10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission file number 001-35108

SERVICESOURCE INTERNATIONAL, INC.

(Exact name of registrant as specified in our charter)

Delaware	No. 81-0578975
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
634 Second Street San Francisco, California	94107
(Address of Principal Executive Offices)	(Zip Code)

(415) 901-6030

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class	Outstanding as of July 30, 2013
Common Stock	79,411,505

SERVICESOURCE INTERNATIONAL, INC.

Form 10-Q

INDEX

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	3
Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012	3
Condensed Consolidated Statements of Operations for the three and six months ended June  30, 2013 and 2012	4
Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2013 and 2012	5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	6
Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3. Default Upon Senior Securities	46
Item 4. Mine Safety Disclosures	46
Item 5. Other Information	46
Item 6. Exhibits	46
Signatures	47
Exhibit Index	48

2

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

SERVICESOURCE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	77,403		$	76,568
Short-term investments	54,649			32,874
Accounts receivable, net	60,894			65,238
Deferred income taxes	177			389
Prepaid expenses and other	6,661			5,178
Total current assets	199,784			180,247
Property and equipment, net	30,275			34,513
Deferred income taxes, net of current portion	1,986			2,321
Other assets, net	794			1,057
Goodwill	6,334			6,334
Total assets	$	239,173		$	224,472
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,505		$	3,293
Accrued taxes	1,801			1,056
Accrued compensation and benefits	18,873			15,738
Accrued liabilities and other	13,640			10,403
Obligations under capital leases	328			326
Total current liabilities	37,147			30,816
Obligations under capital leases, net of current portion	466			638
Other long-term liabilities	4,839			6,091
Total liabilities	42,452			37,545
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock; $0.0001 par value; 1,000,000 shares authorized; 79,099 shares issued and 79,220 shares outstanding as of June 30, 2013; 75,758 shares issued and 75,637 shares outstanding as of December 31, 2012	8			8
Treasury stock	(441		)	(441		)
Additional paid-in capital	235,714			210,650
Accumulated deficit	(38,759		)	(23,398		)
Accumulated other comprehensive income	199			108
Total stockholders’ equity	196,721			186,927
Total liabilities and stockholders’ equity	$	239,173		$	224,472

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

SERVICESOURCE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net revenue	$	67,697		$	59,694		$	128,818		$	117,268
Cost of revenue	38,620			33,882			77,118			66,458
Gross profit	29,077			25,812			51,700			50,810
Operating expenses:
Sales and marketing	15,367			14,169			30,175			27,646
Research and development	6,794			4,298			13,042			8,879
General and administrative	10,783			10,564			22,004			20,639
Total operating expenses	32,944			29,031			65,221			57,164
Loss from operations	(3,867		)	(3,219		)	(13,521		)	(6,354		)
Other expense, net	(295		)	(333		)	(403		)	(424		)
Loss before income taxes	(4,162		)	(3,552		)	(13,924		)	(6,778		)
Income tax provision	744			33,217			1,437			31,267
Net loss	$	(4,906	)	$	(36,769	)	$	(15,361	)	$	(38,045	)
Net loss per common share:
Basic	$	(0.06	)	$	(0.50	)	$	(0.20	)	$	(0.52	)
Diluted	(0.06		)	(0.50		)	(0.20		)	(0.52		)
Weighted-average shares used in computing net loss per common share:
Basic	77,275			74,172			76,447			73,654
Diluted	77,275			74,172			76,447			73,654

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

SERVICESOURCE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net loss	$	(4,906	)	$	(36,769	)	$	(15,361	)	$	(38,045	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	146			(56		)	211			(73		)
Unrealized gain (loss) on short-term investments, net of tax	(151		)	(14		)	(120		)	26
Other comprehensive income (loss), net of tax	(5		)	(70		)	91			(47		)
Total comprehensive loss, net of tax	$	(4,911	)	$	(36,839	)	$	(15,270	)	$	(38,092	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

SERVICESOURCE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2013			2012
Cash flows from operating activities
Net loss	$	(15,361	)	$	(38,045	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	6,028			4,576
Provision for doubtful accounts	(149		)	—
Amortization of deferred financing costs	24			123
Accretion on premium on short-term investments	347			445
Deferred income taxes	545			32,220
Stock-based compensation	11,343			9,607
Income tax charge from stock-based compensation	264			362
Changes in operating assets and liabilities:
Accounts receivable	4,189			2,586
Prepaid expenses and other	(1,204		)	(811		)
Accounts payable	(558		)	(877		)
Accrued taxes	752			298
Accrued compensation and benefits	3,291			(4,820		)
Accrued liabilities and other	2,156			4,145
Net cash provided by operating activities	11,667			9,809
Cash flows from investing activities
Acquisition of property and equipment	(2,224		)	(11,244		)
Purchases of short-term investments	(26,647		)	(24,186		)
Sales of short-term investments	3,154			6,210
Maturities of short-term investments	1,250			11,820
Net cash used in investing activities	(24,467		)	(17,400		)
Cash flows from financing activities
Repayment on capital leases obligations	(161		)	(155		)
Proceeds from common stock issuances	13,612			7,818
Income tax charge from stock-based compensation	(264		)	(362		)
Net cash provided by financing activities	13,187			7,301
Net increase (decrease) in cash and cash equivalents	387			(290		)
Effect of exchange rate changes on cash and cash equivalents	448			(107		)
Cash and cash equivalents at beginning of period	76,568			65,983
Cash and cash equivalents at end of period	$	77,403		$	65,586

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

SERVICESOURCE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of Business and Basis of Presentation

ServiceSource is the global leader in recurring revenue management, partnering with technology and technology-enabled companies to optimize maintenance, support and subscription revenue streams, while also improving customer relationships and loyalty. The Company delivers these results via a cloud-based solution, with dedicated service teams, leveraging benchmarks and best practices derived from their rich database of service and renewal behavior. By integrating software, managed services and data, the Company provides end-to-end management and optimization of the service-contract renewals process, including data management, quoting, selling and recurring revenue business intelligence. The Company receives commissions from its customers based on renewal sales that the Company generates on their behalf under a pay-for-performance model. In addition, the Company recently began to offer a purpose-built Software-As-A-Service (SaaS) application to maximize the renewal of subscriptions, maintenance and support contracts. The Company’s corporate headquarters is located in San Francisco, California. The Company has additional offices in Colorado, Tennessee, the United Kingdom, Ireland, Malaysia and Singapore.

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of ServiceSource International Inc. and its subsidiaries (“SSI” or “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies, consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in our Annual Report on Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for a fair statement of our financial position, operating results, and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results for the entire year.

The December 31, 2012 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-2 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU No. 2013-2 requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the income statement or as a separate disclosure in the notes. The new guidance became effective for the Company’s interim period ended March 31, 2013. The Company adopted this guidance and the adoption did not have any impact on its financial position, results of operations or cash flows as the amounts reclassified out of accumulated other comprehensive income is not material.

In June 2013, the Financial Accounting Standards Board determined that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. This guidance is effective for the Company’s interim and annual periods beginning January 1, 2014. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial statements.

Note 2 — Cash, cash equivalents and short-term investments

Cash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, including money market funds. Short-term investments consist of readily marketable securities with a remaining maturity of more than three months from time of purchase. The Company classifies all of its cash equivalents and short-term investments as “available for sale,” as these investments are free of trading restrictions. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When the Company determines that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to

7

a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. The Company’s realized gains and losses in the three and six months ended June 30, 2013 and 2012 were insignificant.

Cash and cash equivalents and short-term investments consisted of the following as of June 30, 2013 and December 31, 2012 (in thousands):

June 30, 2013

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	45,706	$	—	$	—		$	45,706
Cash equivalents:
Money market mutual funds	31,697		—		—			31,697
Total cash and cash equivalents	77,403		—		—			77,403
Short-term investments:
Corporate bonds	21,471		6		(51		)	21,426
U.S. agency securities	21,126		2		(50		)	21,078
Asset-backed securities	6,669		—		(29		)	6,640
U.S. Treasury securities	5,514		—		(9		)	5,505
Total short-term investments	54,780		8		(139		)	54,649
Cash, cash equivalents and short-term investments	$	132,183	$	8	$	(139	)	$	132,052

December 31, 2012

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	59,568	$	—	$	—		$	59,568
Cash equivalents:
Money market mutual funds	17,000		—		—			17,000
Total cash and cash equivalents	76,568		—		—			76,568
Short-term investments:
Corporate bonds	13,389		2		(14		)	13,377
U.S. agency securities	11,280		4		(1		)	11,283
Asset-backed securities	4,670		1		(5		)	4,666
U.S. Treasury securities	3,546		2		—			3,548
Total short-term investments	32,885		9		(20		)	32,874
Cash, cash equivalents and short-term investments	$	109,453	$	9	$	(20	)	$	109,442

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated maturities as of June 30, 2013:

	Amortized Cost		Estimated Fair Value
Less than 1 year	$	5,098	$	5,097
Due in 1 to 5 years	49,682		49,552
Total	$	54,780	$	54,649

As of June 30, 2013, the Company did not consider any of its investments to be other-than-temporarily impaired.

Note 3 — Fair value of financial instruments

8

The Company measures certain financial instruments at fair value on a recurring basis. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.

Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.

All of the Company’s cash equivalents and short-term investments are classified within Level 1 or Level 2.

The following table presents information about the Company’s financial instruments that are measured at fair value as of June 30, 2013 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	31,697	$	31,697	$	—
Total cash equivalents	31,697		31,697		—
Short-term investments:
Corporate bonds	21,426		—		21,426
U.S. agency securities	21,078		—		21,078
Asset-backed securities	6,640		—		6,639
U.S. Treasury securities	5,505		—		5,506
Total short-term investments	54,649		—		54,649
Cash equivalents and short-term investments	$	86,346	$	31,697	$	54,649

The following table presents information about the Company’s financial instruments that are measured at fair value as of December 31, 2012 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	17,000	$	17,000	$	—
Total cash equivalents	17,000		17,000		—
Short-term investments:
Corporate bonds	13,377		—		13,377
U.S. agency securities	11,283		—		11,283
Asset-backed securities	4,666		—		4,666
U.S. Treasury securities	3,548		—		3,548
Total short-term investments	32,874		—		32,874
Cash equivalents and short-term investments	$	49,874	$	17,000	$	32,874

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The Company did not have any financial liabilities measured at fair value as of June 30, 2013 or December 31, 2012.

Note 4 — Property and Equipment, Net

Property and equipment balances were comprised of the following (in thousands):

	June 30, 2013			December 31, 2012
Computers and equipment	$	15,875		$	14,733
Software	33,317			32,982
Furniture and fixtures	8,660			8,555
Leasehold improvements	10,970			10,801
	68,822			67,071
Less: accumulated depreciation and amortization	(38,660		)	(32,558		)
	30,162			34,513
Construction in progress	113			—
	$	30,275		$	34,513

Depreciation and amortization expense during the three and six months ended June 30, 2013 and the three and six months ended June 30, 2012, was $2.8 million, $6.0 million, $2.3 million and $4.6 million respectively.

Total property and equipment assets under capital lease at June 30, 2013 and December 31, 2012, was $3.2 million and $3.2 million, respectively. Accumulated depreciation related to assets under capital lease as of these dates were $2.4 million and $2.1 million, respectively.

The Company capitalized internal-use software development costs of $0 and $2.8 million during the three months ended June 30, 2013 and 2012, respectively and $0 and $5.0 million during the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, the carrying value of capitalized costs related to internal-use software, net of accumulated amortization, was $11.1 million and $13.6 million, respectively. Amortization of capitalized costs related to internal-use software for the three months ended June 30, 2013 and 2012 was $1.3 million and $0.6 million, respectively, and for the six months ended June 30, 2013 and 2012 was $2.5 million and $1.3 million, respectively.

Note 5 — Accrued Liabilities and Other

Accrued liabilities and other balances were comprised of the following (in thousands):

	June 30, 2013		December 31, 2012
Deferred revenue	$	3,955	$	2,295
Accrued operating expenses	3,633		3,664
Deferred rent obligations	887		986
Other employee related	394		323
Accrued other (includes ESPP contributions of $763 and $1,059 at June 30, 2013 and December 31, 2012, respectively)	4,771		3,135
	$	13,640	$	10,403

Note 6 — Credit Facility and Capital Leases

Revolving Credit Facility

On July 5, 2012, the Company, entered into a three-year credit agreement which provides for a secured revolving line of credit based on eligible accounts receivable of up to $25.0 million on and before July 5, 2013 and up to $30.0 million thereafter, in each case with a $2.0 million letter of credit sublimit. On June 18, 2013, the Company elected to maintain the revolving commitment at $25.0 million rather than have it increase to $30 million on July 5, 2013. Proceeds available under the agreement may be used for working capital and other general corporate purposes. The Company may prepay borrowing under

10

the agreement in whole or in part at any time without premium or penalty. The Company may terminate the commitments under the credit agreement in whole at any time, and may reduce the commitments by up to $10.0 million between July 1, 2013 and June 30, 2014. On June 30, 2013, the Company amended the credit agreement to reduce the quarterly commitment fee, payable in arrears, based on the available commitments from the existing 0.45% rate to 0.30%.

Amounts outstanding on the facility at June 30, 2013 consisted of a letter of credit of $575,000 as required under an operating lease agreement for office space at the Company’s San Francisco headquarters. The loans bear interest, at the Company’s option, at a base rate determined in accordance with the credit agreement, minus 0.5%, or at a LIBOR rate plus 2.0%. Principal, together with all accrued and unpaid interest, is due and payable on July 5, 2015, the maturity date. The Company is also obligated to pay a quarterly commitment fee, payable in arrears, based on the available commitments at a rate of 0.30%. At June 30, 2013, the interest rate for borrowings under the facility was 2.2%.

The credit agreement contains customary affirmative and negative covenants, as well as financial covenants. Affirmative covenants include, among others, delivery of financial statements, compliance certificates and notices of specified events, maintenance of properties and insurance, preservation of existence, and compliance with applicable laws and regulations. Negative covenants include, among others, limitations on the ability of the Company and its subsidiaries to grant liens, incur indebtedness, engage in mergers, consolidations and sales of assets and engage in affiliate transactions. The agreement requires the Company to maintain a maximum leverage ratio and a minimum liquidity amount, each as defined in the agreement.

The credit agreement also contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and change in control of the Company, subject to grace periods in certain instances. Upon an event of default, the lender may declare the outstanding obligations of the Company under the agreement to be immediately due and payable and exercise other rights and remedies provided for under the credit agreement.

The Company’s obligations under the credit agreement are guaranteed by its subsidiary, ServiceSource Delaware, Inc. (the “Guarantor”) and are collateralized by substantially all of the assets of the Company and the Guarantor.

Effective June 29, 2012, the Company terminated a $20.0 million credit facility. At the time of the termination, no borrowings were outstanding other than a letter of credit in the face amount of $850,000.

Capital Leases

The Company has capital lease agreements that are collateralized by the underlying property and equipment and expire through September 2019. The weighted-average imputed interest rates for the capital lease agreements were 2.54% and 3.75% at June 30, 2013 and 2012, respectively.

Future minimum annual payments under capital lease obligations as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years Ending
2013 (remaining six months)	$	163
2014	266
2015	73
2016	75
2017	77
Thereafter	140
Total	$	794

Note 7 — Commitments and Contingencies

Operating Leases

The Company leases its office space and certain equipment under noncancelable operating lease agreements with various expiration dates through September 30, 2022. Rent expense for the three months ended June 30, 2013 and 2012 was $2.1 million and $2 million, respectively, and for the six months ended June 30, 2013 and 2012 was $4.3 million and $4.4 million, respectively. The Company recognizes rent expense on a straight-line basis over the lease period and accrues for rent expense incurred but not paid.

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Future annual minimum lease payments under all noncancelable operating leases as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years ending
2013 (remaining six months).	$	4,473
2014	7,845
2015	5,967
2016	4,169
2017	4,004
Thereafter	12,526
Total	$	38,984

Other Matters

The Company may be subject to litigation or other claims in the normal course of business. In the opinion of management, the Company’s ultimate liability, if any, related to any currently pending or threatened litigation or claims would not materially affect its consolidated financial position, results of operations or cash flows.

Note 8 — Stockholders’ Equity

Stock Option Plans

The Company maintains the following stock plans: the 2011 Equity Incentive Plan (the “2011 Plan”), and the 2011 Employee Stock Purchase Plan. The Company’s board of directors and, as delegated to its compensation committee, administers the 2011 Plan and has authority to determine the directors, officers, employees and consultants to whom options or restricted stock may be granted, the option price or restricted stock purchase price, the timing of when each share is exercisable and the duration of the exercise period and the nature of any restrictions or vesting periods applicable to an option or restricted stock grant

Under the 2011 Plan, options granted are generally subject to a four-year vesting period whereby options become 25% vested after a one-year period and the remainder then vests monthly through the end of the vesting period. Vested options may be exercised up to ten years from the vesting commencement date, as defined in the 2011 Plan. Vested but unexercised options expire three months after termination of employment with the Company. The restricted stock units typically vest over four years with a yearly cliff contingent upon employment with the Company on the dates of vest.

The Company has elected to recognize the compensation cost of all stock-based awards on a straight-line basis over the vesting period of the award. Further, the Company applied an estimated forfeiture rate to unvested awards when computing the share compensation expenses. The Company estimated the forfeiture rate for unvested awards based on its historical experience on employee turnover behavior and other factors.

At the end of each fiscal year, the share reserve under the 2011 Plan will increase automatically by an amount equal to 4% outstanding shares as of the end of that most recently completed fiscal year or 3,840,000 shares, whichever is less. On January 1, 2013, 3.0 million additional shares were reserved under the 2011 Equity Incentive Plan pursuant to the automatic increase.

Determining Fair Value of Stock Awards

The Company estimates the fair value of stock option awards at the date of grant using the Black-Scholes option-pricing model. Options are granted with an exercise price equal to the fair value of the common stock as of the date of grant. Compensation expense is amortized net of estimated forfeitures on a straight-line basis over the requisite service period of the options, which is generally four years. Restricted stock, upon vesting, entitles the holder to one share of common stock for each restricted stock and has a purchase price of $0.0001 per share, which is equal to the par value of the Company’s common stock, and vests over four years. The fair value of the restricted stock is based on the Company’s closing stock price on the date of grant, and compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period.

The weighted average Black-Scholes model assumptions for the three and six months ended June 30, 2013 and 2012 were as follows:

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	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Expected term (in years)	5.0		5.1		5.0		5.1
Expected volatility	44	%	45	%	44	%	45	%
Risk-free interest rate	0.84	%	0.83	%	0.85	%	0.82	%
Expected dividend yield	—		—		—		—

Option and restricted stock activity under the 2011 Plan for the six months ended June 30, 2013 were as follows (shares in thousands)

			Options Outstanding				Restricted Stock Outstanding
	Shares and Units Available for Grant		Number of Shares		Weighted- Average Exercise Price		Number of Shares
Outstanding — December 31, 2012	4,024		15,189		$	6.98	3,928
Additional shares reserved under the 2011 equity incentive plan	3,025		—		—		—
Granted	(3,910	)	2,093		7.05		1,817
Options exercised/ Restricted stock released	—		(2,951	)	7.36		(405	)
Canceled/Forfeited	4,469		(3,793	)	6.65		(676	)
Outstanding — June 30, 2013	7,608		10,538		5.30		4,664

The weighted average grant-date fair value of employee stock options granted during the three months ended June 30, 2013 and 2012 was $2.67 and $6.68 per share, respectively and for the six months ended June 30, 2013 and 2012 was $2.68 and $6.98 per share, respectively.

The following table summarizes the consolidated stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	688	$	715	$	1,420	$	1,287
Sales and marketing	2,449		1,982		4,982		3,656
Research and development	519		530		1,005		893
General and administrative	1,767		2,133		3,936		3,771
Total stock-based compensation	$	5,423	$	5,360	$	11,343	$	9,607

Employee Stock Purchase Plan

The Company’s 2011 Employee Stock Purchase Plan (the “ESPP”) is intended to qualify under Section 423 of the Internal Revenue Code of 1986. Under the ESPP, employees are eligible to purchase common stock through payroll deductions

of up to 10% of their eligible compensation, subject to any plan limitations. The purchase price of the shares on each purchase date is equal to 85% of the lower of the fair market value of the Company’s common stock on the first and last trading days of each six-month offering period.

The Company estimates the fair value of purchase rights under the ESPP using the Black-Scholes valuation model. The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

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	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Expected term (in years)	0.50		0.50		0.50		0.50
Expected volatility	27	%	45	%	27	%	45	%
Risk-free interest rate	0.13	%	0.13	%	0.13	%	0.13	%
Expected dividend yield	—		—		—		—

The ESPP provides that additional shares are reserved under the plan annually on the first day of each fiscal year in an amount equal to the lesser of (i) 1.5 million shares, (ii) one percent of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the board of directors and/or the compensation committee of the board of directors. On January 1, 2013, 750,000 additional shares were reserved under the ESPP pursuant to the plan's automatic increase provision. As of June 30, 2013, 531,646 shares had been issued under the ESPP and 1,850,400 shares were available for future issuance.

Note 9 — Income Taxes

The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. These audits include questioning the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with federal, state, local and foreign tax laws. The Company is currently undergoing examination of the California Franchise Tax Returns relating to California state income taxes of its operating subsidiary for the years 2008 through 2010. The 2008 through 2012 tax years generally remain subject to examination by federal, state and foreign tax authorities. The Company’s gross amount of unrecognized tax benefits increased from $0.4 million as of December 31, 2012 to $0.6 million as of June 30, 2013, $55,000 of which, if recognized, would affect the company’s effective tax rate. It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on the Company’s assessment of many factors, the Company does not expect that changes in the liability for unrecognized tax benefits for the next twelve months will have a significant impact on the Company’s consolidated financial position or results of operations.

During the year ended December 31, 2012 management assessed the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. Management believes that it is not more likely than not that the deferred tax assets will be realized with respect to US federal and state deferred tax assets, except for certain U.S. state deferred tax assets where the Company’s subsidiary has profitable operations. Accordingly, a valuation allowance was provided with respect to U.S. federal and most U.S. State deferred tax assets. A valuation allowance was also provided with respect to deferred tax assets from its Singapore and Ireland subsidiaries. The Company will continue to evaluate its ability to realize deferred tax assets on a quarterly basis. Significant management judgment is required in determining the provision for income taxes and deferred tax assets and liabilities. In the event that actual results differ from these estimates the Company will adjust these estimates in future periods and, the Company may need to adjust the effective tax rate for the current year.

The Company considers the undistributed earnings of its foreign subsidiaries permanently reinvested in foreign operations and has not provided for U.S. income taxes on such earnings.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted, which reinstated the federal research tax credit retroactive to January 1, 2012 and extended the credit through December 31, 2013. The 2012 federal research tax credit along with the first six months of 2013 federal research tax credit, which would otherwise have been recognized in the first half of 2013, is fully offset by a valuation allowance.

Note 10 — Reportable Segments

The Company’s operations are principally managed on a geographic basis and are comprised of three reportable and operating segments: NALA, EMEA, and APJ, as defined below.

The Company reports segment information based on the management approach. The management approach designates the internal reporting used by the Company’s Chief Operating Decision Maker (“CODM”), for making decisions and assessing

performance as the source of the Company’s reportable segments. The CODM is the Company’s Chief Executive Officer. The CODM allocates resources to and assesses the performance of each of the operating segment using information about its revenue and direct profit contribution, which is management’s measure of segment profitability. Management has determined that the Company’s reportable and operating segments are as follows, based on the information used by the CODM:

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NALA — Includes operations from offices in San Francisco, California; Denver, Colorado and Nashville, Tennessee related primarily to end customers in North America.

EMEA — Includes operations from offices in Liverpool, United Kingdom and Dublin, Ireland related primarily to end customers in Europe.

APJ — Includes operations from offices in Singapore related primarily to end customers in Asia Pacific and Japan. Operations in Kuala Lumpur, Malaysia are allocated to the reportable segment of where the customer is located.

The Company does not allocate sales and marketing, research and development, or general and administrative expenses to its geographic regions because management does not include the information in its measurement of the performance of the operating segments. The Company excludes certain items such as stock-based compensation, overhead allocations and other items from direct profit contribution. Revenue for a particular geography reflects fees the Company earns from its customers for sales and renewals of maintenance, support and subscription contracts on their behalf and managed from the Company’s sales center in that geography.

Summarized financial information by geographic location based on the Company’s internal management reporting and as utilized by the Company’s CODM, is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net revenue
NALA	$	42,482		$	36,961		$	80,289		$	73,073
EMEA	18,238			15,518			35,758			31,266
APJ	6,977			7,215			12,771			12,929
Total net revenue	$	67,697		$	59,694		$	128,818		$	117,268
Direct profit contribution
NALA	$	24,377		$	19,150		$	43,610		$	37,668
EMEA	9,154			7,756			17,879			16,223
APJ	1,909			2,523			2,708			4,106
Total direct profit contribution	35,440			29,429			64,197			57,997
Adjustments:
Stock-based compensation	(688		)	(715		)	(1,420		)	(1,287		)
Other, net	(5,675		)	(2,902		)	(11,077		)	(5,900		)
Gross profit	$	29,077		$	25,812		$	51,700		$	50,810

11. Related Party Transactions

Richard Campione was elected to the Company’s Board of Directors (the “Board”) on November 29, 2012. On December 19, 2012, the Company entered into a consulting agreement with Mr. Campione under which Mr. Campione provides certain software consulting services to the Company. The Audit Committee of the Board pre-approved this consulting agreement in accordance with the Company’s formal policy regarding related party transactions. The Company paid Mr. Campione $0.3 million for consulting services provided during the term of the agreement, which ended April 30, 2013.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2012.

