8-K

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): April 28, 2021

________________

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.)

707 17th Street, 25th Floor

Denver, CO 80202

(Address of principal executive offices, including zip code)

(720) 889-8500

(Registrant's telephone number, including area code)

—————————————————

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:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common Stock, $0.0001 Par Value	SREV	The Nasdaq Stock Market LLC

Item 2.02 Results of Operations and Financial Condition.

On April 28, 2021, ServiceSource International, Inc. issued a press release announcing its results for the quarter ended March 31, 2021. 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 contained in Item 2.02 of this current report on Form 8-K and the Exhibit 99.1 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

Exhibit No.	Description
99.1	Press release dated April 28, 2021 and entitled ''ServiceSource Reports First Quarter 2021 Financial Results''

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:	April 28, 2021
		SERVICESOURCE INTERNATIONAL, INC.
		By: /s/ MEGAN FINE
		Name: Megan Fine
		Title: General Counsel

EX-99.1

ServiceSource Reports First Quarter 2021 Financial Results

Total Revenue of $45.0 million

GAAP Net Loss of $8.8 million; Non-GAAP Net Lossof $2.1 million

Adjusted EBITDA of negative $0.2 million

DENVER, April 28, 2021 - ServiceSource (NASDAQ: SREV), the customer journey experience company, today announced financial results for the three months ended March 31, 2021.

“The pandemic has reminded everyone of the value of personal connection and the importance of relationships that add value to our daily lives. Against this backdrop, we have strengthened ties with our clients and deepened their bonds with their customers. This alignment of market need with our business strategy positions us well to deliver on our objectives and we are pleased with our results through the first quarter of the year,” said Gary B. Moore, ServiceSource’s chairman and chief executive officer. “We have kept our clients present, relevant, and compelling with their customers through the power of human touch and the efficiency of digital engagement. And although uncertainty remains around the size and pace of the economic recovery, we have strengthened our business model and enhanced the value of our solutions to allow us to build upon our position as a strategic partner to leading brands across the world.”

Key Financial Results – First Quarter 2021

•GAAP revenue was $45.0 million, compared with $50.1 million reported for Q1 2020.

•GAAP net loss was $8.8 million or $0.09 per diluted share, compared with GAAP net loss of $5.9 million or $0.06 per diluted share reported for Q1 2020.

•Non-GAAP net loss was $2.1 million or $0.02 per diluted share, compared with non-GAAP net loss of $1.8 million or $0.02 per diluted share reported for Q1 2020.

•Adjusted EBITDA, a non-GAAP financial measure, was negative $0.2 million, compared with positive $0.1 million reported for Q1 2020.

•Ended the quarter with $36.5 million of cash and cash equivalents and restricted cash and $15.0 million of borrowings under the Company's $40.0 million revolving line of credit.

A reconciliation of GAAP to non-GAAP financial measures is provided following the Condensed Consolidated Financial Statement tables contained within this press release.

Key Business Highlights – First Quarter 2021

•Secured a three-year global contract renewal with one of the Company’s largest software and cloud clients, representing an estimated total contract value in excess of $90 million over the expected term of the agreement.

•Successfully renewed or extended more than 95% of the contract value that was up for renewal during the quarter.

•Accelerated our go-to-market momentum with a 30% year-over-year increase in new bookings on a trailing twelve-month basis.

•Signed our first new client logo win of the year to support the accelerated transformation to a subscription-based renewals model for a leading data insights provider.

•Grew revenue with five of our top 10 clients on a trailing twelve-month basis.

“We continued to improve the fundamentals of the Company and had a good start to the year,” commented Chad Lyne, executive vice president and chief financial officer of ServiceSource. “Through our early visibility into the market dynamics and challenges our clients were facing, we were able to adapt and position the business accordingly in response to the anticipated revenue contraction. We are

increasingly encouraged by our team’s stronger execution to win new contracts, renew existing scopes of work, and enhance our value with our clients. Although it’s early and more work remains to be done, we are confident our focus and efforts will allow us to deliver on our expectation to return to growth in the second half of the year.”

