2009, determined in accordance with GAAP, was $1.9 million, compared with income from operations of $7.5 million for the same period of 2008. GAAP net income was $1.6 million, or $0.07 per basic and diluted share, compared to net income of $5.4 million and $0.24 per basic and diluted share in the same period of 2008.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Kenexa had cash and cash equivalents and investments of $50.2 million at September 30, 2009, an increase from $47.2 million at the end of the prior quarter.  The Company generated positive cash from operations of $6.1 million during the third quarter, which was partially offset by capital expenditures.  Deferred revenue was $44.2 million at September 30, 2009, an increase of approximately $2.0 million compared to the end of the second quarter 2009 and an increase of 20% from the end of the year ago period.  

Business Outlook

Based on information as of today, November 3, 2009, the Company is issuing guidance for the fourth quarter 2009 as follows:  

Fourth Quarter 2009: The Company expects revenue to be $38 million to $40 million, and non-GAAP operating income to be $3.3 million to $3.9 million. Assuming a 15% effective tax rate for reporting purposes and 22.9 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.13 to $0.15.  




Conference Call Information

Kenexa will host a conference call today, November 3, 2009, at 5:00 pm (Eastern Time) to discuss the Company's financial results. To access this call, dial 877-407-9039 (domestic) or 201-689-8470 (international). A replay of this conference call will be available through November 10, 2009, at 877-660-6853 (domestic) or 201-612-7415 (international). The replay passcode is 334743. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's Web site, (www.kenexa.com) and a replay will be archived on the Web site as well.  

Forward-Looking Statements


This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning.  These statements may contain, among other things, guidance as to future revenue and earnings, operations, expected benefits from acquisitions, prospects of the business generally, intellectual property and the development of products.  These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Kenexa’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by Kenexa’s quarterly reports on Form 10-Q.  Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors, Kenexa’s ability to implement business and acquisition strategies or to complete or integrate acquisitions.  Kenexa does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.


Non-GAAP Financial Measures

This press release contains non-GAAP financial measures.  Kenexa believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Kenexa’s financial condition and results of operations.  The Company’s management uses these non-GAAP results to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes.  These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company’s Board of Directors.  The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in the Company’s industry, many of which present similar non-GAAP financial measures to investors.

Management of the Company does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded.  In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures.

In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results.  Kenexa urges investors and potential investors in the Company’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures which it includes in press releases announcing earnings information, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Kenexa presents the following non-GAAP financial measures in this press release: non-GAAP income from operations before income taxes and interest income; non-GAAP net income; non-GAAP sales and marketing expense; non-GAAP general and administrative expense; non-GAAP research and development expense; and non-GAAP basic and diluted net income per share as described below. The Company’s non-GAAP financial measures exclude share-based compensation and amortization of acquired intangible assets related to the Company’s acquisitions.





Share-based compensation. Share-based compensation consists of expenses for stock options and stock awards that the Company began recording in accordance with SFAS 123(R) during the first quarter of 2006. Share-based compensation was $1.4 million for the three months ended September 30, 2009 compared to $1.3 million for the three months ended September 30, 2008. Share-based compensation expenses are excluded in the Company’s non-GAAP financial measures because share-based compensation amounts are difficult to forecast. This is due in part to the magnitude of the charges which depends upon the volume and timing of stock option grants, which are unpredictable and can vary dramatically from period to period, and external factors such as interest rates and the trading price and volatility of the Company’s common stock.  The Company believes that this exclusion provides meaningful supplemental information regarding the Company’s operating results because these non-GAAP financial measures facilitate the comparison of results for future periods with results from past periods. The dilutive effect of all outstanding options is included in the calculation of diluted earnings per share on both a GAAP and a non-GAAP basis.

Amortization of acquired intangible assets. In accordance with GAAP, operating expenses include amortization of acquired intangible assets which are amortized over the estimated useful lives of such assets.   Amortization of acquired intangible assets was $1.0 million for the three months ended September 30, 2009, and $1.5 million for the three months ended September 30, 2008. Amortization of acquired intangible assets is excluded from the Company’s non-GAAP financial measures because the Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.