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements include, but are not limited to, statements related to changes in market conditions that impact our ability to generate service revenue on behalf of our customers; errors in estimates as to the service revenue we can generate for our customers; our ability to attract new customers and retain existing customers; risks associated with material defects or errors in our software or the effect of data security breaches; our ability to adapt our solution to changes in the market or new competition; our ability to improve our customers’ renewal rates, margins and profitability; our ability to increase our revenue and contribution margin over time from new and existing customers, including as a result of sales of our next-generation technology platform, Renew OnDemand, on a stand-alone subscription basis; our ability to implement Renew OnDemand; the potential effect of mergers and acquisitions on our customer base; business strategies and new sales initiatives; technology development; protection of our intellectual property; investment and financing plans; liquidity; our competitive position; the effects of competition; industry environment; and potential growth opportunities. Forward-looking statements are also often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section of this Quarterly Report on Form 10-Q titled “Risk Factors.” Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

All dollar amounts expressed as numbers in this MD&A (except per share amounts) are in millions.

OVERVIEW

We manage the service contract renewals process for renewals of maintenance, support and subscription agreements on behalf of our customers. Our integrated solution consists of dedicated service sales teams working under our customers’ brands and our proprietary Renew OnDemand platform and applications. By integrating software, managed services and data, we address the critical steps of the renewals process including data management, quoting, selling and service revenue business intelligence. Our business is built on our pay-for-performance model, whereby our revenues are based on the service renewals customers achieve with our solution, although we have been establishing a base of subscription revenue agreements to our technology platform and applications.

We are currently in the midst of a significant investment cycle in which we have taken steps designed to drive our future growth and profitability. We plan to further build out our infrastructure, develop our technology and support Renew OnDemand, our next-generation technology platform, offer additional cloud-based applications, including on a stand-alone, subscription basis, and hire additional sales, service sales and other personnel. These steps impacted our expenses in recent periods as well as our spending for capital expenditures, and are expected to continue to impact our profitability and cash flows in future periods. We have devoted significant resources to developing Renew OnDemand, our software application suite which was recently introduced, and we expect our investment in Renew OnDemand to continue. In addition, we plan to devote significant resources to expand our sales organization, build out the related partner ecosystem, and further develop our service organization to support the platform. We also plan on making targeted brand investments like in industry events like Dreamforce, as well as re-launching our website and producing new marketing collateral. On the sales side, we have seen early success with some of the new sales incentives around Renew OnDemand subscriptions, which drives short-term expense, but has improved our time to market this new solution. The capital expenditures and expenses related to Renew OnDemand are in addition to the expenses of operating our existing technology platform. While these expenses will be incurred and recognized in the near-term, we expect to generate revenues from the sale of subscriptions to Renew OnDemand that will increase over time in 2013

Key Business Metrics

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In assessing the performance of our business, we consider a variety of business metrics in addition to the financial metrics discussed below under, “Basis of Presentation.” These key metrics include service revenue opportunity under management and number of engagements.

Service Revenue Opportunity Under Management. At June 30, 2013, we estimate our opportunity under management to be over $9 billion. Service revenue opportunity under management (“opportunity under management”) is a forward-looking metric and is our estimate, as of a given date, of the value of all end customer service contracts that we will have the opportunity to sell on behalf of our customers over the subsequent twelve-month period. Opportunity under management is not a measure of our expected revenue. In addition, opportunity under management reflects our estimate for a forward twelve-month period and should not be used to estimate our opportunity for any particular quarter within that period. The value of end customer contracts actually delivered during a twelve-month period should not be expected to occur in even quarterly increments due to seasonality and other factors impacting our customers and their end customers.

We estimate the value of such end customer contracts based on a combination of factors, including the value of end customer contracts made available to us by customers in past periods, the minimum value of end customer contracts that our customers are required to give us the opportunity to sell pursuant to the terms of their contracts with us, periodic internal business reviews of our expectations as to the value of end customer contracts that will be made available to us by customers, the value of end customer contracts included in the SPA and collaborative discussions with our customers assessing their expectations as to the value of service contracts that they will make available to us for sale. While the minimum value of end customer contracts that our customers are required to give us represents a portion of our estimated opportunity under management, a significant portion of the opportunity under management is estimated based on the other factors described above. As our experience with our business, our customers and their contracts has grown, we have continually refined the process, improved the assumptions and expanded the data related to our calculation of opportunity under management.

When estimating service revenue opportunity under management, we must, to a large degree, rely on the assumptions described above, which may prove incorrect. These assumptions are inherently subject to significant business and economic uncertainties and contingencies, many of which are beyond our control. Our estimates therefore may prove inaccurate, causing the actual value of end customer contracts delivered to us in a given twelve-month period to differ from our estimate of opportunity under management. These factors include:

• the extent to which customers deliver a greater or lesser value of end customer contracts than may be required or otherwise expected;

• roll-overs of unsold service contract renewals from prior periods to the current period or future periods;

• changes in the pricing or terms of service contracts offered by our customers;

• increases or decreases in the end customer base of our customers;

• the extent to which the renewal rates we achieve on behalf of a customer early in an engagement affect the amount of opportunity that the customer makes available to us later in the engagement;

• customer cancellations of their contracts with us; and

• changes in our customers’ businesses, sales organizations, management, sales processes or priorities.

Our revenue also depends on our close and commissions rates. Our close rate is the percentage of opportunity under management that we renew on behalf of our customers. Our commission rate is an agreed-upon percentage of the renewal value of end customer contracts that we sell on behalf of our customers.

Our close rate is impacted principally by our ability to successfully sell service contracts on behalf of our customers. Other factors impacting our close rate include: the manner in which our customers price their service contracts for sale to their end customers; the stage of life-cycle associated with the products and underlying technologies covered by the service contracts offered to the end customer; the extent to which our customers or their competitors introduce new products or underlying technologies; the nature, size and age of the service contracts; and the extent to which we have managed the renewals process for similar products and underlying technologies in the past.

In determining commission rates for an individual engagement, various factors, including our close rates, as described above, are evaluated. These factors include: historic, industry-specific and customer-specific renewal rates for similar service contracts; the magnitude of the opportunity under management in a particular engagement; the number of end customers associated with these opportunities; and the opportunity to receive additional performance commissions when we exceed certain renewal levels. We endeavor to set our commission rates at levels commensurate with these factors and other factors that may be relevant to a particular engagement.

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Accordingly, our commission rates vary, often significantly, from engagement to engagement. In addition, we sometimes agree to lower commission rates for engagements with significant opportunity under management.

Number of Engagements. We track the number of engagements we have with our customers. We often have multiple engagements with a single customer, particularly where we manage the sales of service renewals relating to different product lines, technologies, types of contracts or geographies for the customer. When the set of renewals we manage on behalf of a customer is associated with a separate customer contract or a distinct product set, type of end customer contract or geography and therefore requires us to assign a service sales team to manage the differentiated renewals, we designate each set of renewals, and associated revenues and costs to us as a unique engagement. For example, we may have one engagement consisting of a service sales team selling maintenance contract renewals of a particular product for a customer in the United States and another engagement consisting of a sales team selling warranty contract renewals of a different product for the same customer in Europe. These would count as two engagements. We had approximately 145, 120 and 100 engagements as of December 31, 2012, 2011 and 2010, respectively.

Factors Affecting our Performance

Sales Cycle. We sell our integrated solution through our sales organization. At the beginning of the sales process, our quota-carrying sales representatives contact prospective customers and educate them about our offerings. Educating prospective customers about the benefits of our solution can take time, as many of these prospects have not historically relied upon integrated solutions like ours for service revenue management, nor have they typically put out a formal request for proposal or otherwise made a decision to focus on this area. As part of our sales process, we utilize our solutions design team to perform a

Service Performance Analysis (“SPA”) of our prospect’s service revenue. The SPA includes an analysis of best practices and benchmarks the prospect’s service revenue against industry peers. Through the SPA process, which typically takes several weeks, we are able to assess the characteristics and size of the prospect’s service revenue, identify potential areas of performance improvement, and formulate our proposal for managing the prospect’s service revenue. The length of our sales cycle for a new customer, inclusive of the SPA process and measured from our first formal discussion with the customer until execution of a new customer contract, is typically longer than six months and has increased in recent periods.

We generally contract with new customers to manage a specified portion of their service revenue opportunity, such as the opportunity associated with a particular product line or technology, contract type or geography. We negotiate the engagement-specific terms of our customer contracts, including commission rates, based on the output of the SPA, including the areas identified for improvement. Once we demonstrate success to a customer with respect to the opportunity under contract, we seek to expand the scope of our engagement to include other opportunities with the customer. For some customers, we manage all or substantially all of their service contract renewals.

Implementation Cycle. After entering into an engagement with a new customer, and to a lesser extent after adding an engagement with an existing customer, we incur sales and marketing expenses related to the commissions owed to our sales personnel. The commissions are based on the estimated total contract value, with a material portion of the commission expensed upfront with the remaining portion expensed over a period of eight to fourteen months. We also make upfront investments in technology and personnel to support the engagement. These expenses are typically incurred one to three months before we begin generating sales and recognizing revenue. Accordingly, in a given quarter, an increase in new customers, and, to a lesser extent, an increase in engagements with existing customers, or a significant increase in the contract value associated with such new customers and engagements, will negatively impact our gross margin and operating margins until we begin to achieve anticipated sales levels associated with the new engagements, which is typically two-to-three quarters after we begin selling contracts on behalf of our customers.

Although we expect new customer engagements to contribute to our operating profitability over time, in the initial periods of a customer relationship, the near term impact on our profitability can be negatively impacted by slower-than anticipated growth in revenues for these engagements as well as the impact of the upfront costs we incur, the lower initial level of associated service sales team productivity and lack of mature data and technology integration with the customer. As a result, an increase in the mix of new customers as a percentage of total customers may initially have a negative impact on our operating results. Similarly, a decline in the ratio of new customers to total customers may positively impact our operating results.

Contract Terms. Substantially all of our revenue comes from our pay-for-performance model. Under our pay-for-performance model, we earn commissions based on the value of service contracts we sell on behalf of our customers. In some cases, we earn additional performance-based commissions for exceeding pre-determined service renewal targets.

Since 2009, our new customer contracts have typically had a term of approximately 36 months, although we sometimes have contract terms of up to 60 months. Our contracts generally require our customers to deliver a minimum value of

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qualifying service revenue contracts for us to renew on their behalf during a specified period. To the extent that our customers do not meet their minimum contractual commitments over a specified period, they may be subject to fees for the shortfall. Our customer contracts are cancelable on relatively short notice, subject in most cases to the payment of an early termination fee by the customer. The amount of this fee is based on the length of the remaining term and value of the contract.

We invoice our customers on a monthly basis based on commissions we earn during the prior month, and with respect to performance-based commissions, on a quarterly basis based on our overall performance during the prior quarter. Amounts invoiced to our customers are recognized as revenue in the period in which our services are performed or, in the case of performance commissions, when the performance condition is determinable. Because the invoicing for our services generally coincides with or immediately follows the sale of service contracts on behalf of our customers, we do not generate or report a significant deferred revenue balance. However, the combination of minimum contractual commitments, our success in generating improved renewal rates for our customers, our customers’ historical renewal rates and the performance improvement potential identified by our SPA process, provides us with revenue visibility.

M&A Activity. Our customers, particularly those in the technology sector, participate in an active environment for mergers and acquisitions. Large technology companies have maintained active acquisition programs to increase the breadth and depth of their product and service offerings and small and mid-sized companies have combined to better compete with large technology companies. A number of our customers have merged, purchased other companies or been acquired by other companies. We expect merger and acquisition activity to continue to occur in the future.

The impact of these transactions on our business can vary. Acquisitions of other companies by our customers can provide us with the opportunity to pursue additional business to the extent the acquired company is not already one of our customers.

Similarly, when a customer is acquired, we may be able to use our relationship with the acquired company to build a relationship with the acquirer. In some cases we have been able to maintain our relationship with an acquired customer even where the acquiring company handles its other service contract renewals through internal resources. In other cases, however, acquirers have elected to terminate or not renew our contract with the acquired company. For example, Oracle terminated our contracts with Sun Microsystems effective as of September 30, 2010 and had previously terminated our contract with another customer, BEA Systems, in April 2008.

Economic Conditions and Seasonality. An improving economic outlook generally has a positive, but mixed, impact on our business. As with most businesses, improved economic conditions can lead to increased end customer demand and sales. In particular, within the technology sector, we believe that the recent economic downturn led many companies to cut their expenses by choosing to let their existing maintenance, support and subscription agreements lapse. An improving economy may have the opposite effect.

However, an improving economy may also cause companies to purchase new hardware, software and other technology products, which we generally do not sell on behalf of our customers, instead of purchasing maintenance, support and subscription services for existing products. To the extent this occurs, it would have a negative impact on our opportunities in the near term that would partially offset the benefits of an improving economy.

We believe the current uncertainty in the economy, combined with shifting market forces toward subscription-based models, is impacting a number of our customers and prospective customers, particularly in the traditional enterprise software and hardware segments. These forces have placed pressure on end customer demand for their renewal contracts and also have led to some slower decision making in general. This economic and industry environment has adversely affected the conversion rates for end customers and contracts. To the extent these conditions continue they will impact our future revenues.

In addition to the uncertainty in the macroeconomic environment, we experience a seasonal variance in our revenue typically for the third quarter of the year as a result of lower or flat renewal volume corresponding to the timing of our customers’ product sales particularly in the international regions. The impact of this seasonal fluctuation can be amplified if the economy as a whole is experiencing disruption or uncertainty, leading to deferral of some renewal decisions. As we increase our subscription revenue base, this seasonality will become less apparent. However for at least the next couple years, we would expect this pattern to continue.

Adoption of “Software-as-a-Service” Solutions. Within the software industry, there is a growing trend toward providing software to customers using a software-as-a-service (“SaaS”) model. Under this model, SaaS companies provide access to software applications to customers on a remote basis, and provide their customers with a subscription to use the software, rather than licensing software to their customers. SaaS companies face a distinct set of challenges with respect to customer renewals, given the potentially lower switching costs for customers utilizing their solutions, and are more reliant on renewals for their long-term revenues than traditional software companies. Given the strategic importance of renewals to their model, SaaS companies may be less inclined than traditional software companies to rely on third-party solutions such as ours to manage the sale of renewals of subscription contracts. We have tailored our solution to address the needs of SaaS companies in this area

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and expect to continue to develop and enhance our solution as this market grows, especially with our Renew OnDemand application suite.

In connection with our purpose-built SaaS offering to manage and maximize recurring revenue, we intend to significantly increase our investment in our customer support, training and professional services organizations to support deployments of Renew OnDemand. We anticipate that the cost of providing professional services, support and training will be significant and that our gross profit will be adversely affected as we build out these functions.

Basis of Presentation

Net Revenue

Substantially all of our net revenue is attributable to commissions we earn from the sale of renewals of maintenance, support and subscription agreements on behalf of our customers. We generally invoice our customers for our services in arrears on a monthly basis for sales commissions, and on a quarterly basis for certain performance sales commissions; accordingly, we typically have no deferred revenue related to these services. We do not set the price, terms or scope of services in the service contracts with end customers and do not have any obligations related to the underlying service contracts between our customers and their end customers.

We also earn revenue from the sale of subscriptions to our cloud based applications. To date, subscription revenue has been insignificant, but we expect revenues generated from subscriptions to Renew OnDemand to increase in 2013. Subscription fees are accounted for separately from commissions, and they are billed in advance over a monthly, quarterly or annual basis. Subscription revenue is recognized ratably over the related subscription term.

We have generated a significant portion of our revenue from a limited number of customers. Our top ten customers accounted for 51% and 49% of our net revenue for the three months ended June 30, 2013 and 2012, respectively, and 49% and 49% for the six months ended June 30, 2013 and 2012, respectively.

Our business is geographically diversified. During the second quarter of 2013, 63% of our net revenue was earned in North America and Latin America (“NALA”), 27% in Europe, Middle East and Africa (“EMEA”) and 10% in Asia Pacific-Japan (“APJ”). Net revenue for a particular geography generally reflects commissions earned from sales of service contracts managed from our sales centers in that geography. Predominantly all of the service contracts sold and managed by our sales centers relate to end customers located in the same geography.

Cost of Revenue and Gross Profit

Our cost of revenue expenses include compensation, technology costs, including those related to the delivery of our cloud-based solutions, and allocated overhead costs. Compensation includes salary, bonus, benefits and stock-based compensation for our dedicated service sales teams. Our allocated overhead includes costs for facilities, information technology and depreciation, including amortization of internal-use software associated with our service revenue technology platform and cloud applications. Allocated costs for facilities consist of rent, maintenance and compensation of personnel in our facilities departments. Our allocated costs for information technology include costs associated with third-party data centers where we maintain our data servers, compensation of our information technology personnel and the cost of support and maintenance contracts associated with computer hardware and software. To the extent our customer base or opportunity under management expands, we may need to hire additional service sales personnel and invest in infrastructure to support such growth. We currently expect that our cost of revenue will fluctuate significantly and may increase on an absolute basis and as a percentage of revenue in the near term, including for the reasons discussed above under, “—Factors Affecting Our Performance—Implementation Cycle” and as a result of our near term plans to run dual technology platforms for several quarters as we commence the launch of Renew OnDemand while maintaining our existing technology platform.

Operating Expenses

Sales and Marketing. Sales and marketing expenses are the largest component of our operating expenses and consist primarily of compensation and sales commissions for our sales and marketing staff, allocated expenses and marketing programs and events. We sell our solutions through our global sales organization, which is organized across three geographic regions: NALA, EMEA and APJ. Our commission plans provide that payment of commissions to our sales representatives is contingent on their continued employment, and we recognize expense over a period that is generally between twelve and fourteen months following the execution of the applicable contract. We currently expect sales and marketing expenses to increase on an absolute basis and as a percentage of revenue in the near term based on commissions earned on customer contracts entered into in prior periods, as well as continued investments in sales and marketing personnel and programs as we expand our business domestically and internationally and pursue new sales initiatives.

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Research and Development. Research and development expenses consist primarily of compensation, allocated costs and the cost of third-party service providers. We focus our research and development efforts on developing new products, including Renew OnDemand, our next-generation technology platform, and adding new features to our existing technology platform. In connection with the development and enhancements of our SaaS applications, we capitalize certain expenditures related to the development and enhancement of internal-use software related to our technology platform. We expect research and development spending to increase on an absolute basis and as a percentage of revenue in the near term as we continue to invest in our Renew OnDemand platform and our expectation that future capitalization of internal-use software costs will be insignificant.

General and Administrative. General and administrative expenses consist primarily of compensation for our executive, human resources, finance and legal functions, and related expenses for professional fees for accounting, tax and legal services, as well as allocated expenses. We expect that our general and administrative expenses will increase on an absolute basis to support our anticipated growth.

Other Income (Expense)

Other income (expense) consists primarily of interest expense associated with fees related to our credit facility, foreign exchange transaction gains and losses and interest income.

Income Tax (Benefit) Provision

We account for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the expected future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of our taxable subsidiaries’ assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

We account for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. We record an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on our tax returns. To the extent that the assessment of such tax positions change, the change in estimate is recorded in the period in which the determination is made. The reserves are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

Results of Operations

The table below sets forth our consolidated results of operations for the periods presented. The period-to-period comparison of financial results presented below is not necessarily indicative of financial results to be achieved in future periods.

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	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Net revenue	$	67,697		$	59,694		$	128,818		$	117,268
Cost of revenue	38,620			33,882			77,118			66,458
Gross profit	29,077			25,812			51,700			50,810
Operating expenses:
Sales and marketing	15,367			14,169			30,175			27,646
Research and development	6,794			4,298			13,042			8,879
General and administrative	10,783			10,564			22,004			20,639
Total operating expenses	32,944			29,031			65,221			57,164
Loss from operations	(3,867		)	(3,219		)	(13,521		)	(6,354		)
Other expense, net	(295		)	(333		)	(403		)	(424		)
Loss before income taxes	(4,162		)	(3,552		)	(13,924		)	(6,778		)
Income tax provision	744			33,217			1,437			31,267
Net loss	$	(4,906	)	$	(36,769	)	$	(15,361	)	$	(38,045	)
Includes stock-based compensation of:
Cost of revenue	$	688		$	715		$	1,420		$	1,287
Sales and marketing	2,449			1,982			4,982			3,656
Research and development	519			530			1,005			893
General and administrative	1,767			2,133			3,936			3,771
Total stock-based compensation	$	5,423		$	5,360		$	11,343		$	9,607

The following table sets forth our operating results as a percentage of net revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(as % of net revenue)				(as % of net revenue)
Net revenue	100	%	100	%	100	%	100	%
Cost of revenue	57	%	57	%	60	%	57	%
Gross profit	43	%	43	%	40	%	43	%
Operating expenses:
Sales and marketing	23	%	24	%	23	%	24	%
Research and development	10	%	7	%	10	%	8	%
General and administrative	16	%	18	%	17	%	18	%
Total operating expenses	49	%	49	%	50	%	50	%
Loss from operations	(6	)%	(6	)%	(10	)%	(7	)%

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Net Revenue

	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Change			% Change
	(in thousands)
Net revenue
NALA	$	42,482	63	%	$	36,961	62	%	$	5,521		15	%
EMEA	18,238		27	%	15,518		26	%	2,720			18	%
APJ	6,977		10	%	7,215		12	%	(238		)	(3	)%
Total net revenue	$	67,697	100	%	$	59,694	100	%	$	8,003		13	%

Net revenue increased $8.0 million, or 13%, for the second quarter of 2013, compared to the second quarter of 2012. Our revenue performance was driven by a combination of growth in opportunity from new and existing customers including some of our large enterprise accounts, as well as strong performance in our NALA and EMEA service sales centers in closing service revenue renewals. The increase in our customer engagements resulted from new engagements with certain existing customers as well as new customer acquisitions due to our investments in our sales organization. These increases were partially offset by some customers in APJ where the scope of our services was reduced.

Cost of Revenue and Gross Profit

	Three Months Ended June 30,
	2013			2012			Change			% Change
	(in thousands)
Cost of revenue	$	38,620		$	33,882		$	4,738		14	%
Included stock-based compensation of:	688			715			(27		)
Gross profit	29,077			25,812			3,265			13	%
Gross profit percentage	43		%	43		%				—	%

The 14% increase in our cost of revenue in the second quarter of 2013 reflected a $3.4 million increase in compensation, attributable in part to an increase in the number of sales enablement personnel in our global sales operations center in Kuala Lumpur, Malaysia associated with two large expansions with existing customers, as well as a $2.0 million increase in technology and amortization expense of our internally developed software. Gross profit in the second quarter of 2013 was flat as compared to second quarter of 2012. For the next several quarters, we expect that we will have increased spending to continue support for our legacy service revenue intelligence platform in addition to growing support expenditures for our Renew OnDemand application suite.

Operating Expenses

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	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Change			% Change
	(in thousands)
Operating expenses:
Sales and marketing	$	15,367	23	%	$	14,169	24	%	$	1,198		8	%
Research and development	6,794		10	%	4,298		7	%	2,496			58	%
General and administrative	10,783		16	%	10,564		18	%	219			2	%
Total operating expenses	$	32,944	49	%	$	29,031	49	%	$	3,913		13	%
Includes stock-based compensation of:
Sales and marketing	$	2,449			$	1,982			$	467
Research and development	519				530				(11		)
General and administrative	1,767				2,133				(366		)
Total stock-based compensation	$	4,735			$	4,645			$	90

Sales and marketing expenses

The 8% increase in sales and marketing expenses in the second quarter of 2013 resulted primarily from an additional $2.3 million in compensation due to a higher number of sales personnel, primarily in NALA as well as higher sales commission expense incurred due to the signing of new customer contracts. The increase in headcount reflected our investment in sales and marketing resources aimed at expanding our customer base. The increase was partially offset by lower marketing expenses of $0.9 million in the first quarter of 2013 as a result of lower spending on brand development initiatives. We expect additional targeted increases in sales and marketing expense in the second half of 2013 as we implement new sales incentives for Renew OnDemand and expand marketing efforts to raise awareness of our solutions and brand.

Research and development expenses

The 58% increase in research and development expense in the second quarter of 2013 was primarily due to no capitalization of labor and third party costs for development of internal-use software in the second quarter of 2013 as compared to $2.3 million capitalized costs in the second quarter of 2012. We expect research and development spending to increase on an absolute basis and as a percentage of revenue in the near term as we continue to enhance our Renew OnDemand platform. We do not expect that future capitalization of internal-use software costs will be significant.

General and administrative expenses

The 2% increase in general and administrative expense in the second quarter of 2013 as compared to the second quarter of 2012 reflected a $0.1 million increase in compensation.

