0001136261-12-000425.txt : 20120731 0001136261-12-000425.hdr.sgml : 20120731 20120731161116 ACCESSION NUMBER: 0001136261-12-000425 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20120731 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120731 DATE AS OF CHANGE: 20120731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICESOURCE INTERNATIONAL, INC. CENTRAL INDEX KEY: 0001310114 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35108 FILM NUMBER: 12997015 BUSINESS ADDRESS: STREET 1: 634 SECOND STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 BUSINESS PHONE: 4159016030 MAIL ADDRESS: STREET 1: 634 SECOND STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 FORMER COMPANY: FORMER CONFORMED NAME: SERVICESOURCE INTERNATIONAL LLC DATE OF NAME CHANGE: 20041129 8-K 1 body8k.htm 8-K _


PDF as a courtesy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

________________

FORM 8-K

________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 31, 2012

________________

ServiceSource International, Inc.
(Exact name of Registrant as specified in its charter)

________________

         

Delaware

 

001-35108

 

81-0578975

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

634 Second Street
San Francisco, California 94107
(Address of principal executive offices, including zip code)

(415) 901-6030
(Registrant's telephone number, including area code)

Not applicable
(Former name or former address, if changed since last report)

________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02 - Results of Operations and Financial Condition.

On July 31, 2012, ServiceSource International, Inc. issued a press release announcing its results for the quarter ended June 30, 2012. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein.

The information in this current report on Form 8-K and the exhibits attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1

  

Press release dated July 31, 2012

 

 

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 31, 2012

 

SERVICESOURCE INTERNATIONAL, INC.

By:

 

/s/ Paul D. Warenski           

Name:

 

Paul D. Warenski

Title:

 

Executive Vice President, General Counsel and Secretary

 

 

 

 

 


EXHIBIT INDEX

 

Exhibit
Number

 

Description

99.1

  

Press release dated July 31, 2012     PDF

     

 

 

 

 

 


EX-99.1 2 exh99-1.htm PRESS RELEASE _

ServiceSource Reports Second Quarter 2012 Financial Results

  • Reports revenue of $59.7 million, up $11.2 million, or 23% from Q2 2011
  • Achieves adjusted EBITDA of $4.5 million and Non-GAAP EPS of $0.02 per diluted share
  • Launches first beta customer on Avalon, on track for Fall 2012 General Availability
  • Delivers second quarter operating cash flow of over $16 million

SAN FRANCISCO, July 31, 2012 - ServiceSource (Nasdaq: SREV), the global leader in Service Revenue Management (SRM), today announced financial results for the quarter ended June 30, 2012.

"Our team executed well during the second quarter, which contributed to revenue and profitability that exceeded the high-end of our guidance," stated Mike Smerklo, Chairman and CEO of ServiceSource. "We have made tremendous progress advancing our Avalon platform, which is our next-generation, cloud application suite for managing recurring revenue. We recently launched our first beta customer and are on track for a fall delivery of Avalon, which we believe will have significant impact on our industry and company."

Revenue for the second quarter of fiscal 2012 was $59.7 million, an increase of 23% compared with $48.5 million in the second quarter last year.

Adjusted EBITDA, which excludes stock-based compensation, for the second quarter of 2012 was $4.5 million, compared with $2.8 million for the second quarter of 2011.

Non-GAAP net income for the second quarter of 2012, which excludes stock-based compensation, a deferred tax valuation charge, and the amortization of internally-developed software, was $1.5 million, or $0.02 per diluted share. This represented an increase over the second quarter of 2011 non-GAAP net income of $0.6 million, or $0.01 per diluted share.

"I'm pleased at the discipline shown in the fiscal management of our business, driving a significant decrease in our DSOs to 77 days. This was a primary contributor to over $16 million of operating cash flow in the quarter," added David Oppenheimer, CFO of ServiceSource. "The strength of our second quarter results and ongoing business momentum provide us with confidence in our full year guidance."

GAAP net loss for the second quarter of 2012 was $36.8 million or $0.50 per share, compared with a net loss of $1.1 million, or $0.02 per share, in the same period last year. GAAP net income reflects a $33.1 million one-time, non-cash charge related to a valuation allowance applied to our deferred tax assets.