Quarterly Conference Call

ServiceSource will discuss its first quarter 2021 results on April 29, 2021, via teleconference at 9:30 a.m. Eastern 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. Conference ID number: 6571544. In addition, a live webcast of the call will also be available on the Investor Relations section of the ServiceSource website under Events and Presentations. The related slide presentation and a replay of the webcast will also be available on the Company's website at http://ir.servicesource.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our financial management and our expectation to continue to invest in our strategic priorities and digital transformation initiatives. 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 our forward-looking statements. Those risks and uncertainties include: a decline in client renewals, the loss of one or more of our key clients, the contraction in our revenue from one or more of our key clients - either in the ordinary course of business or as a result of macroeconomic conditions resulting from the COVID-19 pandemic - in each case resulting in churn, or our clients not expanding their relationships with us; economic or other adverse events or conditions affecting the technology industry, including as a result of the COVID-19 pandemic; and other risks and uncertainties described more fully in our periodic reports filed with the Securities and Exchange Commission, which 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 except as may be legally required we assume no obligation to update these forward-looking statements.

About ServiceSource

ServiceSource International, Inc. (NASDAQ: SREV) is a global outsourced go-to-market services provider that accelerates B2B digital sales and customer success transformation. Our expert sales professionals, data-powered insights and proven methodologies scale and reimagine customer journey experiences (CJX™) into profitable business outcomes. Backed by more than 20 years of experience, ServiceSource drives billions of dollars in client value annually, conducting commerce in 45 languages and 175 countries. To learn more about how we design, develop and manage CJX solutions that transform the agility, speed, efficiency and value of our clients’ growth initiatives, visit www.servicesource.com.

Trademarks

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.

Connect with ServiceSource:

http://www.facebook.com/ServiceSource

http://twitter.com/servicesource

http://www.linkedin.com/company/servicesource

http://www.youtube.com/user/ServiceSourceMKTG

ServiceSource International, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
	For the Three Months Ended March 31,
	2021		2020
Net revenue	$	45,023	$	50,114
Cost of revenue(1)	34,067		35,560
Gross profit	10,956		14,554
Operating expenses:
Sales and marketing(1)	4,030		7,268
Research and development(1)	1,160		1,181
General and administrative(1)	12,190		10,688
Restructuring and other related costs	920		467
Total operating expenses	18,300		19,604
Loss from operations	(7,344)		(5,050)
Interest and other expense, net	(1,160)		(874)
Loss before provision for income taxes	(8,504)		(5,924)
Provision for income tax expense	(331)		(18)
Net loss	$	(8,835)	$	(5,942)
Net loss per share, basic and diluted	$	(0.09)	$	(0.06)
Weighted-average common shares outstanding, basic and diluted	97,234		94,968
(1) Reported amounts include stock-based compensation expense as follows:
	For the Three Months Ended March 31,
	2021		2020
Cost of revenue	$	130	$	45
Sales and marketing	191		377
Research and development	15		18
General and administrative	2,139		605
Total stock-based compensation	$	2,475	$	1,045

ServiceSource International, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	34,171	$	34,006
Accounts receivable, net	34,578		38,890
Prepaid expenses and other	10,876		9,275
Total current assets	79,625		82,171
Property and equipment, net	26,998		29,948
ROU assets	27,515		29,798
Contract acquisition costs	757		872
Goodwill	6,334		6,334
Other assets	3,580		3,490
Total assets	$	144,809	$	152,613
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,151	$	1,204
Accrued expenses	2,728		3,217
Accrued compensation and benefits	15,313		18,342
Revolver	15,000		15,000
Operating lease liabilities	10,365		10,797
Other current liabilities	827		1,209
Total current liabilities	49,384		49,769
Operating lease liabilities, net of current portion	23,739		25,975
Other long-term liabilities	2,302		1,593
Total liabilities	75,425		77,337
Stockholders’ equity:
Preferred stock	—		—
Common stock	10		10
Treasury stock	(441)		(441)
Additional paid-in capital	382,314		379,696
Accumulated deficit	(313,442)		(304,607)
Accumulated other comprehensive income	943		618
Total stockholders’ equity	69,384		75,276
Total liabilities and stockholders’ equity	$	144,809	$	152,613