Income Tax Provision

	Three Months Ended June 30,
	2013		2012		Change			% Change
	(in thousands)
Income tax provision	$	744	$	33,217	$	(32,473	)	(98	)%

In the second quarter of 2013, we recorded a charge to income tax expense of $0.7 million.  This charge represents anticipated taxes in jurisdictions where we have profitable operations, including certain US states, offset by limited benefits available from losses in Ireland.  No benefit was otherwise provided for losses incurred in US and Singapore, because these losses are offset by a full valuation allowance, as discussed below.

In the second quarter of 2012, we recorded a charge to income tax expense of $33.2 million. This charge principally arose from the establishment of a valuation allowance against our U.S. deferred tax assets in that quarter, resulting in a charge

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of $31.8 million with respect to US deferred tax assets as of December 2011.  Second quarter 2012 tax expense also reflects the reversal of the first quarter 2012 deferred tax benefits, plus tax expense in jurisdictions where we have profitable operations as noted above.

Six months ended June 30, 2013 and June 30, 2012

Net Revenue

	Six Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Change			% Change
	(in thousands)
Net revenue
NALA	$	80,289	62	%	$	73,073	62	%	$	7,216		10	%
EMEA	35,758		28	%	31,266		27	%	4,492			14	%
APJ	12,771		10	%	12,929		11	%	(158		)	(1	)%
Total net revenue	$	128,818	100	%	$	117,268	100	%	$	11,550		10	%

Net revenue increased $11.5 million, or 10%, in the six months ended June 30, 2013, compared to the six months ended June 30, 2012. Our revenue performance was driven by a combination of growth in opportunity from new and existing customers, as well as strong performance across all of our service sales centers around the world in closing service revenue renewals. The increase in net revenue reflects revenue growth in NALA and EMEA, due to an increase in the number and value of service contracts sold on behalf of our customers and the ramp of new engagements entered into in 2012.

Cost of Revenue and Gross Profit

	Six Months Ended June 30,
	2013			2012			Change		% Change
	(in thousands)
Cost of revenue	$	77,118		$	66,458		$	10,660	16	%
Included stock-based compensation of:	1,420			1,287			133
Gross profit	51,700			50,810			890		2	%
Gross profit percentage	40		%	43		%			(3	)%

The 16% increase in our cost of revenue in the six months ended June 30, 2013 compared to the six months ended June 30, 2012, reflected an increase in the number of service sales personnel, primarily in NALA and APJ, as we pursue new sales initiatives resulting in a $8.1 million increase in compensation and a $2.3 million increase in allocated costs for facilities, including incremental facility costs related to expansion of facilities in NALA and APJ, and greater allocations for information technology and depreciation. Gross profit in the first half of 2013 was also adversely impacted by the slower ramp of some of our larger new engagements and due to staffing and technology costs associated with the deployment of our cloud applications. For the next several quarters, we expect that our spending will reflect increased amounts to support our legacy service revenue intelligence platform in addition to our recently-announced Renew OnDemand application suite as well as increased spending on deployments of our cloud applications.

Operating Expenses

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	Six Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Change		% Change
	(in thousands)
Operating expenses:
Sales and marketing	$	30,175	23	%	$	27,646	24	%	$	2,529	9	%
Research and development	13,042		10	%	8,879		8	%	4,163		47	%
General and administrative	22,004		17	%	20,639		18	%	1,365		7	%
Total operating expenses	$	65,221	50	%	$	57,164	50	%	$	8,057	14	%
Includes stock-based compensation of:
Sales and marketing	$	4,982			$	3,656			$	1,326
Research and development	1,005				893				112
General and administrative	3,936				3,771				165
Total stock-based compensation	$	9,923			$	8,320			$	1,603

Sales and marketing expenses

The 9% increase in sales and marketing expenses in the six months ended June 30, 2013 compared to the six months ended June 30, 2012, reflected higher stock-based compensation and an increase in the number of sales and marketing personnel, primarily in NALA and EMEA resulting in a $4.4 million increase in compensation. The increase in headcount reflected our investment in sales and marketing resources aimed at expanding our customer base. The increase was partially offset by lower marketing expenses of $2.0 million in the first half of 2013 as a result of lower spending on brand development initiatives. We expect additional targeted increases in sales and marketing expense in the second half of 2013 as we implement new sales incentives for Renew OnDemand and expand marketing efforts to raise awareness of our solutions and brand.

Research and development expenses

The 47% increase in research and development expense in the in the six months ended June 30, 2013 was primarily due to no capitalization of labor and third party costs for development of internal-use software in the six months ended June 30, 2013 as compared to $4.2 million capitalized costs in the six months ended June 30, 2012. We expect research and development spending to increase on an absolute basis and as a percentage of revenue in the near term as we continue to enhance our Renew OnDemand platform. We do not expect that future capitalization of internal-use software costs will be significant.

General and administrative expenses

The 7% increase in general and administrative expense in the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 reflected a $0.7 million increase in compensation, including stock-based compensation.

Income Tax Provision

	Six Months Ended June 30,
	2013		2012		Change			% Change
	(in thousands)
Income tax provision	$	1,437	$	31,267	$	(29,830	)	(95	)%

For the six months ended June 30, 2013, we recorded a charge to income tax expense of $1.4 million.  This charge represents anticipated taxes in jurisdictions where we have profitable operations, including certain US states, offset by limited benefits available from losses in Ireland.  No benefit was otherwise provided for losses incurred in US and Singapore, because these losses are offset by a full valuation allowance, as discussed below.

In the second quarter of 2012, we recorded a charge to income tax expense of $33.2 million. This charge principally arose from the establishment of a valuation allowance against our U.S. deferred tax assets in that quarter, resulting in a charge

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of $31.8 million with respect to US deferred tax assets as of December 2011.  Second quarter 2012 tax expense also reflects the reversal of the first quarter 2012 deferred tax benefits, plus tax expense in jurisdictions where we have profitable operations as noted above.

Liquidity and Capital Resources

At June 30, 2013, we had cash, cash equivalents and short-term investments of $132.0 million, which primarily consisted of money market mutual funds, corporate bonds and U.S. government obligations held by well-capitalized financial institutions. Our primary operating cash requirements include the payment of compensation and related costs, working capital requirements related to accounts receivable and accounts payable, as well as costs for our facilities and information technology infrastructure. Historically, we have financed our operations principally from cash provided by our operating activities, proceeds from stock offerings and the exercise of stock options, and to a lesser extent, from borrowings under various credit facilities, with no such borrowings in 2013. We believe our existing cash and cash equivalents and short-term investments and our currently available credit facility will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

Credit Facility

On June 29, 2012, we terminated a revolving credit facility scheduled to expire in February 2013. The credit facility provided for a $20.0 million line of credit. At the time of termination, no borrowings other than a letter of credit in the face amount of $850,000 were outstanding under the credit facility.

On July 5, 2012, we entered into a three-year credit agreement (the “Credit Agreement”). The Credit Agreement provides for a secured revolving line of credit based on eligible accounts receivable in an amount up to $25.0 million on and before July 5, 2013 and up to $30.0 million thereafter, in each case with a $2.0 million letter of credit sublimit. On June 18, 2013, we elected to reduce our revolving commitment by $5 million from $30 million to $25 million. Proceeds available under the Credit Agreement may be used for working capital and other general corporate purposes. We have the option to prepay the loans under the Credit Agreement in whole or in part at any time without premium or penalty. We also have the option to terminate the commitments under the Credit Agreement in whole at any time, and may reduce the commitments by up to $10.0 million between July 1, 2013 and June 30, 2014.

The loans under the Credit Agreement bear interest, at our option, at a base rate determined in accordance with the Credit Agreement, minus 0.50%, or at a LIBOR rate plus 2.00%. Principal, together with all accrued and unpaid interest, is due and payable on July 5, 2015, the maturity date. We are also obligated to pay a quarterly commitment fee, payable in arrears, based on the available commitments.

The Credit Agreement contains customary affirmative and negative covenants, as well as financial covenants. Affirmative covenants include, among others, delivery of financial statements, compliance certificates and notices of specified events, maintenance of properties and insurance, preservation of existence, and compliance with applicable laws and regulations. Negative covenants include, among others, limitations on our ability and our subsidiaries’ ability to grant liens, incur indebtedness, engage in mergers, consolidations and sales of assets and engage in affiliate transactions. The Credit Agreement requires us to maintain a maximum leverage ratio and a minimum liquidity amount, each as defined in the Credit Agreement.

The Credit Agreement also contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and change in control of the Company, subject to grace periods in certain instances. Upon an event of default, the lender may declare the outstanding obligations of the Company under the Credit Agreement to be immediately due and payable and exercise other rights and remedies provided for under the Credit Agreement.

Our obligations under the Credit Agreement are guaranteed by our subsidiary, ServiceSource Delaware, Inc., and are collateralized by substantially all of our assets and our subsidiary’s assets.

Summary Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated (in thousands):

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	Six Months Ended June 30,
	2013			2012
Net cash provided by operating activities	$	11,667		$	9,809
Net cash used in investing activities	(24,467		)	(17,400		)
Net cash provided by financing activities	13,187			7,301
Net increase (decrease) in cash and cash equivalents, net of impact of foreign exchanges on cash	835			(397		)

Operating Activities

Net cash provided by operating activities was $11.7 million during the six months ended June 30, 2013. Net loss during the period was $15.4 million adjusted by non-cash charges of $6.0 million for depreciation and amortization and $11.3 million for stock-based compensation. Cash generated from operations during the six months ended June 30, 2013 resulted from sequential changes in our working capital including a $4.2 million decrease in accounts receivable, a $3.2 million increase in accrued compensation and benefits and a $2.1 increase in other accrued liabilities. Uses of cash were related to a $1.2 million increase in prepaid expenses and other and a $0.6 million decrease in accounts payable.

Net cash provided by operating activities was $9.8 million during the six months ended June 30, 2012. Our net loss during the period was $38.0 million, which was impacted by a valuation allowance of $33.1 million for a substantial portion of our deferred tax assets and adjusted by non-cash charges of $4.6 million for depreciation and amortization and $9.6 million for stock-based compensation. Cash provided for operations resulted from changes in our working capital, including a $2.6 million decrease in accounts receivable, a $4.1 million increase in other accrued liabilities and a $0.9 million increase in accounts payable. Uses of cash were related to a $4.8 million decrease in accrued compensation and benefits largely due to bonuses that were accrued at December 30, 2011 but were paid out during the first quarter of 2012.

Investing Activities

During the six months ended June 30, 2013 cash used in investing activities was principally for the purchases of short-term investments, net of sales and maturities of $22.2 million, and to a lesser extent for property and equipment purchases of $2.2 million. 

During the six months ended June 30, 2012 cash used in investing activities was principally for the purchases of property and equipment of $11.2 million, including costs capitalized for development of internal-use software and to a lesser extent for the purchases of short-term investments, net of sales and maturities, of $6.2 million.

Financing Activities

Cash provided by financing activities was $13.2 million during the six months ended June 30, 2013 principally resulted from proceeds of $13.6 million from the exercise of common stock options and the purchase of common stock under our employee stock purchase plan.

Cash provided by financing activities was $7.3 million during the six months ended June 30, 2012 and principally resulted from proceeds of $7.8 million from the exercise of common stock options and the purchase of common stock under our employee stock purchase plan.

Off-Balance Sheet Arrangements

We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations and Commitments

Our principal commitments consist of obligations under operating leases for office space and computer equipment. At June 30, 2013, the future minimum payments under these commitments were as follows (in thousands):

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	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Obligations under capital leases	$	794	$	328	$	288	$	178	$	—
Operating lease obligations	38,984		8,639		15,853		9,681		4,811
	$	39,778	$	8,967	$	16,141	$	9,859	$	4,811

The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding, which specify significant terms including payment terms, related services and the approximate timing of the transaction. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Also excluded from the table above is the income tax liability we recorded for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on our tax returns (“unrecognized tax benefits”). As of June 30, 2013, our liability for unrecognized tax benefits was $0.1 million. Reasonably reliable estimates of the amounts and periods of related future payments cannot be made at this time.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies are those related to revenue recognition, stock-based compensation, capitalized internal-use software and income taxes. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no material changes in our critical accounting policies and estimates during the three and six months ended June 30, 2013 as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 8, 2013.

Recent Accounting Pronouncements

The information contained in Note 1 to our condensed consolidated financial statements in Item 1 under the heading, “Recently Adopted Accounting Pronouncements,” is incorporated by reference into this Item 2.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We believe that there have been no significant changes in our market risk exposures for the three and six months ended June 30, 2013, as compared with those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Item 4.Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of the end of the period covered by this report (the “Evaluation Date”).

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.

(b)Management’s Report on Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such

29

term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.Legal Proceedings

From time to time, we are subject to litigation or threatened litigation in the general nature of business. We do not believe the resolution of these matters will have a material adverse impact on our consolidated results of operations, cash flows or financial position.

Item 1A.Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q. If any of the following risks are realized, our business, financial condition, results of operations, cash flows, the trading price of our common stock could be materially and adversely affected. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially affect our business, financial condition, results of operations, cash flows, the trading price of our common stock.

Risks Related to Our Business and Industry

Our quarterly results of operations may fluctuate as a result of numerous factors, many of which may be outside of our control.

Our quarterly operating results are likely to fluctuate. Some of the important factors that may cause our revenue, operating results and cash flows to fluctuate from quarter to quarter include:

• our ability to attract new customers;

• our ability to retain existing customers and/or maintain the size of our engagements with those customers;

• the renewal rates we achieve early in an engagement and the time it takes to achieve the close rates expected for the term of the engagement;

• our ability to effectively sell and implement Renew OnDemand;

• fluctuations in the value of end customer contracts delivered to us;

• fluctuations in close rates;

• changes in our commission rates;

• seasonality;

• loss of customers for any reason including due to acquisition;

• the mix of new customers as compared to existing customers;

• the length of the sales cycle for our solution, and our level of upfront investments prior to the period we begin generating revenue associated with such investments;

• the timing of customer payments and payment defaults by customers;

• the amount and timing of operating costs and capital expenditures related to the operations of our business, including the development of new products such as Renew OnDemand;

• the rate of expansion, productivity and realignment of our direct sales force;

• the cost and timing of the introduction of new technologies or new services, including additional investments in Renew OnDemand;

• general economic conditions;

• technical difficulties or interruptions in delivery of our solution;

• changes in foreign currency exchange rates;

• changes in tax rates;

• regulatory compliance costs, including with respect to data privacy;

• costs associated with acquisitions of companies and technologies;

• extraordinary expenses such as litigation or other dispute-related settlement payments; and

• the impact of new accounting pronouncements.

Many of the above factors are discussed in more detail elsewhere in these Risk Factors. Many of these factors are outside our control, and the variability and unpredictability of such factors could result in our failing to meet our revenue or operating results expectations for a given period. In addition, the occurrence of one or more of these factors might cause our operating

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results to vary widely which could lead to negative impacts on our margins, short-term liquidity or ability to retain or attract key personnel, and could cause other unanticipated issues. Accordingly, we believe that quarter-to-quarter comparisons of our revenue, operating results and cash flows may not be meaningful and should not be relied upon as an indication of future performance.

Our customer relationships and overall business will suffer if our new Renew OnDemand platform does not meet expectations or if we encounter significant problems migrating customers to it.

In the fall of 2012, we introduced Renew OnDemand, our next-generation service revenue management platform. This new platform is offered on a subscription basis and will serves as the core foundation for our customer-facing cloud applications, in addition to applications we use for our internal operations. Renew OnDemand remains relatively new and we have limited experience selling and/or implementing it for customers and migrating customers from our traditional platform to Renew OnDemand. Given the complexity and significance of this ongoing transition, including as a result of the amount of customer data within our systems that will need to be accessed and migrated, our customer relationships, our reputation, and our overall business could be severely damaged if our implementations or migrations are poorly executed. In addition, we expect to incur additional expenses as a result of our near term plans to run dual technology platforms as we move toward broad adoption of Renew OnDemand while maintaining our existing technology platform. Additionally, if we experience any delay or technical problems as a result of moving to Renew OnDemand, we may incur such expenses for much longer than anticipated. Similarly our business operations and customer relationships will be at high risk if Renew OnDemand does not meet our performance expectations, or those of our customers. This could harm our business in numerous ways including, without limitation, a loss of revenue and customer contracts and damage to our reputation.

Our revenue will decline if there is a decrease in the overall demand for our customers’ products and services for which we provide service revenue management.

Our revenue is based on a pay-for-performance model under which we are paid a commission based on the service contracts we sell on behalf of our customers. If a particular customer’s products or services fail to appeal to its end customers, our revenue may decline. In addition, if end customer demand decreases for other reasons, such as negative news regarding our customers or their products, unfavorable economic conditions, shifts in strategy by our customers away from promoting the service contracts we sell in favor of selling their other products or services to their end customers, or if end customers experience financial constraints and fail to renew the service contracts we sell, we may experience a decrease in our revenue as the demand for our customers’ service contracts declines. Similarly, if our customers come under economic pressure, they may be more likely to terminate their contracts with us and/or seek to restructure those contracts, and for customers whose contracts are up for renewal, they may seek to renew those contracts on less favorable terms.

The market for our solution is relatively undeveloped and may not grow.

The market for service revenue management is still relatively undeveloped, has not yet achieved widespread acceptance and may not grow quickly or at all. Our success will depend to a substantial extent on the willingness of companies to engage a third party such as us to manage the sales of their support, maintenance and subscription contracts. Many companies have invested substantial personnel, infrastructure and financial resources in their own internal service revenue organizations—or in some cases have built or modified software applications to help manage renewals—and therefore may be reluctant to switch to a solution such as ours. Companies may not engage us for other reasons, including a desire to maintain control over all aspects of their sales activities and customer relations, concerns about end customer reaction, a belief that they can sell their support, maintenance and subscription services more cost-effectively using their internal sales organizations, perceptions about the expenses associated with changing to a new approach and the timing of expenses once they adopt a new approach, general reluctance to adopt any new and different approach to old ways of doing business, or other considerations that may not always be evident. New concerns or considerations may also emerge in the future. Particularly because our market is relatively undeveloped, we must address our potential customers’ concerns and explain the benefits of our approach in order to convince them to change the way that they manage the sales of support, maintenance and subscription contracts. If companies are not sufficiently convinced that we can address their concerns and that the benefits of our solution are compelling, then the market for our solution may not develop as we anticipate and our business will not grow.

Delayed or unsuccessful investment in new technology, services and markets may harm our financial results.

We plan to continue investing significant resources in research and development in order to enhance Renew OnDemand, our managed services offerings, and other new offerings that will appeal to customers and potential customers. We have

undertaken the development of Renew OnDemand as our new technology to offer improved and more scalable service revenue management, including enhancements to our applications. The development of new products and services entails a number of risks that could adversely affect our business and operating results, including:

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• the risk of diverting the attention of our management and our employees from the day-to-day operations of the business;

• insufficient revenue to offset increased expenses associated with research, development, operational and marketing activities; and

• write-offs of the value of such technology investments as a result of unsuccessful implementation or otherwise.

If Renew OnDemand or any of our other new or modified technology does not work as intended, is not responsive to user preferences or industry or regulatory changes, is not appropriately timed with market opportunity, or is not effectively brought to market, we may lose existing and potential customers or related service revenue opportunities, in which case our results of operations may suffer. The cost of future development of new service revenue management offerings or technologies also could require us to raise additional debt or equity financing. These actions could be dilutive to our stockholders and negatively impact our financial condition or our results of operations.

We plan to sell subscriptions to our cloud applications via Renew OnDemand separately from our integrated solution, which may not be successful and could impact revenue from our existing solution.

We currently derive a small portion of our revenue from subscriptions to our cloud applications for a few customers, and we package and price the applications we offer on Renew OnDemand on a subscription model. We may not be able to fully develop a successful market for our Renew OnDemand subscription applications. In addition, because we have limited prior experience selling technology subscriptions on a stand-alone basis, we may encounter technical and execution challenges that undermine the quality of the technology offering or cause us to fall short of customer expectations. We also have little experience pricing our technology subscriptions separately, which could result in underpricing that damages our profit margins and financial performance. It is also possible that selling a technology solution separately via Renew OnDemand from our integrated solution will result in a reduction in sales of our current offerings that we might otherwise have sold. An unsuccessful expansion of our business to promote a stand-alone subscription model for any of the foregoing reasons or otherwise would lead to a diversion of financial and managerial resources from our existing business and an inability to generate sufficient revenue to offset our investment costs.

Our estimates of service revenue opportunity under management and other metrics may prove inaccurate.

We use various estimates in formulating our business plans and analyzing our potential and historical performance, including our estimate of service revenue opportunity under management. We base our estimates upon a number of assumptions that are inherently subject to significant business and economic uncertainties and contingencies, many of which are beyond our control. Our estimates therefore may prove inaccurate.

Service revenue opportunity under management (“opportunity under management”) is a forward-looking metric and is our estimate, as of a given date, of the value of all end customer service contracts that we will have the opportunity to sell on behalf of our customers over the subsequent twelve-month period. Opportunity under management is not a measure of our expected revenue. We estimate the value of such end customer contracts based on a combination of factors, including the value of end-customer contracts made available to us by customers in past periods; the minimum value of end-customer contracts that our customers are required to give us the opportunity to sell pursuant to the terms of their contracts with us; periodic internal business reviews of our expectations as to the value of end customer contracts that will be made available to us by customers; the value of end customer contracts included in the SPA; and collaborative discussions with our customers assessing their expectations as to the value of service contracts that they will make available to us for sale. While the minimum value of end customer contracts that our customers are required to give us represents a portion of our estimated opportunity under management, a significant portion of the opportunity under management is estimated based on the other factors described above.

When estimating service revenue opportunity under management and other similar metrics, we must, to a large degree, rely on the assumptions described above, which may prove incorrect. These assumptions are inherently subject to significant business and economic uncertainties and contingencies, many of which are beyond our control. Our estimates therefore may prove inaccurate, causing the actual value of end customer contracts delivered to us in a given twelve-month period to differ from our estimate of opportunity under management. These factors include:

• the extent to which customers deliver a greater or lesser value of end customer contracts than may be required or otherwise expected;

• roll-overs of unsold service contract renewals from prior periods to the current period or future periods;

• changes in the pricing or terms of service contracts offered by our customers;

• increases or decreases in the end customer base of our customers;

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• the extent to which the renewal rates we achieve on behalf of a customer early in an engagement affect the amount of opportunity that the customer makes available to us later in the engagement;

• customer cancellations of their contracts with us due to acquisitions or otherwise; and

• changes in our customers’ businesses, sales organizations, sales processes or priorities, including changes in executive support for our partnership.

In addition, opportunity under management reflects our estimate for a forward twelve-month period and should not be used to estimate our opportunity for any particular quarter within that period.

If our security measures are breached or fail, resulting in unauthorized access to customer data, our solution may be perceived as insecure, the attractiveness of our solution to current or potential customers may be reduced and we may incur significant liabilities.

Our solution involves the storage and transmission of the proprietary information and protected data that we receive from our customers. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. If our security measures are breached or fail as a result of third-party action, employee negligence, error, malfeasance or otherwise, unauthorized access to customer or end customer data may occur. Improper activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our computer systems. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, and we may be unable to anticipate these techniques or implement adequate protective measures. Our security measures may not be effective in preventing these types of activities, and the security measures of our third-party data centers and service providers may not be adequate.

Our customer contracts generally provide that we will indemnify our customers for data privacy breaches. If such a breach occurs, we could face contractual damages, damages and fees arising from our indemnification obligations, penalties for violation of applicable laws or regulations, possible lawsuits by affected individuals and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed significantly and we could lose current or potential customers.

We may be liable to our customers or third parties if we make errors in providing our solution or fail to properly safeguard our customers' confidential information.

The solution we offer is complex, and we make errors from time to time. These may include human errors made in the course of managing the sales process for our customers as we interact with their end customers, or errors arising from our technology solution as it interacts with our customers’ systems and the disparate data contained on such systems. Errors may also arise from the launch of and migration of our offerings to Renew OnDemand. The costs incurred in correcting any material errors may be substantial. In addition, as part of our business, we collect, process and analyze confidential information provided by our customers and prospective customers. Although we take significant steps to safeguard the confidentiality of customer information, we could be subject to claims that we disclosed their information without appropriate authorization or used their information inappropriately. Any claims based on errors or unauthorized disclosure or use of information could subject us to exposure for damages, significant legal defense costs, adverse publicity and reputational harm, regardless of the merits or eventual outcome of such claims.

If close rates fall short of our estimates, our customer relationships will be at risk, our revenue will suffer and our ability to grow and achieve broader market acceptance of our solution could be harmed.

Given our pay-for-performance pricing model, our revenue is directly tied to close rates. Close rates represent the percentage of the actual opportunity delivered that we renew on behalf of our customers. If the close rate for a particular customer is lower than anticipated, then our revenue for that customer will also be lower than projected. If close rates fall short of expectations across a broad range of customers, or if they fall below expectations for a particularly large customer, then the impact on our revenue and our overall business will be significant. In the event close rates are lower than expected for a given customer, our margins will suffer because we will have already incurred a certain level of costs in both personnel and infrastructure to support the engagement. This risk is compounded by the fact that many of our customer relationships are terminable if we fail to meet certain specified sales targets over a sustained period of time. If actual close rates fall to a level at which our revenue and customer contracts are at risk, then our financial performance will decline and we will be severely compromised in our ability to retain and attract new customers. Increasing our customer base and achieving broader market acceptance of our solution

depends, to a large extent, on how effectively our solution increases service sales. As a result, poor performance with respect to our close rates, in addition to causing our revenue, margins and earnings to suffer, will likely damage our customer

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relationships and overall reputation, and prevent us from effectively developing and maintaining awareness of our brand or achieving widespread acceptance of our solution, in which case we could fail to grow our business and our revenue, margins and earnings would suffer.