Recent Business Highlights

  • ServiceSource launched its first Avalon beta customer and is on track for General Availability in the second half of the year.

  • ServiceSource added a new SaaS logo to its customer base, with the recent signing of Jive Software, a leading provider of social business solutions.
  • The Company signed several new expansions including Hitachi Data Systems, Mitel, and Red Hat, among others.
  • The Company announced FrontRange Solutions, a Q1 new customer, as the 10th addition to its growing number of enterprise-wide relationships. FrontRange will use ServiceSource's end-to-end cloud application suite, analytics and channel management capabilities combined with dedicated global ServiceSource sales teams.
  • ServiceSource broadened its visibility in the industry with multiple accolades, including being honored as a 2012 Technology Services Innovator Finalist by TSIA; named in the Top 25 of "America's Fastest-Growing Technology Companies" by Forbes Magazine; and recognized as the 10th "Fastest Growing Enterprise Technology Company" by ZDNet.

Business Outlook

The Company provided the following commentary on its expected business outlook:

  • Third quarter 2012: The Company expects revenue for the third quarter of 2012 to be in the range of $57.5 to $59.5 million, adjusted EBITDA of approximately $0.5 to $1.5 million, GAAP net loss of $7.5 to $8.5 million and non-GAAP net loss per share to be between breakeven to a loss of $0.02 per share.
  • Adjusted EBITDA and non-GAAP net income exclude stock-based compensation and amortization of internally-developed software. Non-GAAP earnings per share assume a tax rate of 40% and 74 million basic shares outstanding.

  • Full year 2012: The Company reiterated its guidance for 2012 revenue of $246 to $249 million, adjusted EBITDA between $16 to $18 million and non-GAAP net income per diluted share in the range of $0.05 to $0.07. Reflecting the one-time, non-cash charge related to the deferred tax assets and the revised outlook on GAAP taxes for the year, the Company has revised its guidance for GAAP net loss to range from $46.5 to $48.5 million.

    Adjusted EBITDA and non-GAAP net income exclude stock-based compensation, the one-time charge for the deferred tax valuation allowance, and amortization of internally-developed software. Non-GAAP earnings per share assume a tax rate of 40% and 83 million shares outstanding.

Quarterly Conference Call

ServiceSource will discuss its quarterly results today via teleconference at 1:30 p.m. Pacific Time.  To access the call within the U.S., please dial (877) 293-5486, or outside the U.S. (914) 495-8592, at least five minutes prior to the start time. A live webcast of the call will also be available at http://ir.servicesource.com/events.cfm under the Events & Presentations menu. An audio replay will be available between 4:30 p.m. PT July 31, 2012 and 8:59 p.m. PT August 20,


2012 by calling (855) 859-2056 or (404) 537-3406, with Conference ID 98178483. The replay will also be available on the Company's website at http://ir.servicesource.com.

About ServiceSource, Inc.

P>ServiceSource is the global leader in service revenue management, partnering with technology-based companies to optimize maintenance, support and subscription revenue streams, while also improving customer relationships and loyalty. ServiceSource helps customers increase service revenue contract renewal rates, on average, by over 15 percentage points and, in some cases, up to 44 percentage points. ServiceSource delivers these results via a cloud-based solution, combining its Service Revenue Performance Suite™ of applications with dedicated service sales teams, leveraging a proprietary Service Revenue Intelligence Platform™ of transaction data, benchmarks and best practices. ServiceSource offers its service revenue management solution on a unique pay-for-performance business model that enables a success-driven, shared-risk partnership. The Company is headquartered in San Francisco, and manages service revenue performance for customers across the globe in more than 35 languages.

ServiceSource and any ServiceSource product or service names or logos above are trademarks of ServiceSource International, Inc. All other trademarks used herein belong to their respective owners.

For more information on ServiceSource, visit http://www.servicesource.com.

Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding the availability of our Avalon platform and its expected impact on the industry, ServiceSource's future expected financial results, and our ability to improve the renewal rates of our customers.  These forward-looking statements are based on our current assumptions and beliefs, and involve risks and uncertainties that could cause our results to differ materially from those expressed or implied in our forward-looking statements.  Those risks and uncertainties include, without limitation, changes in market conditions that impact our ability to generate service revenue on our customers' behalf; errors in estimates as to the service revenue we can generate for our customers; risks associated with material defects or errors in our software or the effect of data security breaches; our ability to bring our Avalon platform into general release in a timely and effective manner, without significant disruptions to our customer base; our ability to adapt our solution to changes in the market or new competition;  our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our periodic reports and registration statements filed with the Securities and Exchange Commission, and can be obtained online at the Commission's website at http://www.sec.gov.   All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements.


The following tables reconcile (i) the business outlook net income (loss) to adjusted EBITDA; (ii) the business outlook net income (loss) to non-GAAP net income (loss); and (iii) the business outlook net income (loss) per share to non-GAAP diluted earnings per share for the second quarter and full fiscal year.

ServiceSource International, Inc.
Business Outlook
Reconciliation of Net Income (Loss) to Adjusted EBITDA
($ in thousands, except per share amounts)
                       
          Three Months Ended   Twelve Month Ended
          September 30, 2012   December 31, 2012
               
                       
GAAP Net income (loss) range         $ (8,500) -- $ (7,500)   $ (48,500)   --   $ (46,500)
Income tax (benefit) / expense             100        31,700 
Interest & other expense, net             250        800 
Depreciation & Amortization             2,750        10,500 
EBITDA range         (5,400)   --   $ (4,400)   (5,500)   --   ($3,500)
Stock-based compensation             5,900        21,500 
Adjusted EBITDA Range         $ 500    --   $ 1,500    $ 16,000    --   $ 18,000 
                       
                       
GAAP to Non-GAAP Reconciliation                      
                       
                       
GAAP net income (loss) range         $ (8,500)   --   $ (7,500)   $ (48,500)   --   $ (46,500)
Non-GAAP adjustments:                      
Stock-based compensation             5,900        21,500 
Amortization of internally-developed software             900        3,200 
Income tax effect on non-GAAP adjustments and                       
     impact of normalizing the effective income tax rate             400        28,000 
Non-GAAP net income         $ (1,300)   --   $ (300)   $ 4,200    --   $ 6,200 
                       
                       
GAAP diluted net income (loss) per share         $ (0.11) --  $ (0.10)   $ (0.58)   --   $ (0.56)
Non-GAAP adjustments:                      
Stock-based compensation             0.08        0.26 
Amortization of internally-developed software             0.01        0.04 
Income tax effect on non-GAAP adjustments and                       
     impact of normalizing the effective income tax rate             0.01        0.34 
Non-GAAP diluted net income per share         $ (0.02) --  $ (0.00)   $ 0.05  --  $ 0.07 
                       
Shares used in calculating diluted net income per                      
share on a non-GAAP basis              74,000        83,000 

ServiceSource International, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                                 
                    Three Months Ended   Six Months Ended
                    June 30,   June 30,
                    2012   2011   2012   2011
                                 
Net revenue                   $ 59,694    $ 48,512    $ 117,268    $ 94,634 
Cost of revenue (1)                   33,882    28,229    66,458    54,365 
Gross profit                   25,812    20,283    50,810    40,269 
Operating expenses                                
     Sales and marketing (1)                   14,169    11,415    27,646    22,520 
     Research and development (1)                   4,298    3,390    8,879    6,103 
     General and administrative (1)                   10,564    7,870    20,639    15,723 
Total operating expenses                   29,031    22,675    57,164    44,346 
Loss from operations                   (3,219)   (2,392)   (6,354)   (4,077)
Interest expense                   (70)   (51)   (117)   (384)
Other expense, net                   (263)   (384)   (307)   (909)
Loss before income taxes                   (3,552)   (2,827)   (6,778)   (5,370)
Income tax provision (benefit)                   33,217    (1,694)   31,267    (21,653)
Net income (loss)                   $ (36,769)   $ (1,133)   $ (38,045)   $ 16,283 
                                 
Net income (loss) per common share:                                
     Basic                   $ (0.50)   $ (0.02)   $ (0.52)   $ 0.26 
     Diluted                   $ (0.50)   $ (0.02)   $ (0.52)   $ 0.24 
                                 