ServiceSource International, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	For the Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(8,835)	$	(5,942)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	3,657		3,396
Amortization of contract acquisition costs	167		279
Amortization of ROU assets	2,391		2,313
Stock-based compensation	2,475		1,045
Restructuring and other related costs	902		431
Other	265		18
Net changes in operating assets and liabilities:
Accounts receivable, net	4,131		(1,722)
Prepaid expenses and other assets	(2,099)		1,323
Contract acquisition costs	(51)		9
Accounts payable	3,952		(3,253)
Accrued compensation and benefits	(3,673)		(1,210)
Operating lease liabilities	(2,738)		(1,838)
Accrued expenses	(511)		223
Other liabilities	504		(741)
Net cash provided by (used in) operating activities	537		(5,669)
Cash flows from investing activities:
Purchases of property and equipment	(1,019)		(1,557)
Net cash used in investing activities	(1,019)		(1,557)
Cash flows from financing activities:
Repayment on finance lease obligations	(161)		(238)
Proceeds from Revolver	—		27,000
Proceeds from issuance of common stock	132		76
Net cash (used in) provided by financing activities	(29)		26,838
Effect of exchange rate changes on cash and cash equivalents and restricted cash	650		480
Net change in cash and cash equivalents and restricted cash	139		20,092
Cash and cash equivalents and restricted cash, beginning of period	36,326		29,383
Cash and cash equivalents and restricted cash, end of period	$	36,465	$	49,475

Use of Non-GAAP Financial Measures

To supplement its Condensed Consolidated Financial Statements presented in accordance with generally accepted accounting principles, or GAAP, ServiceSource provides investors with non-GAAP gross profit, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the closest GAAP financial measure is presented in the following financial tables.

ServiceSource believes 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 gross profit consists of gross profit plus adjustments to stock-based compensation and amortization of internally developed software.

Non-GAAP net income (loss) consists of net income (loss) plus stock-based compensation, amortization of internally developed software, restructuring and other related costs, amortization of contract acquisition costs related to the initial adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), non-cash interest expense and applying an income tax rate of 26.5% on non-GAAP adjustments. Stock-based compensation expense is 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 interest rates, all of which are difficult to estimate.

EBITDA consists of net income (loss) plus provision for income tax expense (benefit), interest and other expense (income), net and depreciation and amortization. Adjusted EBITDA consists of EBITDA plus stock-based compensation, restructuring and other related costs, and amortization of contract acquisition costs related to the initial adoption of ASC 606.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.

ServiceSource International, Inc.
GAAP To Non-GAAP Reconciliation
(in thousands, except per share amounts)
(unaudited)
			For the Three Months Ended March 31,
			2021		2020
Net revenue			$	45,023	$	50,114
Gross profit
GAAP gross profit			$	10,956	$	14,554
Non-GAAP adjustments:
	Stock-based compensation	(A)	130		45
	Amortization of internally developed software	(B)	1,832		1,253
Non-GAAP gross profit			$	12,918	$	15,852
Gross profit %
GAAP gross profit			24.3%		29.0%
Non-GAAP adjustments:
	Stock-based compensation	(A)	0.3%		0.1%
	Amortization of internally developed software	(B)	4.1%		2.5%
Non-GAAP gross profit			28.7%		31.6%
Certain totals do not add due to rounding
Operating expenses
GAAP operating expenses			$	18,300	$	19,604
Non-GAAP adjustments:
	Stock-based compensation	(A)	(2,345)		(1,000)
	Amortization of internally developed software	(B)	(360)		(512)
	Restructuring and other related costs	(C)	(920)		(467)
	Amortization of contract acquisition costs - ASC 606 initial adoption	(D)	(84)		(218)
Non-GAAP operating expenses			$	14,591	$	17,407
Net loss
GAAP net loss			$	(8,835)	$	(5,942)
Non-GAAP adjustments:
	Stock-based compensation	(A)	2,475		1,045
	Amortization of internally developed software	(B)	2,192		1,765
	Restructuring and other related costs	(C)	920		467
	Amortization of contract acquisition costs - ASC 606 initial adoption	(D)	84		218
	Non-cash interest expense	(E)	18		18
	Income tax effect on non-GAAP adjustments	(F)	1,077		656
Non-GAAP net loss			$	(2,069)	$	(1,773)
Diluted net loss per share
GAAP net loss per share			$	(0.09)	$	(0.06)
Non-GAAP adjustments:
	Stock-based compensation	(A)	0.03		0.01
	Amortization of internally developed software	(B)	0.02		0.02
	Restructuring and other related costs	(C)	0.01		0.00
	Amortization of contract acquisition costs - ASC 606 initial adoption	(D)	0.00		0.00
	Non-cash interest expense	(E)	0.00		0.00
	Income tax effect on non-GAAP adjustments	(F)	0.01		0.01
Non-GAAP diluted net loss per share			$	(0.02)	$	(0.02)
Certain totals do not add due to rounding
Shares used in calculating diluted net loss per share on a non-GAAP basis		(G)	97,234		94,968