If we are unable to compete effectively against current and future competitors, our business and operating results will be harmed.

The market for service revenue management is evolving. Historically, technology companies have managed their service renewals through internal personnel and relied upon technology ranging from Excel spreadsheets to internally-developed software to customized versions of traditional business intelligence tools and CRM or ERP software from vendors such as Oracle, SAP, salesforce.com and NetSuite. Some companies have made further investments in this area using firms such as Accenture and McKinsey for technology consulting and education services focused on service renewals. These internally-developed solutions represent the primary alternative to our offerings. We also face direct competition from smaller companies that offer specialized service revenue management solutions, typically providing technology for use by their customers’ internal sales personnel.

We believe the principal competitive factors in our markets include the following:

• service revenue industry expertise, best practices, and benchmarks;

• quality and reliability of software offerings;

• marketing resources and capabilities;

• performance-based pricing of solutions;

• ability to increase service revenue, renewal rates, and close rates;

• global capabilities;

• completeness of solution;

• ability to effectively represent customer brands to end customers and channel partners;

• size of upfront investment; and

• size and financial stability of operations.

We believe that more competitors will emerge. These competitors may have greater name recognition, longer operating histories, well-established relationships with customers in our markets and substantially greater financial, technical, personnel and other resources than we have. Potential competitors of any size may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer or end customer requirements. Even if our solution is more effective than competing solutions, potential customers might choose new entrants unless we can convince them of the advantages of our integrated solution. We expect competition and competitive pressure, from both new and existing competitors, to increase in the future.

If there is a widespread shift away from business customers purchasing maintenance and support service contracts, we could be adversely impacted if we are not able to adapt to new trends or expand our target markets.

As a result of our historical concentration in the software and hardware industries, a significant portion of our revenue comes from the sale of maintenance and support service contracts for the software and hardware products used by our customers’ end customers. Although we also sell other types of renewals, such as subscriptions to software-as-a-service offerings, those sales have to date constituted a relatively small portion of our revenue. The emergence of cloud computing and other alternative technology purchasing models, in which technology services are provided on a remote-access basis, may have a significant impact on the size of the market for traditional maintenance and support contracts. If these alternative models continue gaining traction and reduce the size of our traditional market, we will need to continue to adapt our solution to capitalize on these trends or our results of operations will suffer.

The loss of one or more of our key customers could slow our revenue growth or cause our revenue to decline.

A substantial portion of our revenue has to date come from a relatively small number of customers. During the three months ended June 30, 2013, our top ten customers accounted for 51% of our revenue with one customer representing over 10% of our revenue. A relatively small number of customers may continue to account for a significant portion of our revenue for the foreseeable future. The loss of any of our significant customers for any reason, including the failure to renew our contracts, a change of relationship with any of our key customers or their acquisition as discussed below, may cause a significant decrease in our revenue.

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Supporting our existing and growing customer base could strain our personnel resources and infrastructure, and if we cannot scale our operations and increase productivity, we may be unsuccessful in implementing our business plan.

Anticipated growth in our customer base will place a strain on our management, administrative, operational and financial infrastructure. We expect that additional investments in sales personnel, information technology, infrastructure and research and development spending will be required to:

• further develop and enhance Renew OnDemand and our other offerings;

• address the needs of our customers;

• scale our operations and increase productivity;

• develop new technology; and

• expand our markets and opportunity under management, including into new industry verticals and geographic areas.

Our success will depend in part upon our ability to manage our growth effectively. To do so, we must continue to increase the productivity of our existing employees and to hire, train and manage new employees as needed. To manage domestic and international growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting processes and procedures, and implement more extensive and integrated financial and business information systems. These additional investments will increase our operating costs, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. Moreover, if we fail to scale our operations successfully and increase productivity, our overall business will be at risk.

Consolidation in the technology sector is continuing at a rapid pace, which could harm our business in the event that our customers are acquired and their contracts are cancelled.

Consolidation among technology companies in our target market has been robust in recent years, and this trend poses a risk for us. Acquisitions of our customers could lead to cancellation of our contracts with those customers by the acquiring companies and could reduce the number of our existing and potential customers. For example, Oracle has acquired a number of our customers in recent years, including our then-largest customer, Sun Microsystems, in January 2010. Oracle has elected to terminate our service contracts with each customer because Oracle conducts its service revenue management internally. If mergers and acquisitions continue, we expect that some of the acquiring companies, and Oracle in particular, will terminate, renegotiate and/or elect not to renew our contracts with the companies they acquire, which would reduce our revenue.

We enter into long-term, commission-based contracts with our customers, and our failure to correctly price these contracts may negatively affect our profitability.

We enter into long-term contracts with our customers that are priced based on multiple factors determined in large part by the SPA we conduct for our customers. These factors include opportunity size, anticipated close rates and expected commission rates at various levels of sales performance. Some of these factors require forward-looking assumptions that may prove incorrect. If our assumptions are inaccurate, or if we otherwise fail to correctly price our customer contracts, particularly those with lengthy contract terms, then our revenue, profitability and overall business operations may suffer. Further, if we fail to anticipate any unexpected increase in our cost of providing services, including the costs for employees, office space or technology, we could be exposed to risks associated with cost overruns related to our required performance under our contracts, which could have a negative effect on our margins and earnings.

Many of our customer contracts allow termination for our failure to meet certain performance conditions.

Although most of our customer contracts are subject to multi-year terms, these agreements often have termination rights if we fail to meet specified sales targets. During the SPA and contract negotiation phase with a customer, we typically negotiate minimum performance levels for the engagement. If we fail to meet our required targets and our customers choose to exercise their termination rights, our revenue could decline. These termination rights may also create instability in our revenue forecasts and other forward-looking financial metrics.

Our business may be harmed if our customers rely upon our service revenue forecasts in their business and actual results are materially different.

The contracts that we enter into with our customers provide for sharing of information with respect to forecasts and plans for the renewal of maintenance, support and subscription agreements of our customers. Our customers may use such forecasted data for a variety of purposes related to their business. Our forecasts are based upon the data our customers provide to us, and are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond our control.

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In addition, these forecasted expectations are based upon historical trends and data that may not be true in subsequent periods. Any material inaccuracies related to these forecasts could lead to claims on the part of our customers related to the accuracy of the forecasted data we provide to them, or the appropriateness of our methodology. Any liability that we incur or any harm to our brand that we suffer because of inaccuracies in the forecasted data we provide to our customers could impact our ability to retain existing customers and harm our business.

Changing global economic conditions and large scale economic shifts may impact our business.

Our overall performance depends in part on worldwide economic conditions that impact the technology sector and other technology-enabled industries such as healthcare, life sciences and industrial systems. For example, the recent economic downturn resulted in many businesses deferring technology investments, including purchases of new software, hardware and other equipment, and purchases of additional or supplemental maintenance, support and subscription services. To a certain extent, these businesses also slowed the rate of renewals of maintenance, support and subscription services for their existing technology base. A future downturn could cause business customers to stop renewing their existing maintenance, support and subscription agreements or contracting for additional maintenance services as they look for ways to further cut expenses, in which case our business could suffer.

Conversely, a significant upturn in global economic conditions could cause business purchasers to purchase new hardware, software and other technology products, which we generally do not sell, instead of renewing or otherwise purchasing maintenance, support and subscription services for their existing products. A general shift toward new product sales could reduce our near term opportunities for these contracts, which could lead to a decline in our revenue.

Our inability to expand our target markets could adversely impact our business and operating results.

We derive substantially all of our revenue from customers in certain sectors in the technology and technology-enabled healthcare and life sciences industries, and an important part of our strategy is to expand our existing customer base and win new customers in these industries. In addition, because of the service revenue opportunities that we believe exist beyond these industries, we intend to target new customers in additional industry vertical markets, such as technology-enabled building services. In connection with the expansion of our target markets, we may not have familiarity with such additional industry verticals, and our execution of such expansion could face risks where our experience base is less developed within a particular new vertical. We may encounter customers in these previously untapped markets that have different pricing and other business sensitivities than we are used to managing. As a result of these and other factors, our efforts to expand our solution to additional industry vertical markets may not succeed, may divert management resources from our existing operations and may require us to commit significant financial resources to unproven parts of our business, all of which may harm our financial performance.

Our business and growth depend substantially on customers renewing their agreements with us and expanding their use of our solution for additional available markets. Any decline in our customer renewals or failure to expand their relationships with us could harm our future operating results.

In order for us to improve our operating results and grow, it is important that our customers renew their agreements with us when the initial contract term expires and that we expand our customer relationships to add new market opportunities and the related service revenue opportunity under management. Our customers may elect not to renew their contracts with us after their initial terms have expired, and we cannot assure you that our customers will renew service contracts with us at the same or higher level of service, if at all, or provide us with the opportunity to manage additional opportunity. Although our renewal rates have been historically higher than those achieved by our customers prior to their using our solution, some customers have elected not to renew their agreements with us. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our solution and results, our pricing, mergers and acquisitions affecting our customers or their end customers, the effects of economic conditions or reductions in our customers’ or their end customers’ spending levels. If our customers do not renew their agreements with us, renew on less favorable terms or fail to contract with us for additional service revenue management opportunities, our revenue may decline and our operating results may be adversely affected.

A substantial portion of our business consists of supporting our customers’ channel partners in the sale of service contracts. If those channel partners become unreceptive to our solution, our business could be harmed.

Many of our customers, including some of our largest customers, sell service contracts through their channel partners and engage our solution to help those channel partners become more effective at selling service contract renewals. These channel partners may have access to some of our cloud applications, such as our Channel Sales Cloud, in addition to other sales support services we provide. In this context, the ultimate buyers of the service contracts are end customers of those channel partners, who then receive the actual services from our customers. In the event our customers’ channel partners become unreceptive to our involvement in the renewals process, those channel partners could discourage our current or future customers from

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engaging our solution to support channel sales. This risk is compounded by the fact that large channel partners may have relationships with more than one of our customers or prospects, in which case the negative reaction of one or more of those

large channel partners could impact multiple customer relationships. Accordingly, with respect to those customers and prospective customers who sell service contracts through channel partners, any significant resistance to our solution by their channel partners could harm our ability to attract or retain customers, which would damage our overall business operations.

We face long sales cycles to secure new customer contracts, making it difficult to predict the timing of specific new customer relationships.

We face a variable selling cycle to secure new customer agreements, typically spanning a number of months and requiring our effort to obtain and analyze our prospect’s business through the SPA, for which we are not paid. We recently have also experienced a lengthening of our sales cycles reflecting the hiring of a number of new sales personnel in the past eighteen months who are new to selling our solution as well as slower decision making by a few end customers as well as other end customers considering renewals of large, multi-year contracts. This has adversely affected the conversion rates of new customer contracts. Moreover, even if we succeed in developing a relationship with a potential new customer, the scope of the potential subscription or service revenue management engagement frequently changes over the course of the business discussions and, for a variety of reasons, our sales discussions may fail to result in new customer acquisitions. Consequently, we have only a limited ability to predict the timing and size of specific new customer relationships.

If we experience significant fluctuations in our anticipated growth rate and fail to balance our expenses with our revenue forecasts, our results could be harmed.

Due to our evolving business model, the uncertain size of our markets and the unpredictability of future general economic and financial market conditions, we may not be able to accurately forecast our growth rate. We plan our expense levels and investments based on estimates of future sales performance for our customers with respect to their end customers, future revenue and future customer acquisition. If our assumptions prove incorrect, we may not be able to adjust our spending quickly enough to offset the resulting decline in growth and revenue. Consequently, we expect that our gross margins, operating margins and cash flows may fluctuate significantly on a quarterly basis.

If we cannot efficiently implement our offering for customers, we may be delayed in generating revenue, fail to generate revenue and/or incur significant costs.

In general, our customer engagements are complex and may require lengthy and significant work to implement our offerings. We also have limited experience implementing our Renew OnDemand platform. As a result, we generally incur sales and marketing expenses related to the commissions owed to our sales representatives and make upfront investments in technology and personnel to support the engagements one to three months before we begin selling end customer contracts. Each customer’s situation may be different, and unanticipated difficulties and delays may arise as a result of our failure, or that of our customer, to meet respective implementation responsibilities. If the customer implementation process is not executed successfully or if execution is delayed, we could incur significant costs without yet generating revenue, and our relationships with some of our customers may be adversely impacted.

Because competition for our target employees is intense, we may be unable to attract and retain the highly skilled employees we need to support our planned growth.

To continue to execute on our growth plan, we must attract and retain highly qualified sales representatives, engineers and other key employees in the markets in which we have operations. Competition for these personnel is intense, especially for highly educated, qualified sales representatives. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled key employees with appropriate qualifications. If we fail to attract new sales representatives, engineers and other key employees, or fail to retain and motivate our most successful employees, our business and future growth prospects could be harmed.

The length of time it takes our newly-hired sales representatives to become productive could adversely impact our success rate, the execution of our overall business plan and our costs.

It can take twelve months or longer before our internal sales representatives are fully trained and productive in selling our solution to prospective customers. This long ramp period presents a number of operational challenges as the cost of recruiting, hiring and carrying new sales representatives cannot be offset by the revenue such new sales representatives produce until after they complete their long ramp periods. Further, given the length of the ramp period, we often cannot determine if a sales representative will succeed until he or she has been employed for a year or more. If we cannot reliably develop our sales representatives to a productive level, or if we lose productive representatives in whom we have heavily invested, our future growth rates and revenue will suffer.

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If we lose our top executives, or if we are unable to attract, hire, integrate and retain key personnel and other necessary employees, our business will be harmed.

Our future success depends on the continued contributions of our executives, each of whom may be difficult to replace. Our future success also depends in part on our ability to attract, hire, integrate and retain qualified service sales personnel, sales representatives and management-level employees to oversee such sales forces in addition to marketing, research and development and general and administrative personnel to support our global operation. In particular, Michael Smerklo, our chairman of the board of directors and chief executive officer, is critical to the management of our business and operations and the development of our strategic direction. The loss of Mr. Smerklo’s services or those of our other executives, or our inability to continue to attract and retain high-quality talent, could harm our business.

We depend on revenue from sources outside the United States, and our international business operations and expansion plans are subject to risks related to international operations, and may not increase our revenue growth or enhance our business operations.

For the three months ended June 30, 2013, approximately 37% of our revenue was generated from sales centers located outside of the United States. As a result of our continued focus on international markets, we expect that revenue derived from international sources will continue to represent a significant portion of our total revenue.

A portion of the sales commissions earned from our international customers is paid in foreign currencies. As a result, fluctuations in the value of these foreign currencies may make our solution more expensive or cause resulting fluctuations in cost for international customers, which could harm our business. We currently do not undertake hedging activities to manage these currency fluctuations. In addition, if the effective price of the contracts we sell to end customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for such contracts could fall, which in turn would reduce our revenue.

Our growth strategy includes further expansion into international markets. Our international expansion may require significant additional financial resources and management attention, and could negatively affect our financial condition, cash flows and operating results. In addition, we may be exposed to associated risks and challenges, including:

• the need to localize and adapt our solution for specific countries, including translation into foreign languages and associated expenses;

• difficulties in staffing and managing foreign operations;

• different pricing environments, longer sales cycles and longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

• new and different sources of competition;

• weaker protection for our intellectual property than in the United States and practical difficulties in enforcing our rights abroad;

• laws and business practices favoring local competitors;

• compliance obligations related to multiple, conflicting and changing foreign governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;

• increased financial accounting and reporting burdens and complexities;

• restrictions on the transfer of funds;

• adverse tax consequences; and

• unstable regional economic and political conditions.

We cannot assure you we will succeed in creating additional international demand for our solution or that we will be able to effectively sell service agreements in the international markets we enter.

We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we incur significant legal, accounting and other expenses, and greater expenditures may be necessary in the future with the advent of new laws, regulations and stock exchange listing requirements pertaining to public companies. The Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010, as well as rules subsequently implemented by the Securities and Exchange Commission and The NASDAQ Stock Market LLC, impose various requirements on public companies, including establishing effective internal controls and certain corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives, and additional laws and regulations may

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divert further management resources. Moreover, if we are not able to meet new compliance requirements in a timely manner, the market price of our stock could decline, and we could be subject to investigations and other actions by The NASDAQ Stock Market LLC, the Securities and Exchange Commission, or other regulatory authorities, which would require additional financial and management resources.

While we believe we currently have adequate internal control over financial reporting, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Under Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management on our internal control over financial reporting. The report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management.

We monitor and assess our internal control over financial reporting, and if our management identifies one or more material weaknesses in our internal control over financial reporting and such weakness remains uncorrected at year-end, we will be unable to assert such internal control is effective at such time. If we are unable to assert that our internal control over financial reporting is effective at year-end (or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls or concludes that we have a material weakness in our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would likely have an adverse effect on our business and stock price.

Changes in the U.S. and foreign legal and regulatory environment that affect our operations, including those relating to privacy, data security and cross-border data flows, could pose a significant risk to us by disrupting our business and increasing our expenses.

We are subject to a wide variety of laws and regulations in the United States and the other jurisdictions in which we operate, and changes in the level of government regulation of our business have the potential to materially alter our business practices with resultant increases in costs and decreases in profitability. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new regulations or changes in the interpretation of existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes have both prospective and retroactive effect, which is particularly true when a change is made through reinterpretation of laws or regulations that have been in effect for some time.

Privacy and data security are rapidly evolving areas of regulation, and additional regulation in those areas, some of it potentially difficult and costly for us to accommodate, is frequently proposed and occasionally adopted. Laws in many countries and jurisdictions, particularly in the European Union and Canada, govern the requirements related to how we store, transfer or otherwise process the private data provided to us by our customers. In addition, the centralized nature of our information systems at the data and operations centers that we use requires the routine flow of data relating to our customers and their respective end customers across national borders, both with respect to the jurisdictions within which we have operations and the jurisdictions in which we provide services to our customers. If this flow of data becomes subject to new or different restrictions, our ability to serve our customers and their respective customers could be seriously impaired for an extended period of time. For example, we participate in the U.S. Department of Commerce Safe Harbor Framework to govern our treatment of data and data flow with respect to our customers and their respective customers across various jurisdictions. We also have entered into various model contracts and related contractual provisions to enable these data flows. For any jurisdictions in which these measures are not recognized or otherwise not compliant with the laws of the countries in which we process data, or where more stringent data privacy laws are enacted irrespective of international treaty arrangements or other existing compliance mechanisms, we could face increased compliance expenses and face penalties for violating such laws or be excluded from those markets altogether, in which case our operations could be materially damaged.

If we do not adequately protect our intellectual property rights, our competitive position and our business may suffer.

We rely upon a combination of patent, trademark, copyright and trade secret law and contractual terms to protect our intellectual property rights, all of which provide only limited protection. Our success depends, in part, upon our ability to establish, protect and enforce our intellectual property and other proprietary rights. If we fail to protect or effectively enforce our intellectual property rights, others may be able to compete against us using intellectual property that is the same as or similar to our own. In addition, we cannot assure you that our intellectual property rights are sufficient to provide us with a competitive advantage against others who offer services similar to ours.

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While we have filed patent applications to protect our intellectual property, we cannot assure you that any patents will issue or that any issued patents arising from our applications will provide the protection we seek, or that any future patents issued to us will not be challenged, invalidated or circumvented. Also, we cannot assure you that we will obtain any copyright or trademark registrations from our pending or future applications or that any of our trademarks will be enforceable or provide adequate protection of our proprietary rights. We also rely in some circumstances on trade secrets to protect our technology. Trade secrets may lose their value if not properly protected. We endeavor to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. The steps we have taken, however, may not prevent unauthorized use of our technology, and adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and proprietary technology. However, trade secret protection does not prevent others from reverse engineering or independently developing similar technologies. In addition, reverse engineering, unauthorized copying or other misappropriation of our trade secrets could enable third parties to benefit from our technology without paying for it.

Accordingly, despite our efforts, we may be unable to prevent third parties from infringing or misappropriating our intellectual property and using our technology for their competitive advantage. Any such infringement or misappropriation could have a material adverse effect on our business, results of operations and financial condition. Monitoring infringement of our intellectual property rights can be difficult and costly, and enforcement of our intellectual property rights may require us to bring legal actions against infringers. Infringement actions are inherently uncertain and therefore may not be successful, even when claims are meritorious. Even if such actions are successful, they may require a substantial amount of resources and divert our management’s attention.

Claims by others that we infringe or violate their intellectual property could force us to incur significant costs and require us to change the way we conduct our business.

Numerous technology companies including potential competitors protect their intellectual property rights by means such as patents, trade secrets, copyrights and trademarks. We have not conducted an independent review of patents issued to third parties. Additionally, because patent applications in the United States and many other jurisdictions are kept confidential for some period of time before they are published, we may be unaware of pending patent applications that relate to our proprietary technology. From time to time we may receive letters from other parties alleging, or inquiring about, possible breaches of their intellectual property rights.

Any party asserting that we infringe its proprietary rights would force us to defend ourselves, and possibly our customers, against the alleged infringement. The technology industry is characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Moreover, the risk of such a lawsuit will likely increase as we become larger, the scope of our solution and technology expands and the number of competitors in our market increases. Any such claims or litigation could:

• be time-consuming and expensive to defend, and deplete our financial resources, whether meritorious or not;

• require us to stop providing the services that use the technology that infringes the other party’s intellectual property;

• divert the attention of our technical and managerial resources away from our business;

• require us to enter into royalty or licensing agreements with third parties, which may not be available on terms that we deem acceptable, if at all;

• prevent us from operating all or a portion of our business or force us to redesign our technology, which could be difficult and expensive and may make the performance or value of our solution less attractive;

• subject us to significant liability for damages or result in significant settlement payments; or

• require us to indemnify our customers as we are required by contract to indemnify some of our customers for certain claims based upon the infringement or alleged infringement of any third party’s intellectual property rights resulting from our customers’ use of our intellectual property.

During the course of any intellectual property litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could harm us. In addition, any uncertainties resulting from the initiation and continuation of any litigation could significantly limit our ability to continue our operations and could harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our operating results and financial condition.

In addition, we may incorporate open source software into our technology solution. The terms of many open source licenses have not been interpreted by United States or foreign courts, and there is a risk that such licenses could be construed in

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a manner that imposes unanticipated conditions or restrictions on our commercialization of any of our solutions that may include open source software. As a result, we will be required to analyze and monitor our use of open source software closely. As a result of the use of open source software, we could be required to seek licenses from third parties in order to develop such future products, re-engineer our products, discontinue sales of our solutions or release our software code under the terms of an open source license to the public. Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on any use of such open source software, as more generally discussed with respect to general intellectual property claims.

Various risks could affect our worldwide operations, including numerous events outside of our control, exposing us to significant costs that could adversely affect our operations and customer confidence.

We conduct operations throughout the world, including our headquarters in the United States and operations in Ireland, Malaysia, Singapore and the United Kingdom. Such worldwide operations expose us to potential operational disruptions and costs as a result of a wide variety of events, including local inflation or economic downturn, currency exchange fluctuations, political turmoil, labor issues, terrorism, natural disasters and pandemics. Any such disruptions or costs could have a negative effect on our ability to provide our solution or meet our contractual obligations, the cost of our solution, customer satisfaction, our ability to attract or maintain customers, and, ultimately, our profits.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Such events could make it difficult or impossible for us to deliver our solution to our customers, and could decrease demand for our solution. The majority of our research and development activities, corporate headquarters, information technology systems and other critical business operations are located near major seismic faults in the San Francisco Bay Area. Because we may not have insurance coverage that would cover quake-related losses, and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected in the event of a major earthquake or catastrophic event.

Terrorist attacks and other acts of violence or war may adversely affect worldwide financial markets and could potentially lead to economic recession, which could adversely affect our business, results of operations, financial condition and cash flows. These events could adversely affect our customers’ levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles.

The technology we currently use may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.

The technology we currently use, which includes our Renew OnDemand platform, may contain or develop unexpected defects or errors. There can be no assurance that performance problems or defects in our technology will not arise in the future. Errors may result from receipt, entry or interpretation of customer or end customer information or from the interface of our technology with legacy systems and data that are outside of our control. Despite testing, defects or errors may arise in our solution. Any defects and errors that we discover in our technology and any failure by us to identify and effectively address them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation, and increased costs. Defects or errors in our technology may discourage existing or potential customers from contracting with us. Correction of defects or errors could prove impossible or impracticable. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.

Disruptions in service or damage to the data center that hosts our data and our locations could adversely affect our business.