Weighted-average shares used in computing net income                                 
(loss) per common share:                                
     Basic                   74,172    67,607    73,654    62,714 
     Diluted                   74,172    67,607    73,654    69,205 
                                 
(1) Includes stock-based compensation expense as follows:                                
                    Three Months Ended   Six Months Ended
                    June 30,   June 30,
                    2012   2011   2012   2011
Cost of revenue                   $ 715    $ 447    $ 1,287    $ 816 
Sales and marketing                   1,982    949    3,656    1,870 
Research and development                   530    269    893    537 
General and administrative                   2,133    1,023    3,771    1,913 
Total stock-based compensation                   $ 5,360    $ 2,688    $ 9,607    $ 5,136 


ServiceSource International, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                         
                        June 30,       December 31,
                    2012   2011
Assets                        
Current assets:                        
     Cash and cash equivalents                   $ 65,586    $ 65,983 
     Short-term investments                   48,611    42,882 
     Accounts receivable, net                   51,391    54,095 
     Current portion of deferred income taxes                   203    3,526 
     Prepaid expenses and other                   8,404    7,945 
Total current assets                   174,195    174,431 
Property and equipment, net                   33,661    26,840 
Deferred income taxes, net of current portion                   1,341    30,238 
Other assets, net                   1,167    1,118 
Goodwill                   6,334    6,334 
Total assets                   $ 216,698    $ 238,961 
                         
Liabilities and Stockholders' Equity                        
Current liabilities:                        
     Accounts payable                   $ 7,525    $ 8,617 
     Accrued taxes                   3,368    4,008 
     Accrued compensation and benefits                   14,751    18,665 
     Other accrued liabilities                   8,180    7,639 
     Current portion of capital lease obligations                   725    706 
Total current liabilities                   34,549    39,635 
Long-term obligations                   6,094    2,310 
Total liabilities                   40,643    41,945 
Stockholders' equity:                        
     Common stock                    
     Treasury stock                   (441)   (441)
     Additional paid-in capital                   194,925    177,796 
     Retained earnings (accumulated deficit)                   (18,627)   19,416 
     Accumulated other comprehensive income                   191    238 
Total stockholders' equity                   176,055    197,016 
Total liabilities and stockholders' equity                   $ 216,698    $ 238,961 


ServiceSource International, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
      Six Months Ended
      June 30,
      2012   2011
Cash flows from operating activities          
Net income (loss)     $ (38,045)   $ 16,283 
     Adjustments to reconcile net income (loss) to net           
               cash used in operating activities:          
          Depreciation and amortization     4,577    4,488 
          Loss (gain) on disposal of fixed assets     (1)   46 
          Amortization of deferred financing costs     123    298 
          Accretion on premium on short-term investments     445    14 
          Deferred income taxes     32,220    (22,715)
          Stock-based compensation     9,607    5,136 
          Income tax deficiency from stock based compensation     362    -  
     Changes in operating assets and liabilities:          
          Accounts receivable     2,586    4,122 
          Advances to customers     -     18 
          Prepaid expenses and other     (811)   (1,958)
          Accounts payable     (877)   1,107 
          Accrued taxes     (618)   1,321 
          Accrued compensation and benefits     (3,904)   3,404 
          Accrued payables to customers     -     (30,644)
          Other accrued liabilities     4,145    1,128 
Net cash provided by (used in) operating activities     9,809    (17,952)
           
Cash flows from investing activities          
Acquisition of property and equipment     (11,244)   (6,288)
Purchases of short-term investments, net     (24,186)   (42,273)
Sales of marketable securities     6,210    -  
Maturities of marketable securities     11,820    -  
Net cash used in investing activities     (17,400)   (48,561)
           
Cash flows from financing activities          
Net proceeds from issuance of common stock in initial public offering     -     88,015 
Proceeds from revolving credit facility     -     23,424 
Repayment of revolving credit facility     -     (23,424)
Repayments of long-term debt and capital leases     (155)   (15,582)
Payments of deferred debt issuance costs     -     (200)
Proceeds from common stock issuances     7,818    2,247 
Income tax deficiency from stock based compensation     (362)   -  
Net cash provided by financing activities     7,301    74,480 
           
Net increase (decrease) in cash and cash equivalents     (290)   7,967 
Effect of exchange rate changes on cash and cash equivalents     (107)   752 
Cash and cash equivalents at beginning of period     65,983    22,652 
Cash and cash equivalents at end of period     $ 65,586    $ 31,371 
           
* Activity in 2011 resulted from $18.1 million in payments to Oracle/Sun and the related settlement of
accrued payables owed to Oracle/Sun and amounts owed to the Company by Oracle/Sun.