Each of non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP research and development expense, and estimated non-GAAP effective tax rate are each components necessary to calculate non-GAAP income from operations before income taxes and interest income, non-GAAP net income and non-GAAP basic and diluted net income per share and are calculated by adjusting the corresponding GAAP measure for the applicable period by the applicable portion of share-based compensation and severance expenses.

About Kenexa

Kenexa® provides business solutions for human resources. We help global organizations multiply business success by identifying the best individuals for every job and fostering optimal work environments for every organization. For more than 20 years, Kenexa has studied human behavior and team dynamics in the workplace, and has developed the software solutions, business processes and expert consulting that help organizations impact positive business outcomes through HR. Kenexa is the only company that offers a comprehensive suite of unified products and services that support the entire employee lifecycle from pre-hire to exit. Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.

# # #

Note to editors: Kenexa is a registered trademark of Kenexa.  Other company names, product names and company logos mentioned herein are the trademarks or registered trademarks of their respective owners.

Contact


MEDIA CONTACT:

Sarah Teten

Jeanne Achille

Kenexa

The Devon Group

(800) 391-9557

(732) 224-1000, ext. 11

sarah.teten@kenexa.com

jeanne@devonpr.com


INVESTOR CONTACT:

Kori Doherty

ICR

(617) 956-6730

kdoherty@icrinc.com





KENEXA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

 

 

September 30,
2009

 

December 31,
2008

 

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

                  

 

 

                  

 

Current assets

     

 

 

     

 

 

 

Cash and cash equivalents

 

$

28,224

 

$

21,742

 

Short-term investments

 

 

22,000

 

 

4,512

 

Accounts receivable, net of allowance for doubtful accounts of $2,235 and $3,755

 

 

29,809

 

 

33,518

 

Unbilled receivables

 

 

5,613

 

 

5,849

 

Income tax receivable

 

 

1,155

 

 

1,238

 

Deferred income taxes

 

 

4,778

 

 

4,615

 

Prepaid expenses and other current assets

 

 

7,183

 

 

3,745

 

Total current assets

 

 

98,762

 

 

75,219

 

 

 

 

 

 

 

 

 

Long-term investments

 

 

 

 

16,513

 

Property, plant and equipment, net of accumulated depreciation  

 

 

19,437

 

 

20,175

 

Software, net of accumulated amortization

 

 

16,188

 

 

11,025

 

Goodwill

 

 

314

 

 

32,366

 

Intangible assets, net of accumulated amortization

 

 

9,392

 

 

13,414

 

Deferred income taxes, non-current

 

 

39,901

 

 

39,465

 

Deferred financing costs, net of accumulated amortization

 

 

 

 

364

 

Other long-term assets

 

 

9,835

 

 

9,924

 

Total assets

 

$

193,829

 

$

218,465

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

6,922

 

$

6,448

 

Notes payable, current

 

 

12

 

 

40

 

Commissions payable

 

 

709

 

 

559

 

Accrued compensation and benefits

 

 

5,041

 

 

4,010

 

Other accrued liabilities

 

 

6,149

 

 

10,090

 

Deferred revenue

 

 

44,192

 

 

38,638

 

Capital lease obligations

 

 

214

 

 

143

 

Total current liabilities

 

 

63,239

 

 

59,928

 

 

 

 

 

 

 

 

 

Capital lease obligations, less current portion

 

 

310

 

 

108

 

Notes payable, less current portion

 

 

 

 

41

 

Deferred income taxes

 

 

1,202

 

 

1,789

 

Other liabilities

 

 

86

 

 

63

 

Total liabilities

 

 

64,837

 

 

61,929

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

Preferred stock, par value $0.01; 100,000 shares authorized; no shares issued or  outstanding

 

 

 

 

 

Common stock, par value $0.01; 100,000,000 shares authorized; 22,553,686 and 22,504,924 shares issued and outstanding, respectively

 

 

226

 

 

225

 