Our operations depend on our ability to maintain and protect our data servers and cloud applications, which are located in data centers operated for us by third parties. We cannot control or assure the continued or uninterrupted availability of these third-party data centers. In addition, our information technologies and systems, as well as our data center, are vulnerable to damage or interruption from various causes, including natural disasters, war and acts of terrorism and power losses, computer systems failures, Internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. Although we conduct business continuity planning and maintain certain insurance for certain events, the situations for which we plan, and the amount of insurance coverage we maintain, may prove inadequate in any particular case. In addition, the occurrence of any of these events could result in interruptions, delays or cessations in the delivery of the solutions we offer to our customers. Any of these events could impair or prohibit our ability to provide our solution, reduce the attractiveness of our solution to current or potential customers and adversely impact our financial condition and results of operations.

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In addition, despite the implementation of security measures, our infrastructure, data centers, operations and other centers or systems that we interface with, including the Internet and related systems, may be vulnerable to physical intrusions, hackers, improper employee or contractor access, computer viruses, programming errors, denial-of-service attacks or other attacks by third parties.

Any failure or interruptions in the Internet infrastructure, bandwidth providers, data center providers, other third parties or our own systems for providing our solution to customers could negatively impact our business.

Our ability to deliver our solution is dependent on the development and maintenance of the infrastructure of the Internet and other telecommunications services by third parties. Such services include maintenance of a reliable network backbone with the necessary speed, data capacity and security for providing reliable Internet access and services and reliable telecommunications systems that connect our global operations. While our solution is designed to operate without interruption, we have experienced and expect that we will in the future experience interruptions and delays in services and availability from time to time. We rely on internal systems as well as third-party vendors, including data center, bandwidth, and telecommunications equipment providers, to provide our solution. We do not maintain redundant systems or facilities for some of these services. In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could negatively impact our relationship with our customers.

Additional government regulations may reduce the size of the market for our solution, harm demand for our solution and increase our costs of doing business.

Any changes in government regulations that impact our customers or their end customers could have a harmful effect on our business by reducing the size of our addressable market or otherwise increasing our costs. For example, with respect to our technology-enabled healthcare and life sciences customers, any change in U.S. Food and Drug Administration or foreign equivalent regulation of, or denial, withholding or withdrawal of approval of, our customers’ products could lead to a lack of demand for service revenue management with respect to such products. Other changes in government regulations, in areas such as privacy, export compliance or anti-bribery statutes, such as the U.S. Foreign Corrupt Practices Act, could require us to implement changes in our services or operations that increase our cost of doing business and thereby hurt our financial performance.

The future success of our business depends upon the continued use of the Internet as a primary medium for commerce, communication and business applications. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting data privacy and the use of the Internet as a commercial medium. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the Internet. These laws or charges could limit the growth of Internet-related commerce or communications generally, result in a decline in the use of the Internet and the viability of Internet-based applications such as ours and reduce the demand for our solution.

We operate and offer our services in many jurisdictions and, therefore, may be subject to state, local and foreign taxes that could harm our business.

We operate service sales centers in multiple locations. Some of the jurisdictions in which we operate, such as Ireland, give us the benefit of either relatively low tax rates, tax holidays or government grants, in each case, that are dependent on how we operate or how many jobs we create and employees we retain. We plan on utilizing such tax incentives in the future as opportunities are made available to us. Any failure on our part to operate in conformity with applicable requirements to remain qualified for any such tax incentives or grants may result in an increase in our taxes. In addition, jurisdictions may choose to increase rates at any time due to economic or other factors, such as the current economic situation in Ireland. Any such rate increases may harm our results of operations.

In addition, we may lose sales or incur significant costs should various tax jurisdictions impose taxes on either a broader range of services or services that we have performed in the past. We may be subject to audits of the taxing authorities in the jurisdictions where we do business that would require us to incur costs in responding to such audits. Imposition of such taxes on our services could result in substantial unplanned costs, would effectively increase the cost of such services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

If we acquire companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the value of our common stock.

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As part of our business strategy, we may acquire, enter into joint ventures with, or make investments in companies, services and technologies that we believe to be complementary. Acquisitions and investments involve numerous risks, including:

• difficulties in identifying and acquiring technologies or businesses that will help our business;

• difficulties in integrating operations, technologies, services and personnel;

• diversion of financial and managerial resources from existing operations;

• the risk of entering new markets in which we have little to no experience;

• risks related to the assumption of known and unknown liabilities;

• potential litigation by third parties, such as claims related to intellectual property or other assets acquired or liabilities assumed;

• the risk of write-offs of goodwill and other intangible assets;

• delays in customer engagements due to uncertainty and the inability to maintain relationships with customers of the acquired businesses;

• inability to generate sufficient revenue to offset acquisition or investment costs;

• incurrence of acquisition-related costs;

• harm to our existing business relationships with business partners and customers as a result of the acquisition;

• the key personnel of the acquired entity or business may decide not to work for us or may not perform according to our expectations; and

• use of substantial portions of our available cash or dilutive issuances of equity securities or the incurrence of debt to consummate the acquisition.

As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, we may incur costs in excess of what we anticipate and management resources and attention may be diverted from other necessary or valuable activities.

We may be exposed to various risks related to legal proceedings or claims that could adversely affect our operating results.

From time to time, we may be party to lawsuits in the normal course of its business. Litigation in general can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against us, or legal actions initiated by us, can often be expensive and time-consuming. Unfavorable outcomes from any claims and/or lawsuits could adversely affect our business, results of operations, or financial condition, and we could incur substantial monetary liability and/or be required to change its business practices.

Risks Relating to Owning Our Common Stock

Our share price has been volatile and is likely to be volatile in the future.

The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors. Further, our common stock has a limited trading history. In addition to the risks described in this section, factors that may cause the market price of our common stock to fluctuate include:

• fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us as discussed in more detail elsewhere in these “Risk Factors;”

• failure to achieve our revenue or earnings expectations, or those of investors or analysts;

• changes in estimates of our financial results or recommendations by securities analysts;

• recruitment or departure of key personnel;

• investors’ general perception of us;

• volatility inherent in prices of technology company stocks;

• adverse publicity;

• the volume of trading in our common stock, including sales upon exercise of outstanding options;

• sales of shares of our common stock by existing stockholders;

• regulatory developments in our target markets affecting us, our customers or our competitors;

• terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations; and

• actual or perceived changes in general economic, industry and market conditions.

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In addition, if the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations.

Some companies that have had volatile market prices for their securities have had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it would likely result in substantial costs and divert management’s attention and resources. This could have a material adverse effect on our business, operating results and financial condition.

Our actual results may differ significantly from any guidance that we may issue in the future.

From time to time, we may release financial guidance or other forward-looking statements in our earnings releases, earnings conference calls or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. If given, this guidance will be based on forecasts prepared by our management. These forecasts are not prepared with a view toward compliance with published accounting guidelines, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines the forecasts and, accordingly, no such person expresses any opinion or any other form of assurance with respect to such forecasts. The principal reason that we may release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such third persons. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of any future guidance furnished by us may not materialize or may vary significantly from actual future results.

Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

Our directors and executive officers and their affiliates beneficially own, in the aggregate, over 10% of our outstanding common stock as of June 30, 2013. As a result, these stockholders will have substantial influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit the ability of other stockholders to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our certificate of incorporation, by laws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

• authorizing blank check preferred stock, which could be issued by our board of directors without stockholder approval, with voting, liquidation, dividend and other rights superior to our common stock;

• classifying our board of directors, staggered into three classes, only one of which is elected at each annual meeting;

• limiting the liability of, and providing indemnification to, our directors and officers;

• limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

• controlling the procedures for the conduct and scheduling of stockholder meetings;

• providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;

• limiting the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of directors then in office; and

• providing that directors may be removed by stockholders only for cause.

These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which limits the ability of stockholders owning in excess of 15% of our outstanding common stock to merge or combine with us.

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Any provision of our certificate of incorporation, by laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If any of these analysts cease coverage of us, the trading price and trading volume of our stock could be negatively impacted. If analysts downgrade our stock or publish unfavorable research about our business, our stock price would also likely decline.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Default Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

None

Item 6.Exhibits

See the Exhibit Index, which follows the signature page to this report.

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SIGNATURES

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

		SERVICESOURCE INTERNATIONAL, INC. (Registrant)
Date:	August 5, 2013	By:	/s/ ASHLEY F. JOHNSON
			Ashley F. Johnson
			(Principal Financial Officer and Duly Authorized Officer)

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INDEX TO EXHIBITS

Exhibit Number	Description of Document
3.1(1)	Certificate of Incorporation of the Company filed March 24, 2011.
3.2(1)	Bylaws of the Company dated March 24, 2011.
10.1	Amendment 1 to Credit Agreement dated as of June 30, 2013 between the Company and JPMorgan Chase Bank, National Association.
10.2+	Employment and Confidential Employment Agreement dated as of May 1, 2013, between the Company and Richard Campione.
10.3+	Form of Amended and Restated Director and Executive Indemnification Agreement
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data files (XBRL) pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, (ii) the Condensed Consolidated Statement of Operations for the three months and six months ended June 30, 2013 and 2012, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2013 and 2012, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 and (v) the Notes to Condensed Consolidated Financial Statements. **

(1) Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

+Indicates a management contract or compensation plan.

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 1 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”), entered into as of June 30, 2013, is entered into by and between ServiceSource International, Inc., a Delaware corporation (the “Borrower”), and JPMorgan Chase Bank, N.A., as Lender (the “Lender”).

WITNESSETH:

WHEREAS, the Borrower and Lender are parties to that certain Credit Agreement dated as of July 5, 2012, as modified pursuant to that certain Letter Agreement dated as of June 18, 2013 by and between the Borrower and the Lender (as modified, the “Credit Agreement”), pursuant to which Lender has agreed to make certain loans and to extend credit to the Borrower upon the terms and subject to the conditions set forth therein; and

WHEREAS, the parties to the Credit Agreement desire to amend the Credit Agreement to reduce the unused fee with respect to the Revolving Commitment as set forth below.

NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto hereby agree as follows:

1.Definitions. All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement.

2.Amendment to Credit Agreement. On the Amendment No. 1 Effective Date, the Credit Agreement shall be amended as follows:

(a) All references to the Credit Agreement in the Credit Agreement and in any of the Loan Documents shall refer to the Credit Agreement as amended hereby.

(b) The following definitions shall be added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order:

“Amendment No. 1” means that certain Amendment No. 1 to Credit Agreement dated June 30, 2013 by and between the Borrower and Lender.

“Amendment No. 1 Effective Date” shall have the meaning set forth in Section 3 of Amendment No. 1.

(c) Section 2.04 of the Credit Agreement (Unused Fee) shall be amended by replacing the reference to “0.45%” with “0.30%”.

3.Conditions: Notwithstanding the foregoing, this Amendment shall not become effective unless and until such date (the “Amendment No. 1 Effective Date”) as the following conditions are satisfied:

(a) The Lender shall have received a fully-executed copy of this Amendment;

(b) The Lender shall have received a fully-executed copy of the Consent and Acknowledgement of Guarantor, in the form attached to this Amendment; and

(c) The Lender shall have received such other documents as the Lender or its counsel may reasonably request.

4.Representations and Warranties. Borrower repeats and reaffirms the representations and warranties set forth in Article V of the Credit Agreement, except to the extent that such representations and warranties relate solely to an earlier date. Borrower also represents and warrants that the execution,

delivery and performance of this Amendment, and the documents required herein, are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the shareholders of Borrower; (ii) violate any provision of the articles of incorporation or by-laws of Borrower or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower or any subsidiary; (iii) require the consent or approval of, or filing a registration with, any governmental body, agency or authority; or (iv) result in any breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of Borrower or any subsidiary pursuant to, any indenture or other agreement or instrument under which Borrower or any subsidiary is a party or by which it or its properties may be bound or affected. This Amendment constitutes legal, valid and binding obligations of Borrower enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally.

5.Obligations Enforceable, Etc. Borrower acknowledges and agrees that its obligations under the Credit Agreement are not subject to any offset, defense or counterclaim assertable by Borrower and that the Credit Agreement and the Loan Documents are valid, binding and fully enforceable according to their respective terms. Except as expressly provided above, the Credit Agreement and the Loan Documents shall remain in full force and effect, and this Amendment shall not release, discharge or satisfy any present or future debts, obligations or liabilities to the Lender of Borrower or of any debtor, guarantor or other person or entity liable for payment or performance of any of such debts, obligations or liabilities of Borrower, or any security interest, lien or other collateral or security for any of such debts, obligations or liabilities of Borrower or such debtors, guarantors, or other persons or entities, or waive any default, and the Lender expressly reserves all of its rights and remedies with respect to Borrower and all such debtors, guarantors or other persons or entities, and all such security interests, liens and other collateral and security. This is an amendment and not a novation. Without limiting the generality of the foregoing, all present and future debts, obligations and liabilities of Borrower under the Credit Agreement, as amended, are and shall continue to be secured by the Pledge and Security Agreement and the Intellectual Property Security Agreement given by the Borrower, and shall continue to be guaranteed by the Guaranty (which Guaranty is secured by the Pledge and Security Agreement given by the Guarantor).

6.Fees and Expenses. As contemplated by Section 9.01(a) of the Credit Agreement, Borrower shall be responsible for the payment of all fees and out-of-pocket disbursements incurred by the Lender in connection with the preparation, execution and delivery of this Amendment. Borrower further acknowledges and agrees that, pursuant to and on the terms set forth in such Section 9.01(a), Borrower is and shall be responsible for the payment of other fees, expenses, costs and charges arising under or relating to the Loan Agreement, as amended hereby, and the Loan Documents, as set forth in such Section 9.01(a).

7.Entire Agreement. This Amendment and the other documents referred to herein contain the entire agreement between the Borrower and the Lender with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, undertaking, promise or condition concerning the subject matter hereof shall be binding upon the Lender unless clearly expressed in this Amendment or in the other documents referred to herein.

8.Miscellaneous. The provisions of this Amendment shall inure to the benefit of and be binding upon any successor to any of the parties hereto. All agreements, representations and warranties made herein shall survive the execution of this Amendment and the making of the loans under the Credit Agreement, as so amended. This Amendment shall be governed by and construed in accordance with the internal laws of the State of California. This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment is solely for the benefit of the parties hereto and their permitted successors and assigns. No other person or entity shall have any rights under, or because of the existence of, this Amendment.

[Signature Pages Follow]

4818-5452-8020.1

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

ServiceSource International, Inc.

By: /s/ASHLEY F. JOHNSON                    

Name: ASHLEY F. JOHNSON                     Title: CFO    

[Signature Page to Amendment No. 1 to Credit Agreement]

4818-5452-8020.1

JPMORGAN CHASE BANK, N.A.

By: /s/ JEFFREY A. DEROSA

Name: JEFFREY A. DEROSA    

Title: SVP

[Signature Page to Amendment No. 1 to Credit Agreement]

Consent and Acknowledgment of Guarantor

The undersigned Guarantor hereby consents to the foregoing Amendment No. 1 to Credit Agreement, and agrees that its Guaranty dated as of July 5, 2012, in favor of the Lender, and all collateral and security therefor, shall remain in full force and effect notwithstanding the amendments made above.

Dated: June 30, 2013.

ServiceSource Delaware, Inc.

/S/ ASHLEY F. JOHNSON

By: ASHLEY F. JOHNSON

Title: CFO

EX-10.2

Exhibit 10.2+

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of May 1, 2013 (the “Effective Date”) by and between ServiceSource International, Inc. (“ServiceSource”) and Richard Campione (“Employee”).

Recitals

WHEREAS, ServiceSource and Employee desire to enter into this Agreement in connection with Employee's employment as President, Cloud & Data Services Business of ServiceSource.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements of the parties contained herein, the parties acknowledge and agree as follows:

1.EMPLOYMENT TERMS AND CONDITIONS. ServiceSource hereby employs Employee as ServiceSource's President, Cloud & Data Services Business, and Employee hereby accepts such employment with ServiceSource upon all of the terms and conditions described in this Employment Agreement (this “Agreement”), effective as of May 1, 2013 (the “Commencement Date”).

2.DUTIES.

(a)Responsibilities. Employee's position is President, Cloud & Data Services Business, reporting to ServiceSource's Chairman and Chief Executive Officer. Employee shall be responsible for and expected to perform all duties and tasks as directed by ServiceSource.

(b)Loyal and Full Time Performance of Duties. While employed by ServiceSource, Employee shall not directly or indirectly, engage in any Competitive Activity. For the purpose of this Agreement, “Competitive Activity” is any activity which is the same as or competitive with any activity engaged in by ServiceSource, during Employee's employment by ServiceSource. Competitive Activities may include, without limitation, the provision of (a) outsourced sales, technology and/or marketing services, or (b) consulting services for a client with respect to the sales and marketing of services agreements to end users where such clients compete with ServiceSource and/or its customers.

(c)ServiceSource Policies. Employee agrees to abide by ServiceSource's rules, regulations, policies and practices, written and unwritten, as they may from time to time be adopted or modified by ServiceSource at its sole discretion. ServiceSource's written rules, policies, practices and procedures shall be binding on Employee unless superseded by or in conflict with this Agreement.

3.EMPLOYMENT AT-WILL. Employee and ServiceSource acknowledge and agree that during Employee's employment with ServiceSource the parties intend to strictly maintain an at-will employment relationship. This means that at any time during the course of Employee's employment with ServiceSource, Employee is entitled to resign with or without cause and with or without advance notice. Similarly, ServiceSource specifically reserves the same right to terminate Employee's employment at any time with or without cause and with or without advance notice. Nothing in this Agreement or the relationship between the parties now or in the future may be construed or interpreted to create an employment relationship for a specific length of time or a right to continued employment. Employee and ServiceSource understand

and agree that only ServiceSource's Chief Executive Officer possesses the authority to alter the at-will nature of Employee's employment status, and that any such change may be made only by an express written employment contract signed by ServiceSource's Chief Executive Officer. No implied contract concerning any employment-related decision or term or condition of employment can be established by any other statement, conduct, policy or practice.

4.CASH COMPENSATION.

(a)Base Salary and Target Bonus. In consideration for the services and covenants described in this Agreement, ServiceSource agrees to pay Employee an annual base salary of four hundred thousand dollars ($400,000), paid on ServiceSource's normal payroll dates, subject to all applicable withholdings. In addition, Employee will be eligible for a potential annual target bonus amount of up to two hundred thousand dollars ($200,000), prorated to May 1^st for the 2013 fiscal year. The bonus is discretionary, not guaranteed, and is also subject to applicable performance requirements as determined by the Board of Directors of ServiceSource (the “Board of Directors”) in its sole discretion. Except as otherwise provided in this Agreement, Employee must be employed as of the date of the scheduled bonus payment in order to be eligible for any form of bonus payment. In no event shall any such bonus be paid after the later of (i) the fifteenth (15th) day of the third (3rd) month following the close of ServiceSource's fiscal year in which any such bonus is earned or (ii) March 15 following the calendar year in which any such bonus is earned

5.EQUITY COMPENSATION. Employee will be eligible to participate in the ServiceSource International, Inc. 2011 Equity Incentive Plan (the “Equity Incentive Plan”) and the ServiceSource International, Inc. 2011 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), subject to the requirements of the applicable plan. Subject to (i) approval by the Board of Directors (or its Compensation Committee), (ii) the terms of the Equity Incentive Plan, and (iii) the terms of the respective equity compensation award agreements under the Plan, the Company will recommend to the Board of Directors of ServiceSource (or its Compensation Committee) that Employee be granted the equity compensation described under subsections (a) and (b) of this Section 5, in addition to Employee's cash compensation, effective upon the action of the Board of Directors (or Compensation Committee) approving the equity compensation grant (or such later date as the Board of Director or Compensation Committee may determine). The grant date of the equity compensation as determined above is herein referred to as the “Grant Date.”

(a)Stock Option Grant.The Company will recommend to the Board of Directors (or its Compensation Committee) that Employee be granted a nonqualified stock option to purchase up to two hundred thousand (200,000) shares of ServiceSource's common stock (“Shares”) under the Equity Incentive Plan (the “Option”), at an exercise price per share equal to the fair market value on the Grant Date of a single Share as determined under the Equity Incentive Plan. The Option will be scheduled to vest as follows: (i) twenty five percent (25%) of the Shares underlying the Option shall vest on December 31, 2013 and (ii) the remaining seventy five percent (75%) of the Shares underlying the Option shall vest monthly on a pro rata basis, on the last day of each calendar month, over the following thirty six (36) months, so as to be 100% vested on December 31, 2016. In all cases, vesting shall be subject to Employee remaining as a Service Provider (as such term is defined in the Equity Incentive Plan) through each vesting date, subject to any acceleration of vesting as provided in this Agreement. Note that the above grant and its terms remain subject to approval by the Board of Directors (or the Compensation Committee), and to the terms and conditions of the Equity Incentive Plan and a related stock option agreement, and that any granted shares will be subject to all applicable state and federal tax and securities laws.

(b)Restricted Stock Units Grant. The Company will recommend to the Board of Directors of ServiceSource (or its Compensation Committee) that Employee be granted two hundred thousand

(200,000) restricted stock units (“RSUs”) under the Equity Incentive Plan. The proposed RSUs will be scheduled to vest and be payable as follows: (i) twenty-five percent (25%) of Employee's RSUs will vest on December 31, 2013 and (ii) the remaining RSUs will vest and be payable in three equal installments on each of December 31, 2014, December 31, 2015 and December 31, 2016 so as to be fully vested on December 31, 2016. In all cases, vesting shall be subject to Employee remaining as a Service Provider (as such term is defined in the Equity Incentive Plan) through each vesting date, subject to any acceleration of vesting as provided in this Agreement. Note that the above grant and its terms remain subject to approval by the Board of Directors (or the Compensation Committee), and to the terms and conditions of the Equity Incentive Plan and a related RSU agreement, and that any granted shares will be subject to all applicable state and federal tax and securities laws.

(c)Employee Stock Purchase Plan. Subject to the terms and conditions of the Employee Stock Purchase Plan as now or hereafter in effect as determined by the Board of Directors (or Compensation Committee), Employee will be eligible to participate in the Employee Stock Purchase Plan while he meets the eligibility requirements under the Employee Stock Purchase Plan. Note that any purchase rights or purchased shares under the Employee Stock Purchase Plan will be subject to all applicable state and federal tax and securities laws and the employment policies of ServiceSource.

6.BENEFITS. As a full-time employee, Employee shall be entitled to all of the benefits provided to ServiceSource executive employees, in accordance with any benefit plan or policy adopted by ServiceSource from time to time during the existence of this Agreement. Employee's rights and those of Employee's dependents under any such benefit plan or policy shall be governed solely by the terms of such plan or policy. ServiceSource reserves the right to cancel or change the benefit plans and policies it offers to its employees at any time. ServiceSource reserves to itself or its designated administrators exclusive authority and discretion to determine all issues of eligibility, interpretation and administration of each such benefit plan or policy.

7.PROPRIETARY AND CONFIDENTIAL INFORMATION (INCLUDING TRADE SECRETS). Employee acknowledges that his employment with ServiceSource will allow him access to Proprietary and Confidential Information. Employee understands that Proprietary and Confidential Information includes customer and applicant lists, whether written or solely a function of memory, data bases, whether on computer disc or not, business files, contracts and all other information which is used in the day-to-day operation of ServiceSource which is not known by persons not employed by ServiceSource and which ServiceSource undertakes efforts to maintain its secrecy. Employee understands and agrees that this is confidential information which the law treats as privileged, therefore protecting an employer from use without consent.

(a)Definition. “Proprietary and Confidential Information” is defined as all information and any idea in whatever form, tangible or intangible, of a confidential or secret nature that pertains in any manner to the business of ServiceSource. As used herein, the term “Confidential Information” shall include any and all non-public information relating to ServiceSource or its business, operations, financial affairs, performance, assets, pricing and pricing strategies, technology, research and development, processes, products, contracts, customers, licensees, sublicensees, suppliers, personnel, plans or prospects, whether or not in written form and whether or not expressly designated as confidential, including (without limitation) any such information consisting of or otherwise relating to trade secrets, know-how, technology (including software and programs), designs, drawings, photographs, samples, processes, license or sublicense arrangements, formulae, proposals, product specifications, customer lists or preferences, referral sources, marketing or sales techniques or plans, operating manuals, service manuals, financial information or projections, lists of suppliers or distributors or sources of supply.

Proprietary and Confidential Information shall include both information developed by Employee for ServiceSource and information Employee obtained while in ServiceSource's employment. All Proprietary and Confidential Information, whether created by Employee or other employees, shall remain the property of ServiceSource.

(b)Non-Disclosure and Return. Employee agrees that he will not, under any circumstances, or at any time, whether as an individual, partnership, or corporation, or employee, principal, agent, partner or shareholder thereof, in any way, either directly or indirectly, divulge, disclose, copy, use, divert or attempt to divulge, disclose, copy, use or divert ServiceSource's Proprietary and Confidential Information, except to the extent authorized and necessary to carry out Employee's responsibilities during employment with ServiceSource, or as required by law. Upon termination of Employee's employment with ServiceSource, Employee shall immediately return to ServiceSource all property in Employee's possession or control that belongs to ServiceSource, including all property in electronic form and all copies of Proprietary and Confidential Information.

(c)Former Employer Information. Employee agrees that Employee will not, during Employee's employment with ServiceSource, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that Employee will not bring onto the premises of ServiceSource any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. Employee represents and warrants to ServiceSource that Employee is not in breach of any agreement with any former Employer by accepting employment with ServiceSource.