Use of Non-GAAP Financial Measures

To supplement its financial statements presented in accordance with generally accepted accounting principles, or GAAP, ServiceSource also provides investors with non-GAAP net income per share and Adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the closest GAAP financial measure is presented in the financial tables below under the heading, "GAAP to Non-GAAP Reconciliation." 

ServiceSource believes that the non-GAAP financial information provided in this release can assist investors in understanding and assessing its on-going core operations and prospects for the future and provides an additional tool for investors to use in comparing ServiceSource's financial results with other companies in the industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP net income per share consists of net income (loss) plus stock-based compensation, amortization of internally-developed software and applying an annual income tax rate of 40% reflecting our estimated tax expense on our core operations. Accordingly, our non-GAAP calculation of net income has excluded a one-time, non-cash income tax charge of $33.1 million recorded during the period ended June 30, 2012 related to a valuation allowance for a substantial portion of the company's deferred tax assets. Results for the six months ended June 30, 2011 reflect a one-time tax benefit related to the conversion of ServiceSource from a limited liability corporation to a Delaware corporation, which has also been excluded from the calculation of non-GAAP net income. Stock-based compensation expenses are expected to vary depending on the number of new grants issued, changes in the company's stock price, stock market volatility, expected option lives and risk-free rates of return, all of which are difficult to estimate.  

EBITDA consists of net income (loss) plus depreciation and amortization, interest expense, other expenses, net, and income tax expense and a deduction for income tax benefit. Adjusted EBITDA consists of EBITDA plus non-cash, stock-based compensation expense. ServiceSource uses Adjusted EBITDA as a measure of operating performance because it assists the company in comparing performance on a consistent basis, as it removes from the operating results the impact of the company's capital structure.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States.

 


The following table provides a reconciliation of net income (loss) to Adjusted EBITDA:

ServiceSource International, Inc.
Reconciliation of net loss to Adjusted EBITDA
(In thousands)
(Unaudited)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2012   2011   2012   2011
         
Net income (loss)   $ (36,769)   $ (1,133)   $ (38,045)   $ 16,283 
Income tax provision (benefit)   33,217    (1,694)   31,267    (21,653)
Interest expense   70    51    117    384 
Other expense, net   263    384    307    909 
Depreciation   2,309    2,543    4,577    4,488 
EBITDA   (910)   151    (1,777)   411 
Stock-based compensation   5,360    2,688    9,607    5,136 
Adjusted EBITDA   $ 4,450    $ 2,839    $ 7,830    $ 5,547 

 

 

 

 

 


ServiceSource International, Inc.
GAAP To Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
(unaudited)
                       
        Three Months Ended   Six Months Ended
        June 30,   June 30,
        2012   2011   2012   2011
Gross Profit                
     GAAP gross profit   $ 25,812    $ 20,283    $ 50,810    $ 40,269 
     Non-GAAP adjustments:                
          Stock-based compensation       ( A ) 715    447    1,287    816 
          Amortization of internally-developed software       ( B ) 318    463    458    807 
     Non-GAAP gross profit         $ 26,845    $ 21,193    $ 52,555    $ 41,892 
                       
Gross Profit %                      
     GAAP gross profit         43%   42%   43%   43%
     Non-GAAP adjustments:                      
          Stock-based compensation       ( A ) 1%   1%   1%   1%
          Amortization of internally-developed software       ( B ) 1%   1%   1%   1%
     Non-GAAP gross profit         45%   44%   45%   45%
                       
Operating expenses                      
GAAP operating expenses         $ 29,031    $ 22,675    $ 57,164    $ 44,346 
Stock-based compensation       ( A ) (4,645)   (2,241)   (8,320)   (4,320)
Amortization of internally-developed software       ( B ) (317)   (715)   (812)   (1,133)
Non-GAAP operating expenses         $ 24,069    $ 19,719    $ 48,032    $ 38,893 
                       