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, stock unit 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 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) Restructuring and other related costs. Included in our GAAP presentation, we incurred expenses related to our restructuring effort to better align our cost structure with current revenue levels. Restructuring and other related costs consist primarily of employees' severance payments, related employee benefits, related legal fees and charges related to leases and other contract termination costs. These are one-time in nature costs that are not indicative of our core operating performance.

(D) Amortization of contract acquisition costs - ASC 606 initial adoption. Upon adoption of ASC 606 using the modified retrospective approach, we capitalized approximately $3.3 million of previously expensed sales commissions from 2015, 2016 and 2017. Amortization of these amounts are included in our GAAP presentation as sales and marketing expense. We believe the non-cash amortization expense is not related to or indicative of our ongoing operating performance.

(E) Non-cash interest expense. Under GAAP, we recognize interest expense at the effective interest rate which includes interest costs related to the amortization of debt issuance costs. The difference between the effective interest rate and the contractual interest rate is excluded from our assessment of our operating performance because we believe this non-cash expense is not indicative of ongoing operating performance. We believe that the exclusion of the non-cash interest expense provides investors a view of our core operating performance.

(F) Income tax effect on non-GAAP adjustments. This adjusts the provision for income taxes to reflect the effect of the non-GAAP items A, B, C, D, E and F noted above on our non-GAAP net income (loss).

(G) Shares used in calculating diluted net income (loss) per share on a non-GAAP basis.The share count for basic and diluted earnings per share is the same due to GAAP net losses for the three months ended March 31, 2021 and 2020.

ServiceSource International, Inc.
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
		For the Three Months Ended March 31,
		2021		2020
Net loss		$	(8,835)	$	(5,942)
Provision for income tax expense		331		18
Interest and other expense, net		1,160		874
Depreciation and amortization(1)		3,657		3,396
EBITDA		(3,687)		(1,654)
Stock-based compensation	(A)	2,475		1,045
Restructuring and other related costs	(C)	920		467
Amortization of contract acquisition asset costs - ASC 606 initial adoption	(D)	84		218
Adjusted EBITDA		$	(208)	$	76
(1) Depreciation and amortization expense are comprised of the following:
		For the Three Months Ended March 31,
		2021		2020
Internally developed software amortization		$	2,192	$	1,765
Property and equipment depreciation		1,465		1,631
Depreciation and amortization		$	3,657	$	3,396

Investor Relations Contact for ServiceSource:

Chad Lyne

ServiceSource International, Inc.

investorrelations@servicesource.com

XML

Cover Page	Apr. 28, 2021	Oct. 23, 2020
Cover [Abstract]
Document Type	8-K
Document Period End Date	Apr. 28, 2021
Entity Registrant Name	ServiceSource International, Inc.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-35108
Entity Tax Identification Number	81-0578975
Entity Address, Address Line One		707 17th Street, 25th Floor
Entity Address, City or Town		Denver
Entity Address, State or Province		CO
Entity Address, Postal Zip Code		80202
City Area Code		720
Local Phone Number		889-8500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.0001 Par Value
Trading Symbol	SREV
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0001310114