(d)Third Party Information. Employee recognizes that ServiceSource may have received and in the future may continue to receive from third parties their confidential or proprietary information as they may so designate, subject to a duty on ServiceSource's part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out Employee's work for ServiceSource consistent with ServiceSource's agreement with such third party.

(e)Notification to New Employer. In the event that Employee's employment with ServiceSource ends, Employee consents to notification by ServiceSource to any subsequent employer of Employee's rights and obligations under this Agreement.

(f)No Solicitation of Clients Using Proprietary and Confidential Information. Employee acknowledges and agrees that the names, addresses, and contact information of ServiceSource's clients and all other confidential information relating to those clients, have been compiled by ServiceSource at great expense and represent a real asset of ServiceSource. Employee further understands and agrees that this information is deemed confidential by ServiceSource and constitutes trade secrets of ServiceSource. Employee understands that this information has been provided to Employee in confidence, and Employee agrees that the sale or unauthorized use or disclosure of any of ServiceSource's trade secrets obtained by Employee during employment with ServiceSource constitutes unfair competition. Employee agrees and promises not to engage in any unfair competition with ServiceSource. Employee further agrees not to, directly or indirectly, during or after termination of employment, make known to any person, firm, or company any information concerning any of the clients of ServiceSource which, as Employee acknowledges, is confidential and constitutes trade secrets of ServiceSource. Nor shall Employee use any such confidential and trade secret information to solicit, take away, or attempt to call on, solicit or take away any of the clients

of ServiceSource on whom Employee called or whose accounts Employee had serviced during employment with ServiceSource, whether on Employee's own behalf or for any other person, firm, or ServiceSource.

(g)No Solicitation of Employees. Employee understands and acknowledges that as an employee of ServiceSource he has certain fiduciary duties to ServiceSource which would be violated by the solicitation and/or encouragement of ServiceSource employees to leave the employ of ServiceSource. Employee therefore agrees that he will not, either during his employment or for a period of one year after employment has terminated, solicit any of ServiceSource's employees for a competing business or otherwise induce or attempt to induce such employees to terminate employment with ServiceSource, either directly or through any third parties. Employee agrees that any such solicitation during that period of time would constitute unfair competition.

(h)Assignment of Rights. All Proprietary and Confidential Information and all patents, patent rights, copyrights, trade secret rights, trademark rights and other rights (including, without limitation, intellectual property rights) owned by or otherwise belonging to ServiceSource anywhere in the world in connection therewith, is and shall be the sole property of the ServiceSource. Employee hereby assigns to ServiceSource any and all rights, title and interest Employee may have or acquire in ServiceSource's Proprietary and Confidential Information and ServiceSource's property.

8.SEVERANCE BENEFITS.

(a)Termination Without Cause Before December 31, 2013. If ServiceSource should terminate Employee's employment without Cause (as defined below) prior to December 31, 2013, Employee shall be entitled to receive, in a lump sum in cash, an amount equal to Employee's then current base salary for the period from the date of Employee's termination through December 31, 2013, subject to all applicable withholding requirements. In addition, Employee shall vest as to the portion of the Option and the RSUs that would have vested had he remained employed through December 31, 2013.

(b)Termination Without Cause or Resignation for Good Reason Following a Change in Control (Equity Acceleration). If ServiceSource or a successor should terminate Employee's employment without Cause or Employee should resign from his employment for Good Reason, in either case upon or following a “Change in Control” (as defined in the Equity Incentive Plan), then all of Employee's outstanding equity compensation awards (including, without limitation, all stock options, restricted stock, restricted stock units and any other equity compensation awards) shall immediately have their vesting accelerated 100%, so as to become fully vested.

(c)Definitions: For purposes of this Section 8:

(i)“Cause” shall mean the occurrence of any of the following events: (i) Employee's commission of any felony or any crime involving fraud or dishonesty under the laws of the United States or any state thereof; (ii) Employee's commission of, or participation in, a fraud or act of dishonesty against ServiceSource; (iii) Employee's willful violation of any contract or agreement between Employee and ServiceSource or any statutory duty owed to ServiceSource; (iv) Employee's unauthorized use or disclosure of Proprietary and Confidential Information; or (v) Employee's gross misconduct; and

(ii)“Good Reason” shall mean the occurrence of any one of the following events, without Employee's written consent: (1) a material, adverse change in Employee's job title from that in effect immediately prior to the Change in Control; (2) Employee is not (x) the most senior software executive of the ultimate parent company of the successor entity to such Change in Control (or the successor entity itself, if no such parent entity exists) (the “Successor Entity”), (y) reporting directly to the Chief Executive Officer

of the Successor Entity and (z) a member of the board of directors of the Successor Entity; (3) any other material, adverse change in Employee's duties, authorities or job responsibilities from that in effect immediately prior to the Change in Control; (4) a relocation of Employee's principal place of employment beyond a radius of 30 miles from its location immediately prior to the Change in Control; or (5) any material reduction in Employee's base salary, target bonus or aggregate level of benefits measured against such compensation or benefits as in effect immediately prior to the Change in Control; providedthat Employee has notified ServiceSource in writing of the event described in (1), (2), (3), (4) or (5) above within ninety (90) days after the occurrence of such event, ServiceSource (or its successor) has within thirty (30) days thereafter failed to restore Employee to the appropriate job title, duties, authorities, responsibility, location, salary, target commissions or benefits and Employee actually terminates employment within thirty (30) days following the expiration of ServiceSource's thirty (30)-day cure period described above; and

(iii)“Section 409A Limit” shall mean the lesser of two (2) times: (a) Employee's annualized compensation based upon the annual rate of pay paid to Employee during Employee's taxable year preceding Employee's taxable year of Employee's separation from service with ServiceSource; or (b) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) for the year in which Employee's employment is terminated.

(d)Release. Notwithstanding the foregoing, the severance benefits described in this Section 8 are subject to Employee's execution and delivery of a binding general release of claims in the form set forth as Schedule A, and such release shall becoming effective, binding and irrevocable in accordance with its terms within fifty-two (52) days following the termination date. No severance payments or vesting acceleration under this Agreement shall be paid or provided unless and until the release becomes effective. Any severance payment to which Employee is entitled shall be paid by ServiceSource in full on the fifty-third (53^d) day following Employee's employment termination date or such later date as is required to avoid the imposition of additional taxes under Code Section 409A and the regulations and guidance thereunder, and any applicable state law equivalent (together, “Section 409A”).

(e)Section 409A Compliance. Notwithstanding any provision to the contrary herein, no Deferred Payments (as defined below) that become payable under this Agreement by reason of Employee's termination of employment with ServiceSource (or any successor entity thereto) will be made unless such termination of employment constitutes a “separation from service” within the meaning of Section 409A. Further, if Employee is a “specified employee” of ServiceSource (or any successor entity thereto) within the meaning of Section 409A on the date of Employee's termination of employment (other than a termination of employment due to death), then the Deferred Payments that are payable within the first six (6) months following Employee's termination of employment, shall be delayed until the first payroll date that occurs on or after the date that is six (6) months and one (1) day after the date of Employee's termination of employment, when they shall be paid in full arrears. All subsequent Deferred Payments, if any, will be paid in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Employee dies following Employee's employment termination but prior to the six (6) month anniversary of his employment termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. For the purposes of this Agreement, “Deferred Payment” means any severance pay or benefits to be paid or provided to Employee (or Employee's estate or beneficiaries) pursuant to this Agreement and any other severance payments or separation benefits, that in each case, when considered together, are considered deferred compensation under Section 409A.

It is intended that none of the severance payments under this Agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the “short-term deferral period” as described below or resulting from an “involuntary separation from service” as described below. Any ambiguities or ambiguous terms herein will be interpreted to be exempt from or comply with the requirements of Section 409A. ServiceSource and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A.

Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of this Section 8. Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit will not constitute Deferred Payments for purposes of this Section 8.

(f)Termination of Employment for Other Reasons. The above severance benefits in this Section 8 shall not be paid or provided in the event of the termination of Employee's employment due to Employee's death, disability or resignation (other than a resignation for Good Reason upon or following a Change in Control as set forth in Section 8(b) above), or the termination of his employment by ServiceSource or its successor for Cause. For purposes of clarity, a termination by reason of Employee's death or disability shall not be deemed a termination without “Cause” under this Agreement.

9.SEVERABILITY. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable to any extent, such term or provision shall be enforced to the fullest extent permissible under the law and all remaining terms and provisions hereof shall continue in full force and effect.

10.MODIFICATION OF AGREEMENT. This Agreement may be modified only in writing by mutual agreement of ServiceSource and Employee. Any such writing must specifically state that it is intended to modify the parties' Agreement and state which specific provision or provisions this writing intends to modify. Such written modification will only be effective if signed by ServiceSource's Chief Executive Officer. Any attempt to modify this Agreement orally, or by a writing signed by any person other than ServiceSource's Chief Executive Officer, or by any other means, shall be null and void. This Agreement is intended to be the final and complete statement of the parties' agreement concerning the legal nature of their employment relationship in any and all disputes arising from that relationship.

11.COMPLETE AND VOLUNTARY AGREEMENT. This Agreement constitutes the entire understanding of the parties on the subject covered. The parties expressly warrant that they have read and fully understand this Agreement; that they have had the opportunity to consult with legal counsel of their own choosing to have the terms of this Agreement fully explained to them; that they are not executing this Agreement in reliance on any promises, representations or inducements other than those contained herein; and that they are executing this Agreement voluntarily, free of any duress or coercion.

12.DISPUTE RESOLUTION. This Agreement shall be governed by California law, without regard to its principles of conflicts of laws. Any dispute arising from this Agreement shall be subject to the exclusive jurisdiction of state and federal courts located in the Northern District of California, and each party hereby waives any and all objections to that venue. The prevailing party in any such dispute shall recover

its reasonable attorneys' fees and costs from the losing party, including any fees or costs arising from an appeal.

13.SUCCESSORS AND ASSIGNS. This Agreement will be binding upon Employee's heirs, executors, administrators and other legal representatives and will be for the benefit of ServiceSource, its successors, and its assigns.

14.GOLDEN PARACHUTE BEST AFTER TAX RESULTS If any of the payments to Employee (prior to any reduction, below) provided for in this Agreement, together with any other payments which Employee has the right to receive from ServiceSource or any corporation which is a member of an “affiliated group” as defined in Section 1504(a) of the Code, without regard to Section 1504(b) of the Internal Revenue Code), of which ServiceSource is a member (the “Payments”) would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and if the Safe Harbor Amount is greater than the Taxed Amount, then the total amount of such Payments shall be reduced to the Safe Harbor Amount. The “Safe Harbor Amount” is the largest portion of the Payments that would result in no portion of the Payments being subject to the excise tax set forth at Section 4999 of the Code (“Excise Tax”), after reduction for taxes as described below. The “Taxed Amount” is the total amount of the Payments after reduction for taxes as described below (prior to any reduction, above) notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. Solely for the purpose of comparing which of the Safe Harbor Amount and the Taxed Amount is greater, the determination of each such amount, shall be made on an after-tax basis, taking into account all applicable federal, state and local employment taxes, income taxes, and, if applicable, the Excise Tax (all of which shall be computed at the highest applicable marginal rate regardless of Employee's actual marginal rate). If a reduction of the Payments to the Safe Harbor Amount is necessary, then the reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of equity awards other than options; cancellation of accelerated vesting of options; and reduction of employee benefits. In the event that acceleration of vesting of equity awards or options is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Employee's awards. If two or more equity awards other than options are granted on the same date, and reduction of acceleration is required under this paragraph, each award will be reduced on a pro-rata basis. If two or more options are granted on the same date, and reduction of acceleration is required under this paragraph, each option will be reduced on a pro-rata basis. In no event shall Employee have any discretion with respect to the ordering of payment reductions. ServiceSource and its tax advisors shall make all determinations and calculations required to be made to effectuate this paragraph at ServiceSource's expense.

[Signature page follows]

ServiceSource International, Inc.

By: /s/ MICHAEL A. SMERKLO4/30/13

Michael SmerkloDate

Employee

/s/ RICHARD CAMPIONE4/30/13

Richard Campione Date

Schedule A

Form of Release

In exchange for the consideration provided by ServiceSource International, Inc. or its successor (the “Company”) to the undersigned current or former employee of the Company (the “Employee”) under this Agreement or the employment agreement between the Company and the Employee, that Employee is not otherwise entitled to receive, and subject to the Company's compliance with its post-termination obligations to Employee, Employee hereby generally and completely releases the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to Employee's employment with the Company or the termination of that employment; (2) all claims related to Employee's compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys' fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the Family and Medical Leave Act; the Employee Retirement Income Security Act; California Fair Employment and Housing Act (as amended ), any statelabor code; the Equal Pay Act, of 1963, as amended.

Section 1542 Waiver. Employee hereby acknowledges that he has read and understands Section 1542 of the Civil Code of the State of California, which reads as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Employee hereby expressly waives and relinquishes all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to the release of any unknown or unsuspected claims Employee may have against the Company, its affiliates, and the entities and persons specified above.

ADEA Waiver and Release. Employee acknowledges that Employee knowingly and voluntarily waives and releases any rights Employee may have under the ADEA, as amended. Employee also acknowledges that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that Employee has been advised by this writing, as required by the ADEA, that: (a) his waiver and release does not apply to any rights or claims that may arise after the execution date of this Agreement; (b) Employee has been advised that he has the right to consult with an attorney prior to executing this Agreement; (c) Employee has been given twenty-one (21) days to consider this Agreement; (d) Employee has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after this

Agreement is executed by Employee, provided that the Company has also executed this Agreement by that date (“Effective Date”). The parties acknowledge and agree that revocation by Employee of the ADEA Waiver and Release is not effective to revoke his waiver or release of any other claims pursuant to this Agreement.

By: Date:

EX-10.3

Exhibit 10.3+

SERVICESOURCE INTERNATIONAL, INC.

FORM OF AMENDED AND RESTATED INDEMNIFICATION AGREEMENT

THIS AGREEMENT is entered into, effective as of __________, 20__ by and between ServiceSource International, Inc., a Delaware corporation (the “Company”), and _______________ (“Indemnitee”).

WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;

WHEREAS, Indemnitee is a director and/or officer of the Company;

WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims currently being asserted against directors and officers of corporations;

WHEREAS, the Certificate of Incorporation permits and Bylaws of the Company require the Company to indemnify and advance expenses to its directors and officers to the fullest extent permitted under Delaware law, and the Indemnitee has been serving and continues to serve as a director and/or officer of the Company in part in reliance on the Company's Certificate of Incorporation and Bylaws;

WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance the Indemnitee's continued and effective service to the Company and, specific contractual assurance that the protection promised by the Certificate of Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Certificate of Incorporation and Bylaws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), and in order to induce Indemnitee to provide effective services to the Company as a director and/or officer, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted under Delaware law and as set forth in this Agreement, and, to the extent insurance is maintained which includes Indemnitee as a covered party, to provide for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies; and

WHEREAS, to the extent Indemnitee is serving as a director on the Company's Board of Directors at the request or direction of a venture capital fund or other entity and/or certain of its affiliates (collectively, the “Fund Indemnitors”), Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by or with respect to the Fund Indemnitors, which Indemnitee, the Company and the Fund Indemnitors intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided herein, with the Company's acknowledgement of and agreement to the foregoing being a material condition to Indemnitee's willingness to serve as a director of the Company.

NOW, THEREFORE, in consideration of the above premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties agree as follows:

1.Certain Definitions.

(a)“Board” shall mean the Board of Directors of the Company.

(b)“Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the

“Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets, or (v) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change of Control has occurred.

(c)“Corporate Status” describes the status of a person who is or was a director or officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of a subsidiary of the Company or of any other Enterprise.

(d)“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e)“Enterprise” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, trust or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary.

(f)“Expenses” shall mean any expense, liability, or loss, including attorneys' fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon, any federal, state, local, or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement, and all other costs and obligations, paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding relating to any Indemnifiable Event.

(g)“Indemnifiable Event” shall mean any event or occurrence that takes place either prior to or after the execution of this Agreement, related to

(i)Indemnitee's Corporate Status or related to anything done or not done by Indemnitee in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity or in any other capacity or

(ii)Indemnitee's being compelled to testify or to respond to a subpoena in any Proceeding to which Indemnitee is not a party, but that arises from Indemnitee's Corporate Status.

(h) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has

been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement.

(i)“Proceeding” shall mean any threatened, pending, or completed action, suit, or proceeding or any alternative dispute resolution mechanism (including an action by or in the right of the Company), or any inquiry, hearing, or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit, or proceeding, whether civil, criminal, administrative, investigative, or other.

(j)“Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

2.Agreement to Indemnify.

(a)General Agreement. In the event Indemnitee was, is, or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses to the fullest extent permitted by law, as the same exists or may hereafter be amended or interpreted. The parties hereto intend that this Agreement shall provide for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Company's Certificate of Incorporation, its Bylaws, vote of its stockholders or disinterested directors, or applicable law. The only limitation that shall exist upon the Company's obligations pursuant to this Section 2 shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined by a court of competent jurisdiction in a final judgment, not subject to appeal, to be unlawful.

(b)Initiation of Proceeding. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding or part thereof initiated by Indemnitee against the Company or any director or officer of the Company unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding or part thereof; (ii) the Proceeding or part thereof is one to enforce indemnification rights under Section 4; or (iii) the Proceeding or part thereof is instituted after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) and Independent Counsel has approved its initiation.

(c)Expense Advances.  If so requested by Indemnitee, the Company shall advance (within thirty business days of such request) any and all Expenses incurred by Indemnitee (an “Expense Advance”). The Indemnitee shall qualify for such Expense Advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to repay such Expense Advances if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Until it is so finally determined by the court that Indemnitee is not entitled to indemnification, Indemnitee shall not be required to repay such Expense Advances to the Company and Indemnitee shall continue to receive Expense Advances pursuant to this Section 2(c). Indemnitee's obligation to reimburse

the Company for Expense Advances shall be unsecured and no interest shall be charged thereon. To the extent permissible under third party policies, the Company agrees that invoices for Expense Advances shall be billed in the name of and be payable directly by the Company.

(d)Mandatory Indemnification. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

(e)Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Attorneys' fees and expenses shall not be prorated but shall be deemed to apply to the portion of indemnification to which Indemnitee is entitled.

(f)Prohibited Indemnification. No indemnification pursuant to this Agreement shall be paid by the Company on account of any Proceeding in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act, or similar provisions of any federal, state, or local laws.

3.    Procedures upon Application for Indemnification.

(a)    To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding, provided, however, that Indemnitee shall not be indemnified if it is prohibited under Section 2(f) above. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.

(b)    Upon written request by Indemnitee for indemnification pursuant to Section 3(a), a determination with respect to Indemnitee's entitlement thereto shall be made in the specific case (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Company's board of directors, a copy of which shall be delivered to Indemnitee or (ii) if a Change in Control shall not have occurred, if required by applicable law (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Company's board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Company's board of directors, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Company's board of directors, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Company's board of directors, by the stockholders of the Company. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made as soon as practicable after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.

(c)    In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 3(b), the Independent Counsel shall be selected as provided in this Section 3(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Company's board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Company's board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 3(a) hereof and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 3(b) hereof. Upon the due commencement of any judicial proceeding pursuant to Section 4(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). The Company shall pay the reasonable fees and expenses of any Independent Counsel.

4.    Indemnification Process and Appeal.

(a)    Suit to Enforce Rights. If Indemnitee has not received full advancement within thirty (30) days or full indemnification within ninety (90) days after making a demand in accordance with Section 3(a), Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in the Court of Chancery of the State of Delaware seeking an initial determination by the court or challenging any determination by the Company or any aspect thereof. The Company hereby consents to service of process and to appear in any such proceeding. The remedy provided for in this Section 4 shall be in addition to any other remedies available to Indemnitee at law or in equity. The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 4(a) that the procedures and presumptions of this Agreement are not valid, binding, and enforceable and shall stipulate that the Company is bound by all the provisions of this Agreement.

(b)    Defense to Indemnification, Burden of Proof, and Presumptions. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action to whether Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense or determination shall be on the Company to establish by clear and convincing evidence that Indemnitee is not so entitled to indemnification. It is the parties' intention that if Indemnitee commences legal proceedings to secure a judicial determination that Indemnitee should

be indemnified under this Agreement or applicable law, the question of Indemnitee's right to indemnification shall be for the court to decide, as a de novo trial on the merits.

(c)    Presumption Concerning Request. To the maximum extent permitted by applicable law in making a determination with respect to entitlement to indemnification (or advancement of expenses) hereunder, the Company shall presume that Indemnitee is entitled to indemnification (or advancement of expenses) under this Agreement if Indemnitee has submitted a request for advancement under Section 2(c) of this Agreement for indemnification in accordance with Section 3(a) of this Agreement, and the Company shall have the burden of proof to overcome that assumption by clear and convincing evidence in connection with the making of any determination contrary to that presumption.

(d)    Acknowledgement. The Company acknowledges that a settlement or other disposition of a Proceeding short of final judgment may constitute success by Indemnitee if it permits a party to avoid expense, delay, distraction, disruption, and uncertainty. In the event that any Proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such Proceeding without payment of money or other consideration) it shall be presumed (unless there is clear and convincing evidence to the contrary) that Indemnitee has been successful on the merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.

5.    Indemnification for Expenses Incurred in Enforcing Rights. The Company shall indemnify Indemnitee against any and all Expenses that are incurred by Indemnitee in connection with any action brought by Indemnitee for:

(a)    indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events, and/or

(b)    recovery under directors' and officers' liability insurance policies maintained by the Company, but only in the event that Indemnitee ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be.

In addition, the Company shall, if so requested by Indemnitee, advance the foregoing Expenses to Indemnitee, subject to and in accordance with Section 2(c).

6.    Notification and Defense of Proceeding.

(a)    Notice. Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve the Company from any liability that it may have to Indemnitee, except as provided in Section 6(c).

(b)    Defense. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof (including, but not limited to, a claim referred to in Section 11 hereof), the Company will be entitled to participate in the Proceeding at its own expense and except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election

to assume the defense of any Proceeding, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable costs of investigation, transition costs associated with the Company's assumption of the defense, or as otherwise provided below. Indemnitee shall have the right to employ legal counsel in such Proceeding, but all Expenses related thereto incurred after notice from the Company of its assumption of the defense shall be at Indemnitee's expense unless: (i) the employment of legal counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of the Proceeding, (iii) after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control), the employment of counsel by Indemnitee that has been approved by Independent Counsel, or (iv) the Company shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which cases all Expenses of the Proceeding shall be borne by the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall have made the determination provided for in (ii), (iii), and (iv) above.

(c)    Settlement of Claims. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company's written consent, such consent not to be unreasonably withheld; provided, however, that if a Change in Control has occurred (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control), the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee's prior written consent. The Company shall promptly notify Indemnitee once the Company has received an offer or intends to make an offer to settle any such Proceeding and the Company shall provide Indemnitee as much time as reasonably practicable to consider such offer; provided, however Indemnitee shall have no less than three (3) business days to consider the offer. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action; the Company's liability hereunder shall not be excused if participation in the Proceeding by the Company was barred by this Agreement.

7.    Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with such events and transactions.

8.    Non-Exclusivity. Except with regard to the Company's primary obligations, as set forth in Section 12 hereof, the rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Certificate of Incorporation, Bylaws, applicable law, or otherwise; provided, however, that this Agreement shall supersede any prior indemnification agreement between the Company and the Indemnitee. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification than would be afforded currently under the Company's Certificate of Incorporation, Bylaws, applicable law, or this Agreement, it is the intent of the parties that Indemnitee enjoy

by this Agreement the greater benefits so afforded by such change without any further action by the parties hereto.

9.    Liability Insurance. 

(a)    The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an agent of the Company and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of the fact that the Indemnitee was an agent of the Company, the Company, subject to Section 9(b), shall use reasonable efforts to obtain and maintain in full force and effect directors' and officers' liability insurance (“DO Insurance”) in reasonable amounts from established and reputable insurers and Indemnitee shall be a covered party under such insurance to the maximum extent of the coverage available for any director or officer of the Company.

(b)    Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain DO Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, or the coverage is reduced by exclusions so as to provide an insufficient benefit.

10.    Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

11.    Subrogation. Except with regard to the Company's primary obligations, as set forth in Section 12 hereof, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

12.    No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise received payment (under any insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable hereunder; provided, however, that (a) the Company hereby agrees that its obligations to Indemnitee under this Agreement or any other agreement or undertaking to provide advancement, indemnification, or both to Indemnitee are primary, and any obligation of the Fund Indemnitors to provide advancement or indemnification to Indemnitee for the any Expenses, judgments, fines, and amounts paid in settlement (including all interest, assessments, and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, and amounts paid in settlement) incurred by Indemnitee are secondary, and (b) if the Fund Indemnitors pays or causes to be paid, for any reason, any amounts otherwise indemnifiable hereunder for the benefit of Indemnitee or under any other indemnification agreement with Indemnitee (whether pursuant to the Bylaws or Certificate or another contract), then (i) the Fund Indemnitors shall be fully subrogated to all rights of Indemnitee with respect to such payment and (ii) the Company shall fully indemnify, reimburse, and hold harmless the Fund Indemnitors for all such payments actually made by the Fund Indemnitors. In addition, the Company hereby unconditionally and irrevocably waives, relinquishes, releases, and covenants and agrees not to exercise, any rights that the Company may now have or hereafter acquires against the Fund Indemnitors or Indemnitee that arise from or relate to contribution, subrogation, or any other recovery of any kind under this Agreement or any other indemnification agreement (whether

pursuant to the Bylaws or Certificate or another contract). The Company and Indemnitee hereby agree that this Section 12 shall be deemed exclusive and shall be deemed to modify, amend, and clarify any right to indemnification or advancement provided to Indemnitee under any other contract, agreement, or document with the Company.