Additional paid-in capital

 

 

273,758

 

 

269,365

 

Accumulated deficit

 

 

(142,006

)

 

(110,633

)

Accumulated other comprehensive loss

 

 

(3,093

)

 

(2,421

)

Total shareholders' equity

 

 

128,885

 

 

156,536

 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

 

107

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

193,829

 

$

218,465

 





KENEXA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenue:

 

 

                    

 

 

                    

 

 

                    

 

 

                    

 

Subscription

     

$

33,221

     

$

43,031

     

$

100,527

     

$

125,855

 

Other

 

 

7,093

 

 

10,995

 

 

18,083

 

 

32,819

 

Total revenues

 

 

40,314

 

 

54,026

 

 

118,610

 

 

158,674

 

Cost of revenues

 

 

13,129

 

 

16,461

 

 

40,462

 

 

46,739

 

Gross profit

 

 

27,185

 

 

37,565

 

 

78,148

 

 

111,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

9,083

 

 

10,298

 

 

26,029

 

 

31,175

 

General and administrative

 

 

10,182

 

 

12,649

 

 

30,972

 

 

37,487

 

Research and development

 

 

2,453

 

 

3,756

 

 

7,557

 

 

12,605

 

Depreciation and amortization

 

 

3,582

 

 

3,337

 

 

10,084

 

 

8,766

 

Goodwill impairment charge

 

 

 

 

 

 

33,329

 

 

 

Total operating expenses

 

 

25,300

 

 

30,040

 

 

107,971

 

 

90,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

1,885

 

 

7,525

 

 

(29,823

)

 

21,902

 

Interest (expense) income, net

 

 

(28

)

 

255

 

 

(186

)

 

1,216

 

Investment income

 

 

102

 

 

 

 

54

 

 

 

Income (loss) before income taxes

 

 

1,959

 

 

7,780

 

 

(29,955

)

 

23,118

 

Income tax expense

 

 

361

 

 

2,356

 

 

1,418

 

 

6,955

 

Net income (loss)

 

$

1,598

 

$

5,424

 

$

(31,373

)

$

16,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) income per share

 

$

0.07

 

$

0.24

 

$

(1.39

)

$

0.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used  to compute net income (loss) income per share - basic

 

 

22,539,717

 

 

22,551,225

 

 

22,525,144

 

 

22,852,499

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) income per share

 

$

0.07

 

$

0.24

 

$

(1.39

)

$

0.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used  to compute net income (loss) income per share - diluted

 

 

22,920,935

 

 

22,788,468

 

 

22,525,144

 

 

23,084,524

 





Non-GAAP income from operations and Non-GAAP net income excludes share-based compensation and amortization of intangibles.

 

 

Three Months Ended
September 30,

 

 

 

2009

 

2008

 

 

 

 

(unaudited)

 

 

(unaudited)

 

Non-GAAP income from operations reconciliation:

     

 

                    

     

 

                    

 

Income from operations

 

$

1,885

 

$

7,525

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense

 

 

1,384

 

 

1,256

 

Amortization of intangibles associated with acquisitions

 

 

1,041

 

 

1,526

 

Non-GAAP income from operations

 

$

4,310

 

$

10,307

 

Non-GAAP income from operations as a percentage of total revenue

 

 

11

%

 

19

%

 

 

 

 

 

 

 

 

Weighted average shares used  to compute Non-GAAP net income per share - basic

 

 

22,539,717

 

 

22,551,225

 

Dilutive effect of options and restricted stock units

 

 

381,218

 

 

237,243

 

Weighted average shares used  to compute Non-GAAP net income per share - diluted

 

 

22,920,935

 

 

22,788,468

 

 

 

 

 

 

 

 

 

Non-GAAP income reconciliation:

 

 

 

 

 

 

 

Net income

 

$

1,598

 

$

5,424

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense

 

 

1,384

 

 

1,256

 

Amortization of intangibles associated with acquisitions

 

 

1,041

 

 

1,526

 

Non-GAAP net income

 

$

4,023

 