Net Income (Loss)                      
     GAAP net income (loss)         $ (36,769)   $ (1,133)   $ (38,045)   $ 16,283 
     Non-GAAP adjustments:                      
          Stock-based compensation       ( A ) 5,360    2,688    9,607    5,136 
          Amortization of internally-developed software       ( B ) 635    1,178    1,270    1,940 
          Non-recurring income tax items       ( C ) 33,072    -     33,072    (21,417)
          Income tax effect on non-GAAP adjustments and                      
          impact of normalizing the effective income tax rate       ( D ) (832)   (2,111)   (3,445)   (919)
     Non-GAAP net income          $ 1,466    $ 622    $ 2,459    $ 1,023 
                       
Diluted Net Income (Loss) Per Share                      
     GAAP diluted net income (loss) per share          $ (0.50)   $ (0.02)   $ (0.52)   $ 0.24 
     Non-GAAP adjustments:                      
          Stock-based compensation       ( A ) 0.07    0.04    0.13    0.07 
          Amortization of internally-developed software       ( B ) 0.01    0.02    0.02    0.03 
          Non-recurring income tax items       ( C ) 0.45    -     0.45    (0.31)
          Income tax effect on non-GAAP adjustments and                      
          impact of normalizing the effective income tax rate       ( D ) (0.01)   (0.03)   (0.05)   (0.01)
     Non-GAAP diluted net income per share          $ 0.02    $ 0.01    $ 0.03    $ 0.01 
Certain totals do not add due to rounding                      
Shares used in calculating diluted net income per share                      
on a non-GAAP basis         79,245    75,476    79,197    69,275 


Footnotes to GAAP to Non-GAAP Reconciliation

(A)

Stock-based compensation. Included in our GAAP presentation of cost of revenue and operating expenses, stock-based compensation consists of expenses for stock options and awards and purchase rights under our stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.

(B)

Amortization of internally-developed software. Included in our GAAP presentation of cost of revenue and operating expenses, amortization of internally-developed software reflects non-cash expense for certain software purchases and software developed or obtained for internal use. We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance.

(C)

One-time tax items. We elected to be treated as a corporation under Subchapter C of Chapter 1 of the United States Internal Revenue Code, effective March 1, 2011, and therefore became subject to federal and state tax expense beginning March 1, 2011. As a result of this tax election, we recorded a net deferred tax asset and a one-time non-cash tax benefit of $21.4 million in the first quarter of 2011. During the second quarter of 2012, we recorded a $33.1 million one-time, non-cash charge against a substantial portion of our deferred tax assets, much of which was recorded in connection with electing to be treated as a corporation, because the recoverability of these items for financial reporting purposes is uncertain. We have excluded these items from our non-GAAP measures because they are non-recurring and unique and are not indicative of our core operating performance.

(D)

Income tax effect on non-GAAP adjustments and impact of normalizing the effective income tax rate.   This adjusts the provision for income taxes to reflect the effect of the non-GAAP items A, B and C noted above on our non-GAAP net income and adjusts the income tax rate to a normalized effective tax rate of 40%.

 

 

 


ServiceSource International, Inc.
Revenue by Segment
(In thousands)
(unaudited)
                 
    Three Months Ended June 30,
    2012   2011
        % of       % of
    $   Revenue   $   Revenue
                 
NALA                   $ 36,961    62%    $ 28,686    59% 
EMEA   15,518    26%    14,254    29% 
APJ   7,215    12%    5,572    12% 
    $ 59,694    100%    $ 48,512    100% 
                 
                 
    Six Months Ended June 30,
    2012   2011
        % of       % of
    $   Revenue   $   Revenue
                 
NALA   $ 73,073    62%    $ 56,431    60% 
EMEA   31,266    27%    29,247    31% 
APJ   12,929    11%    8,956    9% 
    $ 117,268    100%    $ 94,634    100% 

Investor Relations Contact for ServiceSource:
Ashley F. Johnson
ServiceSource, Inc.
(415) 901-6030
investorrelations@servicesource.com

 

 

 


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