13.    Binding Effect. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written, and implied, between the parties hereto with respect to the subject matter hereof. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal representatives. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while Indemnitee was serving in an indemnified capacity pertaining to an Indemnifiable Event even though he may have ceased to serve in such capacity at the time of any Proceeding.

14.    Severability. If any provision (or portion thereof) of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwise unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable.

15.    Third-Party Beneficiary.  The Fund Indemnitors and Independent Counsel are express third-party beneficiaries of this Agreement, and may specifically enforce the Company's obligations hereunder (including, but not limited to, the obligations specified in Section 12 hereof) as though a party hereunder.

16.    Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to its principles of conflicts of laws.

17.    Consent to Jurisdiction. The Company and Indemnitee hereby irrevocably (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Chancery Court”), (ii) consent to submit to the exclusive jurisdiction of the Chancery Court for purposes of any action or proceeding arising out of or in connection with this Agreement, and (iii) waive any objection to the venue of any such action or proceeding in the Chancery Court.

18.    Notices. All notices, demands and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt or mailed, postage prepaid, certified or registered mail, return receipt requested and addressed to the Company at:

ServiceSource International, Inc.

634 Second Street

San Francisco, CA 94107

Attention: Chief Executive Officer

and to Indemnitee at the address set forth below Indemnitee's signature hereto. Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

19.    Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

* * * * *

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day specified above.

SERVICESOURCE INTERNATIONAL, INC.

a Delaware corporation

By:

Name:

Title:

INDEMNITEE,

an individual

Indemnitee

Address:

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. Smerklo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ServiceSource International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	August 5, 2013	By:	/s/ MICHAEL A. SMERKLO
			Name: Michael A. Smerklo
			Title: Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ashley F. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ServiceSource International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	August 5, 2013	By:	/s/ ASHLEY F. JOHNSON
			Name: Ashley F. Johnson
			Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Based on my knowledge, I, Michael A. Smerklo, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ServiceSource International, Inc. on Form 10-Q for the quarter ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceSource International, Inc.

Date:	August 5, 2013	By:	/s/ MICHAEL A. SMERKLO
			Name: Michael A. Smerklo
			Title: Chairman of the Board and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Based on my knowledge, I, Ashley F. Johnson, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ServiceSource International, Inc. on Form 10-Q for the quarter ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceSource International, Inc.

Date:	August 5, 2013	By:	/s/ ASHLEY F. JOHNSON
			Name: Ashley F. Johnson
			Title: Chief Financial Officer

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Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Richard Campione was elected to the Company’s Board of Directors (the “Board”) on November 29, 2012. On December 19, 2012, the Company entered into a consulting agreement with Mr. Campione under which Mr. Campione provides certain software consulting services to the Company. The Audit Committee of the Board pre-approved this consulting agreement in accordance with the Company’s formal policy regarding related party transactions. The Company paid Mr. Campione $0.3 million for consulting services provided during the term of the agreement, which ended April 30, 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net revenue	$ 67,697	$ 59,694	$ 128,818	$ 117,268
Cost of revenue	38,620	33,882	77,118	66,458
Gross profit	29,077	25,812	51,700	50,810
Operating expenses:
Sales and marketing	15,367	14,169	30,175	27,646
Research and development	6,794	4,298	13,042	8,879
General and administrative	10,783	10,564	22,004	20,639
Total operating expenses	32,944	29,031	65,221	57,164
Loss from operations	(3,867)	(3,219)	(13,521)	(6,354)
Other expense, net	(295)	(333)	(403)	(424)
Loss before income taxes	(4,162)	(3,552)	(13,924)	(6,778)
Income tax provision	744	33,217	1,437	31,267
Net loss	$ (4,906)	$ (36,769)	$ (15,361)	$ (38,045)
Net loss per common share:
Basic (in dollars per share)	$ (0.06)	$ (0.50)	$ (0.20)	$ (0.52)
Diluted (in dollars per share)	$ (0.06)	$ (0.50)	$ (0.20)	$ (0.52)
Weighted-average shares used in computing net loss per common share:
Basic (in shares)	77,275	74,172	76,447	73,654
Diluted (in shares)	77,275	74,172	76,447	73,654

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

Property and equipment balances were comprised of the following (in thousands):

	June 30, 2013			December 31, 2012
Computers and equipment	$	15,875		$	14,733
Software	33,317			32,982
Furniture and fixtures	8,660			8,555
Leasehold improvements	10,970			10,801
	68,822			67,071
Less: accumulated depreciation and amortization	(38,660		)	(32,558		)
	30,162			34,513
Construction in progress	113			—
	$	30,275		$	34,513

Depreciation and amortization expense during the three and six months ended June 30, 2013 and the three and six months ended June 30, 2012, was $2.8 million, $6.0 million, $2.3 million and $4.6 million respectively.

Total property and equipment assets under capital lease at June 30, 2013 and December 31, 2012, was $3.2 million and $3.2 million, respectively. Accumulated depreciation related to assets under capital lease as of these dates were $2.4 million and $2.1 million, respectively.

The Company capitalized internal-use software development costs of $0 and $2.8 million during the three months ended June 30, 2013 and 2012, respectively and $0 and $5.0 million during the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, the carrying value of capitalized costs related to internal-use software, net of accumulated amortization, was $11.1 million and $13.6 million, respectively. Amortization of capitalized costs related to internal-use software for the three months ended June 30, 2013 and 2012 was $1.3 million and $0.6 million, respectively, and for the six months ended June 30, 2013 and 2012 was $2.5 million and $1.3 million, respectively.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Future Annual Minimum Lease Payments Under All Noncancelable Operating Leases

Future annual minimum lease payments under all noncancelable operating leases as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years ending
2013 (remaining six months).	$	4,473
2014	7,845
2015	5,967
2016	4,169
2017	4,004
Thereafter	12,526
Total	$	38,984

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Description of Business and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-2 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU No. 2013-2 requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the income statement or as a separate disclosure in the notes. The new guidance became effective for the Company’s interim period ended March 31, 2013. The Company adopted this guidance and the adoption did not have any impact on its financial position, results of operations or cash flows as the amounts reclassified out of accumulated other comprehensive income is not material.

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Weighted Average Black-Scholes Model Assumptions (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Schedule Of Stockholders Equity [Line Items]
Expected term (in years)	5 years	5 years 1 month 6 days	5 years	5 years 1 month 6 days
Expected volatility	44.00%	45.00%	44.00%	45.00%
Risk-free interest rate	0.84%	0.83%	0.85%	0.82%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Cash Cash Equivalents and Short-term Investments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Total cash and cash equivalents, Amortized Cost	$ 77,403	$ 76,568	$ 65,586	$ 65,983
Total short-term investments, Amortized Cost	54,780	32,885
Total short-term investments, Unrealized Gains	8	9
Total short-term investments, Unrealized Losses	(139)	(20)
Total short-term investments, Estimated Fair Value	54,649	32,874
Cash, cash equivalents and short-term investments, Amortized Cost	132,183	109,453
Cash, cash equivalents and short-term investments, Unrealized Gains	8	9
Cash, cash equivalents and short-term investments, Unrealized Losses	(139)	(20)
Cash, cash equivalents and short-term investments, Estimated Fair Value	132,052	109,442
Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Total short-term investments, Amortized Cost	21,471	13,389
Total short-term investments, Unrealized Gains	6	2
Total short-term investments, Unrealized Losses	(51)	(14)
Total short-term investments, Estimated Fair Value	21,426	13,377
U.S. agency securities
Schedule of Available-for-sale Securities [Line Items]
Total short-term investments, Amortized Cost	21,126	11,280
Total short-term investments, Unrealized Gains	2	4
Total short-term investments, Unrealized Losses	(50)	(1)
Total short-term investments, Estimated Fair Value	21,078	11,283
Asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Total short-term investments, Amortized Cost	6,669	4,670
Total short-term investments, Unrealized Gains	0	1
Total short-term investments, Unrealized Losses	(29)	(5)
Total short-term investments, Estimated Fair Value	6,640	4,666
U.S. Treasury securities
Schedule of Available-for-sale Securities [Line Items]
Total short-term investments, Amortized Cost	5,514	3,546
Total short-term investments, Unrealized Gains	0	2
Total short-term investments, Unrealized Losses	(9)	0
Total short-term investments, Estimated Fair Value	5,505	3,548
Cash
Schedule of Available-for-sale Securities [Line Items]
Total cash and cash equivalents, Amortized Cost	45,706	59,568
Total cash and cash equivalents, Unrealized Gains	0	0
Total cash and cash equivalents, Unrealized Losses	0	0
Total cash and cash equivalents, Estimated Fair Value	45,706	59,568
Money market mutual funds
Schedule of Available-for-sale Securities [Line Items]
Total cash and cash equivalents, Amortized Cost	31,697	17,000
Total cash and cash equivalents, Unrealized Gains	0	0
Total cash and cash equivalents, Unrealized Losses	0	0
Total cash and cash equivalents, Estimated Fair Value	31,697	17,000
Cash Equivalents
Schedule of Available-for-sale Securities [Line Items]
Total cash and cash equivalents, Amortized Cost	77,403	76,568
Total cash and cash equivalents, Unrealized Gains	0	0
Total cash and cash equivalents, Unrealized Losses	0	0
Total cash and cash equivalents, Estimated Fair Value	$ 77,403	$ 76,568

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Reportable Segments (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Summarized Financial Information Based Geographic Location

Summarized financial information by geographic location based on the Company’s internal management reporting and as utilized by the Company’s CODM, is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net revenue
NALA	$	42,482		$	36,961		$	80,289		$	73,073
EMEA	18,238			15,518			35,758			31,266
APJ	6,977			7,215			12,771			12,929
Total net revenue	$	67,697		$	59,694		$	128,818		$	117,268
Direct profit contribution
NALA	$	24,377		$	19,150		$	43,610		$	37,668
EMEA	9,154			7,756			17,879			16,223
APJ	1,909			2,523			2,708			4,106
Total direct profit contribution	35,440			29,429			64,197			57,997
Adjustments:
Stock-based compensation	(688		)	(715		)	(1,420		)	(1,287		)
Other, net	(5,675		)	(2,902		)	(11,077		)	(5,900		)
Gross profit	$	29,077		$	25,812		$	51,700		$	50,810

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Future Minimum Annual Payments Under Capital Lease Obligation (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Debt Disclosure [Abstract]
2013 (remaining six months)	$ 163
2014	266
2015	73
2016	75
2017	77
Thereafter	140
Total long-term debt	$ 794

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Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 5,423	$ 5,360	$ 11,343	$ 9,607
Cost of Revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	688	715	1,420	1,287
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	2,449	1,982	4,982	3,656
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	519	530	1,005	893
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,767	$ 2,133	$ 3,936	$ 3,771

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Property and Equipment, Net - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense related to property and equipment	$ 2.8	$ 2.3	$ 6.0	$ 4.6
Property and equipment under capital lease	3.2		3.2		3.2
Accumulated depreciation related to assets under capital lease	2.4		2.4		2.1
Internal-use software development costs capitalized	0	2.8	0	5.0
Carrying value of internal-use software, net of accumulated amortization	11.1		11.1		13.6
Amortization of capitalized costs related to internal-use software	$ 1.3	$ 0.6	$ 2.5	$ 1.3

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Reportable Segments - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013 Segment
Segment Reporting [Abstract]
Number of reportable segments	3
Number of operating segments	3

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2013

Reconciliation of Option and Restricted Stock Activity

Option and restricted stock activity under the 2011 Plan for the six months ended June 30, 2013 were as follows (shares in thousands)

			Options Outstanding				Restricted Stock Outstanding
	Shares and Units Available for Grant		Number of Shares		Weighted- Average Exercise Price		Number of Shares
Outstanding — December 31, 2012	4,024		15,189		$	6.98	3,928
Additional shares reserved under the 2011 equity incentive plan	3,025		—		—		—
Granted	(3,910	)	2,093		7.05		1,817
Options exercised/ Restricted stock released	—		(2,951	)	7.36		(405	)
Canceled/Forfeited	4,469		(3,793	)	6.65		(676	)
Outstanding — June 30, 2013	7,608		10,538		5.30		4,664

Summary of Stock-Based Compensation Expense

The following table summarizes the consolidated stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	688	$	715	$	1,420	$	1,287
Sales and marketing	2,449		1,982		4,982		3,656
Research and development	519		530		1,005		893
General and administrative	1,767		2,133		3,936		3,771
Total stock-based compensation	$	5,423	$	5,360	$	11,343	$	9,607

Stock Option Plan

Weighted Average Black-Scholes Model Assumptions

The weighted average Black-Scholes model assumptions for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Expected term (in years)	5.0		5.1		5.0		5.1
Expected volatility	44	%	45	%	44	%	45	%
Risk-free interest rate	0.84	%	0.83	%	0.85	%	0.82	%
Expected dividend yield	—		—		—		—

Employee Share Purchase Plan

Weighted Average Black-Scholes Model Assumptions

Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Expected term (in years)	0.50		0.50		0.50		0.50
Expected volatility	27	%	45	%	27	%	45	%
Risk-free interest rate	0.13	%	0.13	%	0.13	%	0.13	%
Expected dividend yield	—		—		—		—

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities
Net loss	$ (15,361)	$ (38,045)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	6,028	4,576
Provision for doubtful accounts	(149)	0
Amortization of deferred financing costs	24	123
Accretion on premium on short-term investments	347	445
Deferred income taxes	545	32,220
Stock-based compensation	11,343	9,607
Income tax charge from stock-based compensation	264	362
Changes in operating assets and liabilities:
Accounts receivable	4,189	2,586
Prepaid expenses and other	(1,204)	(811)
Accounts payable	(558)	(877)
Accrued taxes	752	298
Accrued compensation and benefits	3,291	(4,820)
Accrued liabilities and other	2,156	4,145
Net cash provided by operating activities	11,667	9,809
Cash flows from investing activities
Acquisition of property and equipment	(2,224)	(11,244)
Purchases of short-term investments	(26,647)	(24,186)
Sales of short-term investments	3,154	6,210
Maturities of short-term investments	1,250	11,820
Net cash used in investing activities	(24,467)	(17,400)
Cash flows from financing activities
Repayment on capital leases obligations	(161)	(155)
Proceeds from common stock issuances	13,612	7,818
Income tax charge from stock-based compensation	(264)	(362)
Net cash provided by financing activities	13,187	7,301
Net increase (decrease) in cash and cash equivalents	387	(290)
Effect of exchange rate changes on cash and cash equivalents	448	(107)
Cash and cash equivalents at beginning of period	76,568	65,983
Cash and cash equivalents at end of period	$ 77,403	$ 65,586

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Cash, Cash Equivalents and Short-term Investments

6 Months Ended

Jun. 30, 2013

Cash and Cash Equivalents [Abstract]

Cash, cash equivalents and short-term investments

Cash, cash equivalents and short-term investments

Cash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, including money market funds. Short-term investments consist of readily marketable securities with a remaining maturity of more than three months from time of purchase. The Company classifies all of its cash equivalents and short-term investments as “available for sale,” as these investments are free of trading restrictions. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When the Company determines that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. The Company’s realized gains and losses in the three and six months ended June 30, 2013 and 2012 were insignificant.

Cash and cash equivalents and short-term investments consisted of the following as of June 30, 2013 and December 31, 2012 (in thousands):

June 30, 2013

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	45,706	$	—	$	—		$	45,706
Cash equivalents:
Money market mutual funds	31,697		—		—			31,697
Total cash and cash equivalents	77,403		—		—			77,403
Short-term investments:
Corporate bonds	21,471		6		(51		)	21,426
U.S. agency securities	21,126		2		(50		)	21,078
Asset-backed securities	6,669		—		(29		)	6,640
U.S. Treasury securities	5,514		—		(9		)	5,505
Total short-term investments	54,780		8		(139		)	54,649
Cash, cash equivalents and short-term investments	$	132,183	$	8	$	(139	)	$	132,052

December 31, 2012

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	59,568	$	—	$	—		$	59,568
Cash equivalents:
Money market mutual funds	17,000		—		—			17,000
Total cash and cash equivalents	76,568		—		—			76,568
Short-term investments:
Corporate bonds	13,389		2		(14		)	13,377
U.S. agency securities	11,280		4		(1		)	11,283
Asset-backed securities	4,670		1		(5		)	4,666
U.S. Treasury securities	3,546		2		—			3,548
Total short-term investments	32,885		9		(20		)	32,874
Cash, cash equivalents and short-term investments	$	109,453	$	9	$	(20	)	$	109,442

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated maturities as of June 30, 2013:

	Amortized Cost		Estimated Fair Value
Less than 1 year	$	5,098	$	5,097
Due in 1 to 5 years	49,682		49,552
Total	$	54,780	$	54,649

As of June 30, 2013, the Company did not consider any of its investments to be other-than-temporarily impaired.

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Accrued Liabilities and Other

6 Months Ended

Jun. 30, 2013

Payables and Accruals [Abstract]

Accrued Liabilities and Other

Accrued Liabilities and Other

Accrued liabilities and other balances were comprised of the following (in thousands):

	June 30, 2013		December 31, 2012
Deferred revenue	$	3,955	$	2,295
Accrued operating expenses	3,633		3,664
Deferred rent obligations	887		986
Other employee related	394		323
Accrued other (includes ESPP contributions of $763 and $1,059 at June 30, 2013 and December 31, 2012, respectively)	4,771		3,135
	$	13,640	$	10,403

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Fair value of financial instruments

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair value of financial instruments

Fair value of financial instruments

The Company measures certain financial instruments at fair value on a recurring basis. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.

Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.

All of the Company’s cash equivalents and short-term investments are classified within Level 1 or Level 2.

The following table presents information about the Company’s financial instruments that are measured at fair value as of June 30, 2013 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	31,697	$	31,697	$	—
Total cash equivalents	31,697		31,697		—
Short-term investments:
Corporate bonds	21,426		—		21,426
U.S. agency securities	21,078		—		21,078
Asset-backed securities	6,640		—		6,639
U.S. Treasury securities	5,505		—		5,506
Total short-term investments	54,649		—		54,649
Cash equivalents and short-term investments	$	86,346	$	31,697	$	54,649

The following table presents information about the Company’s financial instruments that are measured at fair value as of December 31, 2012 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	17,000	$	17,000	$	—
Total cash equivalents	17,000		17,000		—
Short-term investments:
Corporate bonds	13,377		—		13,377
U.S. agency securities	11,283		—		11,283
Asset-backed securities	4,666		—		4,666
U.S. Treasury securities	3,548		—		3,548
Total short-term investments	32,874		—		32,874
Cash equivalents and short-term investments	$	49,874	$	17,000	$	32,874

The Company did not have any financial liabilities measured at fair value as of June 30, 2013 or December 31, 2012.

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Fair Value of Each Purchase Right Under the ESPP was Estimated on the Date of Grant Using the Black-Scholes Option Valuation Model and the Straight-line Attribution (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years	5 years 1 month 6 days	5 years	5 years 1 month 6 days
Expected volatility	44.00%	45.00%	44.00%	45.00%
Risk-free interest rate	0.84%	0.83%	0.85%	0.82%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 months	6 months	6 months	6 months
Expected volatility	27.00%	45.00%	27.00%	45.00%
Risk-free interest rate	0.13%	0.13%	0.13%	0.13%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Summary of Cost and Estimated Fair Values of Short Term Fixed Income Securities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Amortized Cost
Less than 1 year	$ 5,098
Due in 1 to 5 years	49,682
Total	54,780
Estimated Fair Value
Less than 1 year	5,097
Due in 1 to 5 years	49,552
Total	$ 54,649

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Comprised Balance of Accrued Liabilities and Other (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Payables and Accruals [Abstract]
Deferred revenue	$ 3,955	$ 2,295
Accrued operating expenses	3,633	3,664
Deferred rent obligations	887	986
Other employee related	394	323
Accrued other (includes ESPP contributions of $763 and $1,059 at June 30, 2013 and December 31, 2012, respectively)	4,771	3,135
Total accrued liabilities and other balance	13,640	10,403
ESPP Contributions	$ 763	$ 1,059

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Stockholders' Equity - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2013	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional shares authorized for equity awards	3,000,000.0			3,025,000
Common stock, par value		$ 0.0001		$ 0.0001		$ 0.0001
Weighted average grant-date fair value of stock options granted		$ 2.67	$ 6.68	$ 2.68	$ 6.98
Share issued under employee stock purchase plan		531,646
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual increase in shares reserved for equity awards, percentage of outstanding shares		4.00%
Annual Increase in number of shares reserved for equity awards		3,840,000		3,840,000
Restricted Stock Outstanding
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment award, award vesting period				4 years
Share issued under Employee stock purchase plan				1,817,000
Additional shares authorized for equity awards				0
Number of shares converted				1
2011 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested option expiring period				10 years
Vested but unexercised option expiring period				3 months
2011 Plan | Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment award, award vesting period				4 years
Percentage of option vesting during first year				25.00%
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of payroll deductions		10.00%
Percentage of purchase price of the shares on each purchase date is equal to the fair market value		85.00%
Common stock on the first and last trading days on offering period		6 months
Share issued under employee stock purchase plan		1,500,000
Percentage of outstanding common stock shares		1.00%
Additional Shares reserved	750,000
Shares available for future issuance		1,850,400		1,850,400

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Related Party Transactions - Additional information (Detail) (Director, Noninterest Expense Directors Fees, USD $) In Millions, unless otherwise specified	3 Months Ended	4 Months Ended
	Jun. 30, 2013	Apr. 30, 2013 Related Party Transactions
Transactions with Third Party [Line Items]
Related party transaction payment for consulting services		$ 0.3
Related party transaction, agreement end date	Apr. 30, 2013

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	79,099,000	75,758,000
Common stock, shares outstanding	79,220,000	75,637,000

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Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity

Stockholders’ Equity

Stock Option Plans

The Company maintains the following stock plans: the 2011 Equity Incentive Plan (the “2011 Plan”), and the 2011 Employee Stock Purchase Plan. The Company’s board of directors and, as delegated to its compensation committee, administers the 2011 Plan and has authority to determine the directors, officers, employees and consultants to whom options or restricted stock may be granted, the option price or restricted stock purchase price, the timing of when each share is exercisable and the duration of the exercise period and the nature of any restrictions or vesting periods applicable to an option or restricted stock grant

Under the 2011 Plan, options granted are generally subject to a four-year vesting period whereby options become 25% vested after a one-year period and the remainder then vests monthly through the end of the vesting period. Vested options may be exercised up to ten years from the vesting commencement date, as defined in the 2011 Plan. Vested but unexercised options expire three months after termination of employment with the Company. The restricted stock units typically vest over four years with a yearly cliff contingent upon employment with the Company on the dates of vest.

The Company has elected to recognize the compensation cost of all stock-based awards on a straight-line basis over the vesting period of the award. Further, the Company applied an estimated forfeiture rate to unvested awards when computing the share compensation expenses. The Company estimated the forfeiture rate for unvested awards based on its historical experience on employee turnover behavior and other factors.

At the end of each fiscal year, the share reserve under the 2011 Plan will increase automatically by an amount equal to 4% outstanding shares as of the end of that most recently completed fiscal year or 3,840,000 shares, whichever is less. On January 1, 2013, 3.0 million additional shares were reserved under the 2011 Equity Incentive Plan pursuant to the automatic increase.

Determining Fair Value of Stock Awards

The Company estimates the fair value of stock option awards at the date of grant using the Black-Scholes option-pricing model. Options are granted with an exercise price equal to the fair value of the common stock as of the date of grant. Compensation expense is amortized net of estimated forfeitures on a straight-line basis over the requisite service period of the options, which is generally four years. Restricted stock, upon vesting, entitles the holder to one share of common stock for each restricted stock and has a purchase price of $0.0001 per share, which is equal to the par value of the Company’s common stock, and vests over four years. The fair value of the restricted stock is based on the Company’s closing stock price on the date of grant, and compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period.

The weighted average Black-Scholes model assumptions for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Expected term (in years)	5.0		5.1		5.0		5.1
Expected volatility	44	%	45	%	44	%	45	%
Risk-free interest rate	0.84	%	0.83	%	0.85	%	0.82	%
Expected dividend yield	—		—		—		—

Option and restricted stock activity under the 2011 Plan for the six months ended June 30, 2013 were as follows (shares in thousands)

			Options Outstanding				Restricted Stock Outstanding
	Shares and Units Available for Grant		Number of Shares		Weighted- Average Exercise Price		Number of Shares
Outstanding — December 31, 2012	4,024		15,189		$	6.98	3,928
Additional shares reserved under the 2011 equity incentive plan	3,025		—		—		—
Granted	(3,910	)	2,093		7.05		1,817
Options exercised/ Restricted stock released	—		(2,951	)	7.36		(405	)
Canceled/Forfeited	4,469		(3,793	)	6.65		(676	)
Outstanding — June 30, 2013	7,608		10,538		5.30		4,664

The weighted average grant-date fair value of employee stock options granted during the three months ended June 30, 2013 and 2012 was $2.67 and $6.68 per share, respectively and for the six months ended June 30, 2013 and 2012 was $2.68 and $6.98 per share, respectively.