$

8,206

 

Non-GAAP basic and diluted net income per share

 

$

0.18

 

$

0.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Non-GAAP measures referenced on earnings call excludes stock based compensation and severance expense:

 

 

 

 

 

 

 

Gross profit

 

$

27,185

 

$

37,565

 

Add: share-based compensation expense

 

 

59

 

 

96

 

Non-GAAP gross profit

 

$

27,244

 

$

37,661

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

9,083

 

$

10,298

 

Less: share-based compensation expense

 

 

(286

)

 

(68

)

Non-GAAP sales and marketing

 

$

8,797

 

$

10,230

 

 

 

 

 

 

 

 

 

General and administrative

 

$

10,182

 

$

12,649

 

Less: share-based compensation expense

 

 

(902

)

 

(985

)

Non-GAAP general and administrative

 

$

9,280

 

$

11,664

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,453

 

$

3,756

 

Less: share-based compensation expense

 

 

(137

)

 

(107

)

Non-GAAP research and development

 

$

2,316

 

$

3,649

 





KENEXA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

For the Nine Months Ended September 30,

 

 

 

2009

 

2008

 

 

 

 

(unaudited)

 

 

(unaudited)

 

Cash flows from operating activities

     

 

                  

     

 

                  

 

Net (loss) Income

 

$

(31,373

)

$

16,163

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,084

 

 

8,766

 

Loss on change in fair market value of ARS and put option, net

 

 

9

 

 

 

Goodwill Impairment Charge

 

 

33,329

 

 

 

Share-based compensation expense

 

 

4,080

 

 

4,430

 

Excess tax benefits from share-based payment arrangements

 

 

 

 

(192

)

Amortization of deferred financing costs

 

 

364

 

 

224

 

Bad debt (recoveries) expense

 

 

(471

)

 

1,293

 

Deferred income (benefit) taxes

 

 

(1,118

)

 

1,213

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

 

4,272

 

 

(3,705

)

Prepaid expenses and other current assets

 

 

(1,907

)

 

(462

)

Income taxes receivable

 

 

83

 

 

 

Other long-term assets

 

 

(903

)

 

(2,659

)

Accounts payable

 

 

336

 

 

584

 

Accrued compensation and other accrued liabilities

 

 

180

 

 

(2,424

)

Commissions payable

 

 

149

 

 

(64

)

Deferred revenue

 

 

5,433

 

 

1,919

 

Other liabilities

 

 

(34

)

 

8

 

Net cash provided by operations

 

 

22,513

 

 

25,094

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(10,923

)

 

(16,609

)

Purchases of available-for-sale securities

 

 

(4,765

)

 

(25,195

)

Sales of available-for-sale securities

 

 

2,572

 

 

57,931

 

Sales of trading securities

 

 

1,650

 

 

 

Acquisitions and joint venture, net of cash acquired

 

 

(4,795

)

 

(29,747

)

Net cash released from escrow for acquisitions

 

 

 

 

(80

)

Net cash used in investing activities

 

 

(16,261

)

 

(13,700

)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Repayments of notes payable

 

 

(73

)

 

(33

)

Proceeds from common stock issued through Employee Stock Purchase Plan

 

 

244

 

 

255

 

Repurchase of common shares

 

 

 

 

(29,842

)

Excess tax benefits from share-based payment arrangements

 

 

 

 

192

 

Net Proceeds from option exercises

 

 

70

 

 

366

 

Repayments of capital lease obligations

 

 

(237)

 

 

(174

)

Net cash provided by (used in)  financing activities

 

 

4

 

 

(29,236

)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

226

 

 

(692

)

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

6,482

 

 

(18,534

)

Cash and cash equivalents at beginning of year

 

 

21,742

 

 

38,032

 

Cash and cash equivalents at end of period:

 

$

28,224

 

$

19,498

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

190

 

$

138

 

Income taxes

 

$

4,634

 

$

2,987

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

Capital Leases

 

$

513

 

$

260

 

Stock issuance for earn out

 

$

1,050

 

$

1,050