The following table summarizes the consolidated stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	688	$	715	$	1,420	$	1,287
Sales and marketing	2,449		1,982		4,982		3,656
Research and development	519		530		1,005		893
General and administrative	1,767		2,133		3,936		3,771
Total stock-based compensation	$	5,423	$	5,360	$	11,343	$	9,607

Employee Stock Purchase Plan

The Company’s 2011 Employee Stock Purchase Plan (the “ESPP”) is intended to qualify under Section 423 of the Internal Revenue Code of 1986. Under the ESPP, employees are eligible to purchase common stock through payroll deductions

of up to 10% of their eligible compensation, subject to any plan limitations. The purchase price of the shares on each purchase date is equal to 85% of the lower of the fair market value of the Company’s common stock on the first and last trading days of each six-month offering period.

The Company estimates the fair value of purchase rights under the ESPP using the Black-Scholes valuation model. The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Expected term (in years)	0.50		0.50		0.50		0.50
Expected volatility	27	%	45	%	27	%	45	%
Risk-free interest rate	0.13	%	0.13	%	0.13	%	0.13	%
Expected dividend yield	—		—		—		—

The ESPP provides that additional shares are reserved under the plan annually on the first day of each fiscal year in an amount equal to the lesser of (i) 1.5 million shares, (ii) one percent of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the board of directors and/or the compensation committee of the board of directors. On January 1, 2013, 750,000 additional shares were reserved under the ESPP pursuant to the plan's automatic increase provision. As of June 30, 2013, 531,646 shares had been issued under the ESPP and 1,850,400 shares were available for future issuance.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net loss	$ (4,906)	$ (36,769)	$ (15,361)	$ (38,045)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	146	(56)	211	(73)
Unrealized gain (loss) on short-term investments, net of tax	(151)	(14)	(120)	26
Other comprehensive income (loss), net of tax	(5)	(70)	91	(47)
Total comprehensive loss, net of tax	$ (4,911)	$ (36,839)	$ (15,270)	$ (38,092)

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 77,403	$ 76,568
Short-term investments	54,649	32,874
Accounts receivable, net	60,894	65,238
Deferred income taxes	177	389
Prepaid expenses and other	6,661	5,178
Total current assets	199,784	180,247
Property and equipment, net	30,275	34,513
Deferred income taxes, net of current portion	1,986	2,321
Other assets, net	794	1,057
Goodwill	6,334	6,334
Total assets	239,173	224,472
Current liabilities:
Accounts payable	2,505	3,293
Accrued taxes	1,801	1,056
Accrued compensation and benefits	18,873	15,738
Accrued liabilities and other	13,640	10,403
Obligations under capital leases	328	326
Total current liabilities	37,147	30,816
Obligations under capital leases, net of current portion	466	638
Other long-term liabilities	4,839	6,091
Total liabilities	42,452	37,545
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock; $0.0001 par value; 1,000,000 shares authorized; 79,099 shares issued and 79,220 shares outstanding as of June 30, 2013; 75,758 shares issued and 75,637 shares outstanding as of December 31, 2012	8	8
Treasury stock	(441)	(441)
Additional paid-in capital	235,714	210,650
Accumulated deficit	(38,759)	(23,398)
Accumulated other comprehensive income	199	108
Total stockholders’ equity	196,721	186,927
Total liabilities and stockholders’ equity	$ 239,173	$ 224,472

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Financial Instruments that are Measured at Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Cash equivalents:
Total cash equivalents	$ 31,697	$ 17,000
Short-term investments:
Total short-term investments	54,649	32,874
Cash equivalents and short-term investments	86,346	49,874
Fair Value, Measurements, Recurring | Money market mutual funds
Cash equivalents:
Total cash equivalents	31,697	17,000
Fair Value, Measurements, Recurring | Corporate bonds
Short-term investments:
Total short-term investments	21,426	13,377
Fair Value, Measurements, Recurring | U.S. agency securities
Short-term investments:
Total short-term investments	21,078	11,283
Fair Value, Measurements, Recurring | Asset-backed securities
Short-term investments:
Total short-term investments	6,640	4,666
Fair Value, Measurements, Recurring | U.S. Treasury securities
Short-term investments:
Total short-term investments	5,505	3,548
Quoted Prices in Active Markets for Identical Assets (Level 1)
Cash equivalents:
Total cash equivalents	31,697	17,000
Short-term investments:
Cash equivalents and short-term investments	31,697	17,000
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Money market mutual funds
Cash equivalents:
Total cash equivalents	31,697	17,000
Significant Other Observable Inputs (Level 2)
Short-term investments:
Total short-term investments	54,649	32,874
Cash equivalents and short-term investments	54,649	32,874
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Corporate bonds
Short-term investments:
Total short-term investments	21,426	13,377
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. agency securities
Short-term investments:
Total short-term investments	21,078	11,283
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Asset-backed securities
Short-term investments:
Total short-term investments	6,639	4,666
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. Treasury securities
Short-term investments:
Total short-term investments	$ 5,506	$ 3,548

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Credit Facility and Capital Leases (Tables)

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Future Minimum Annual Payments Under Capital Lease Obligations

Future minimum annual payments under capital lease obligations as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years Ending
2013 (remaining six months)	$	163
2014	266
2015	73
2016	75
2017	77
Thereafter	140
Total	$	794

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Reportable Segments - Summarized Financial Information Based Geographic Location (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net revenue
Total net revenue	$ 67,697	$ 59,694	$ 128,818	$ 117,268
Direct profit contribution
Total direct profit contribution	35,440	29,429	64,197	57,997
Adjustments:
Stock-based compensation	(688)	(715)	(1,420)	(1,287)
Other, net	(5,675)	(2,902)	(11,077)	(5,900)
Gross profit	29,077	25,812	51,700	50,810
NALA
Net revenue
Net revenue	42,482	36,961	80,289	73,073
Direct profit contribution
Direct profit contribution, Home Country	24,377	19,150	43,610	37,668
EMEA
Net revenue
Net revenue	18,238	15,518	35,758	31,266
Direct profit contribution
Direct profit contribution, Foreign Country	9,154	7,756	17,879	16,223
APJ
Net revenue
Net revenue	6,977	7,215	12,771	12,929
Direct profit contribution
Direct profit contribution, Foreign Country	$ 1,909	$ 2,523	$ 2,708	$ 4,106

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Option and Restricted Stock Activity (Detail) (USD $)	1 Months Ended	6 Months Ended
	Jan. 31, 2013	Jun. 30, 2013
Options Outstanding, Number of Shares
Shares and Units Available for Grant, Beginning balance	4,024,000	4,024,000
Additional shares reserved under the 2012 equity incentive plan	3,000,000.0	3,025,000
Shares and Units Available for Grant, Granted		(3,910,000)
Shares and Units Available for Grant, Options exercised/ Restricted stock released		0
Options Outstanding, Number of Shares, Canceled /Forfeited		4,469,000
Shares and Units Available for Grant, Ending balance		7,608,000
Stock Options
Options Outstanding, Number of Shares
Options Outstanding, Number of Shares, Beginning Balance	15,189,000	15,189,000
Additional shares reserved under the 2012 equity incentive plan		0
Options Outstanding, Number of Shares, Granted		2,093,000
Options Outstanding, Number of Shares, Options exercised/ Restricted stock released		(2,951,000)
Options Outstanding, Number of Shares, Canceled /Forfeited		3,793,000
Options Outstanding, Number of Shares, Ending Balance		10,538,000
Options Outstanding, Options, Weighted Average Exercise Price
Options Outstanding, Weighted Average Exercise Price, Beginning Balance	$ 6.98	$ 6.98
Options Outstanding, Weighted Average Exercise Price, Grants in Period		$ 7.05
Options Outstanding, Weighted Average Exercise Price, Options exercised/ Restricted stock released in Period		$ 7.36
Options Outstanding, Weighted Average Exercise Price, Forfeitures in Period		$ 6.65
Options Outstanding, Weighted Average Exercise Price, Ending Balance		$ 5.30
Restricted Stock Outstanding
Options Outstanding, Number of Shares
Restricted Stock Outstanding Number of Share, Beginning balance	3,928,000	3,928,000
Additional shares reserved under the 2012 equity incentive plan		0
Restricted Stock Outstanding Number of Share, Granted		1,817,000
Restricted Stock Outstanding Number of Share, Options exercised/ Restricted stock released		(405,000)
Restricted Stock Outstanding Number of Share, Canceled /Forfeited		(676,000)
Restricted Stock Outstanding Number of Share, Ending balance		4,664,000

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Commitment and Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Commitments and Contingencies Disclosure [Abstract]
Operating lease payment of non-cancelable agreement expiration period	Through September 30, 2022
Rent expense	$ 2.1	$ 2.0	$ 4.3	$ 4.4

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Future Annual Minimum Lease Payments Under All Noncancelable Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
2013 (remaining six months).	$ 4,473
2014	7,845
2015	5,967
2016	4,169
2017	4,004
Thereafter	12,526
Total future annual minimum lease payment	$ 38,984

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases

The Company leases its office space and certain equipment under noncancelable operating lease agreements with various expiration dates through September 30, 2022. Rent expense for the three months ended June 30, 2013 and 2012 was $2.1 million and $2 million, respectively, and for the six months ended June 30, 2013 and 2012 was $4.3 million and $4.4 million, respectively. The Company recognizes rent expense on a straight-line basis over the lease period and accrues for rent expense incurred but not paid.

Future annual minimum lease payments under all noncancelable operating leases as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years ending
2013 (remaining six months).	$	4,473
2014	7,845
2015	5,967
2016	4,169
2017	4,004
Thereafter	12,526
Total	$	38,984

Other Matters

The Company may be subject to litigation or other claims in the normal course of business. In the opinion of management, the Company’s ultimate liability, if any, related to any currently pending or threatened litigation or claims would not materially affect its consolidated financial position, results of operations or cash flows.

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Property and Equipment (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross, excluding construction in progress	$ 68,822	$ 67,071
Less: accumulated depreciation and amortization	(38,660)	(32,558)
Property plant and equipment excluding construction in progress, net	30,162	34,513
Construction in progress	113	0
Property and equipment, net	30,275	34,513
Computers and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	15,875	14,733
Software
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	33,317	32,982
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	8,660	8,555
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	$ 10,970	$ 10,801

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Income Taxes - Additional Information (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 600,000	$ 400,000
Gross amount of unrecognized tax benefits, which, if recognized, would affect effective tax rate	$ 55,000

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Reportable Segments

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

The Company’s operations are principally managed on a geographic basis and are comprised of three reportable and operating segments: NALA, EMEA, and APJ, as defined below.

The Company reports segment information based on the management approach. The management approach designates the internal reporting used by the Company’s Chief Operating Decision Maker (“CODM”), for making decisions and assessing

performance as the source of the Company’s reportable segments. The CODM is the Company’s Chief Executive Officer. The CODM allocates resources to and assesses the performance of each of the operating segment using information about its revenue and direct profit contribution, which is management’s measure of segment profitability. Management has determined that the Company’s reportable and operating segments are as follows, based on the information used by the CODM:

NALA — Includes operations from offices in San Francisco, California; Denver, Colorado and Nashville, Tennessee related primarily to end customers in North America.

EMEA — Includes operations from offices in Liverpool, United Kingdom and Dublin, Ireland related primarily to end customers in Europe.

APJ — Includes operations from offices in Singapore related primarily to end customers in Asia Pacific and Japan. Operations in Kuala Lumpur, Malaysia are allocated to the reportable segment of where the customer is located.

The Company does not allocate sales and marketing, research and development, or general and administrative expenses to its geographic regions because management does not include the information in its measurement of the performance of the operating segments. The Company excludes certain items such as stock-based compensation, overhead allocations and other items from direct profit contribution. Revenue for a particular geography reflects fees the Company earns from its customers for sales and renewals of maintenance, support and subscription contracts on their behalf and managed from the Company’s sales center in that geography.

Summarized financial information by geographic location based on the Company’s internal management reporting and as utilized by the Company’s CODM, is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net revenue
NALA	$	42,482		$	36,961		$	80,289		$	73,073
EMEA	18,238			15,518			35,758			31,266
APJ	6,977			7,215			12,771			12,929
Total net revenue	$	67,697		$	59,694		$	128,818		$	117,268
Direct profit contribution
NALA	$	24,377		$	19,150		$	43,610		$	37,668
EMEA	9,154			7,756			17,879			16,223
APJ	1,909			2,523			2,708			4,106
Total direct profit contribution	35,440			29,429			64,197			57,997
Adjustments:
Stock-based compensation	(688		)	(715		)	(1,420		)	(1,287		)
Other, net	(5,675		)	(2,902		)	(11,077		)	(5,900		)
Gross profit	$	29,077		$	25,812		$	51,700		$	50,810

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Credit Facility and Capital Leases

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Credit Facility and Capital Leases

Credit Facility and Capital Leases

Revolving Credit Facility

On July 5, 2012, the Company, entered into a three-year credit agreement which provides for a secured revolving line of credit based on eligible accounts receivable of up to $25.0 million on and before July 5, 2013 and up to $30.0 million thereafter, in each case with a $2.0 million letter of credit sublimit. On June 18, 2013, the Company elected to maintain the revolving commitment at $25.0 million rather than have it increase to $30 million on July 5, 2013. Proceeds available under the agreement may be used for working capital and other general corporate purposes. The Company may prepay borrowing under the agreement in whole or in part at any time without premium or penalty. The Company may terminate the commitments under the credit agreement in whole at any time, and may reduce the commitments by up to $10.0 million between July 1, 2013 and June 30, 2014. On June 30, 2013, the Company amended the credit agreement to reduce the quarterly commitment fee, payable in arrears, based on the available commitments from the existing 0.45% rate to 0.30%.

Amounts outstanding on the facility at June 30, 2013 consisted of a letter of credit of $575,000 as required under an operating lease agreement for office space at the Company’s San Francisco headquarters. The loans bear interest, at the Company’s option, at a base rate determined in accordance with the credit agreement, minus 0.5%, or at a LIBOR rate plus 2.0%. Principal, together with all accrued and unpaid interest, is due and payable on July 5, 2015, the maturity date. The Company is also obligated to pay a quarterly commitment fee, payable in arrears, based on the available commitments at a rate of 0.30%. At June 30, 2013, the interest rate for borrowings under the facility was 2.2%.

The credit agreement contains customary affirmative and negative covenants, as well as financial covenants. Affirmative covenants include, among others, delivery of financial statements, compliance certificates and notices of specified events, maintenance of properties and insurance, preservation of existence, and compliance with applicable laws and regulations. Negative covenants include, among others, limitations on the ability of the Company and its subsidiaries to grant liens, incur indebtedness, engage in mergers, consolidations and sales of assets and engage in affiliate transactions. The agreement requires the Company to maintain a maximum leverage ratio and a minimum liquidity amount, each as defined in the agreement.

The credit agreement also contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and change in control of the Company, subject to grace periods in certain instances. Upon an event of default, the lender may declare the outstanding obligations of the Company under the agreement to be immediately due and payable and exercise other rights and remedies provided for under the credit agreement.

The Company’s obligations under the credit agreement are guaranteed by its subsidiary, ServiceSource Delaware, Inc. (the “Guarantor”) and are collateralized by substantially all of the assets of the Company and the Guarantor.

Effective June 29, 2012, the Company terminated a $20.0 million credit facility. At the time of the termination, no borrowings were outstanding other than a letter of credit in the face amount of $850,000.

Capital Leases

The Company has capital lease agreements that are collateralized by the underlying property and equipment and expire through September 2019. The weighted-average imputed interest rates for the capital lease agreements were 2.54% and 3.75% at June 30, 2013 and 2012, respectively.

Future minimum annual payments under capital lease obligations as of June 30, 2013 were as follows (in thousands):

	June 30, 2013
Years Ending
2013 (remaining six months)	$	163
2014	266
2015	73
2016	75
2017	77
Thereafter	140
Total	$	794

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

ServiceSource is the global leader in recurring revenue management, partnering with technology and technology-enabled companies to optimize maintenance, support and subscription revenue streams, while also improving customer relationships and loyalty. The Company delivers these results via a cloud-based solution, with dedicated service teams, leveraging benchmarks and best practices derived from their rich database of service and renewal behavior. By integrating software, managed services and data, the Company provides end-to-end management and optimization of the service-contract renewals process, including data management, quoting, selling and recurring revenue business intelligence. The Company receives commissions from its customers based on renewal sales that the Company generates on their behalf under a pay-for-performance model. In addition, the Company recently began to offer a purpose-built Software-As-A-Service (SaaS) application to maximize the renewal of subscriptions, maintenance and support contracts. The Company’s corporate headquarters is located in San Francisco, California. The Company has additional offices in Colorado, Tennessee, the United Kingdom, Ireland, Malaysia and Singapore.

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of ServiceSource International Inc. and its subsidiaries (“SSI” or “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies, consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in our Annual Report on Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for a fair statement of our financial position, operating results, and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results for the entire year.

The December 31, 2012 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-2 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU No. 2013-2 requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the income statement or as a separate disclosure in the notes. The new guidance became effective for the Company’s interim period ended March 31, 2013. The Company adopted this guidance and the adoption did not have any impact on its financial position, results of operations or cash flows as the amounts reclassified out of accumulated other comprehensive income is not material.

In June 2013, the Financial Accounting Standards Board determined that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. This guidance is effective for the Company’s interim and annual periods beginning January 1, 2014. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial statements.

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Credit Facility and Capital Leases - Additional Information (Detail) (USD $)	0 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended		0 Months Ended
	Jun. 30, 2013	Jun. 29, 2012	Jun. 30, 2013	Jun. 29, 2013	Jun. 30, 2013 Minimum	Jun. 30, 2012 Maximum	Jul. 05, 2012 Line of Credit	Jun. 30, 2013 Before July 5, 2013	Jun. 18, 2013 Before July 5, 2013	Jun. 30, 2013 After July 5, 2013	Jun. 18, 2013 After July 5, 2013	Jun. 30, 2013 Letter Of Credit Sublimit
Line of Credit Facility [Line Items]
Credit agreement term							3 years
Line of credit facility maximum borrowing capacity								$ 25,000,000.0	$ 25,000,000.0	$ 30,000,000.0	$ 30,000,000	$ 2,000,000.0
Line of credit facility reduction in commitment			10,000,000.0
Outstanding balance of revolving credit facility	575,000	850,000	575,000
Interest rate			(0.50%)
LIBOR rate	2.00%		2.00%
Revolving credit facility, maturity date			Jul. 05, 2015
Commitment fee	0.30%		0.30%	0.45%
Interest rate for borrowings under credit facility	2.20%		2.20%
Terminated credit facility		$ 20,000,000.0
Underlying property and equipment expiration period					September 2019
Weighted-average imputed interest rates for the capital lease agreements					2.54%	3.75%

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Cash, Cash Equivalents and Short-term Investments (Tables)

6 Months Ended

Jun. 30, 2013

Cash and Cash Equivalents [Abstract]

Summary of Cash and Cash Equivalents and Short-Term Investments

Cash and cash equivalents and short-term investments consisted of the following as of June 30, 2013 and December 31, 2012 (in thousands):

June 30, 2013

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	45,706	$	—	$	—		$	45,706
Cash equivalents:
Money market mutual funds	31,697		—		—			31,697
Total cash and cash equivalents	77,403		—		—			77,403
Short-term investments:
Corporate bonds	21,471		6		(51		)	21,426
U.S. agency securities	21,126		2		(50		)	21,078
Asset-backed securities	6,669		—		(29		)	6,640
U.S. Treasury securities	5,514		—		(9		)	5,505
Total short-term investments	54,780		8		(139		)	54,649
Cash, cash equivalents and short-term investments	$	132,183	$	8	$	(139	)	$	132,052

December 31, 2012

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	59,568	$	—	$	—		$	59,568
Cash equivalents:
Money market mutual funds	17,000		—		—			17,000
Total cash and cash equivalents	76,568		—		—			76,568
Short-term investments:
Corporate bonds	13,389		2		(14		)	13,377
U.S. agency securities	11,280		4		(1		)	11,283
Asset-backed securities	4,670		1		(5		)	4,666
U.S. Treasury securities	3,546		2		—			3,548
Total short-term investments	32,885		9		(20		)	32,874
Cash, cash equivalents and short-term investments	$	109,453	$	9	$	(20	)	$	109,442

Cost and Estimated Fair Value of Short-Term Fixed Income Securities

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated maturities as of June 30, 2013:

	Amortized Cost		Estimated Fair Value
Less than 1 year	$	5,098	$	5,097
Due in 1 to 5 years	49,682		49,552
Total	$	54,780	$	54,649

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. These audits include questioning the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with federal, state, local and foreign tax laws. The Company is currently undergoing examination of the California Franchise Tax Returns relating to California state income taxes of its operating subsidiary for the years 2008 through 2010. The 2008 through 2012 tax years generally remain subject to examination by federal, state and foreign tax authorities. The Company’s gross amount of unrecognized tax benefits increased from $0.4 million as of December 31, 2012 to $0.6 million as of June 30, 2013, $55,000 of which, if recognized, would affect the company’s effective tax rate. It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on the Company’s assessment of many factors, the Company does not expect that changes in the liability for unrecognized tax benefits for the next twelve months will have a significant impact on the Company’s consolidated financial position or results of operations.

During the year ended December 31, 2012 management assessed the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. Management believes that it is not more likely than not that the deferred tax assets will be realized with respect to US federal and state deferred tax assets, except for certain U.S. state deferred tax assets where the Company’s subsidiary has profitable operations. Accordingly, a valuation allowance was provided with respect to U.S. federal and most U.S. State deferred tax assets. A valuation allowance was also provided with respect to deferred tax assets from its Singapore and Ireland subsidiaries. The Company will continue to evaluate its ability to realize deferred tax assets on a quarterly basis. Significant management judgment is required in determining the provision for income taxes and deferred tax assets and liabilities. In the event that actual results differ from these estimates the Company will adjust these estimates in future periods and, the Company may need to adjust the effective tax rate for the current year.

The Company considers the undistributed earnings of its foreign subsidiaries permanently reinvested in foreign operations and has not provided for U.S. income taxes on such earnings.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted, which reinstated the federal research tax credit retroactive to January 1, 2012 and extended the credit through December 31, 2013. The 2012 federal research tax credit along with the first six months of 2013 federal research tax credit, which would otherwise have been recognized in the first half of 2013, is fully offset by a valuation allowance.

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Accrued Liabilities and Other (Tables)

6 Months Ended

Jun. 30, 2013

Payables and Accruals [Abstract]

Comprised Balance of Accrued Liabilities and Other

Accrued liabilities and other balances were comprised of the following (in thousands):

	June 30, 2013		December 31, 2012
Deferred revenue	$	3,955	$	2,295
Accrued operating expenses	3,633		3,664
Deferred rent obligations	887		986
Other employee related	394		323
Accrued other (includes ESPP contributions of $763 and $1,059 at June 30, 2013 and December 31, 2012, respectively)	4,771		3,135
	$	13,640	$	10,403

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Fair value of financial instruments (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Summary of Fair Value Measurement of Financial Instruments

The following table presents information about the Company’s financial instruments that are measured at fair value as of June 30, 2013 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	31,697	$	31,697	$	—
Total cash equivalents	31,697		31,697		—
Short-term investments:
Corporate bonds	21,426		—		21,426
U.S. agency securities	21,078		—		21,078
Asset-backed securities	6,640		—		6,639
U.S. Treasury securities	5,505		—		5,506
Total short-term investments	54,649		—		54,649
Cash equivalents and short-term investments	$	86,346	$	31,697	$	54,649

The following table presents information about the Company’s financial instruments that are measured at fair value as of December 31, 2012 and indicates the fair value hierarchy of the valuation (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Description
Cash equivalents:
Money market mutual funds	$	17,000	$	17,000	$	—
Total cash equivalents	17,000		17,000		—
Short-term investments:
Corporate bonds	13,377		—		13,377
U.S. agency securities	11,283		—		11,283
Asset-backed securities	4,666		—		4,666
U.S. Treasury securities	3,548		—		3,548
Total short-term investments	32,874		—		32,874
Cash equivalents and short-term investments	$	49,874	$	17,000	$	32,874

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 30, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	SREV
Entity Registrant Name	SERVICESOURCE INTERNATIONAL, INC.
Entity Central Index Key	0001310114
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		79,411,505

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Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment balances were comprised of the following (in thousands):

	June 30, 2013			December 31, 2012
Computers and equipment	$	15,875		$	14,733
Software	33,317			32,982
Furniture and fixtures	8,660			8,555
Leasehold improvements	10,970			10,801
	68,822			67,071
Less: accumulated depreciation and amortization	(38,660		)	(32,558		)
	30,162			34,513
Construction in progress	113			—
	$	30,275		$	34,513