EX-99.1 2 f51440exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
    CONTACTS:
     
(SUCCESS FACTORS LOGO)   Dominic Paschel
SuccessFactors, Inc.
Public & Investor Relations
415-262-4641
dpaschel@successfactors.com
SuccessFactors Announces
Fourth Quarter and Fiscal 2008 Results
Total 2008 Revenues Grow 77%, While Improving Operating Margins By 99%,
and Achieving Cash Profitability in Q4
    Company achieves cash profitability (positive cash flow from operations) in Q408
 
    Guidance of 30% revenue growth and ongoing quarterly cash profitability
 
    Company becomes one of the largest SaaS providers exceeding 4.5 million global users and adding more than 1.5 million users in 2008
SAN MATEO, Calif. — February 9, 2009 — SuccessFactors, Inc. (NASDAQ: SFSF), the global leader in on-demand performance and talent management solutions, today announced financial results for its fourth quarter and fiscal 2008 which ended December 31, 2008.
“SuccessFactors continues to deliver Software-as-a-Service (SaaS) leading revenue growth of 77% year-over-year,” said Lars Dalgaard, chief executive officer for SuccessFactors. “We achieved cash profitability 9 months ahead of our original target. In the recessionary environment, SuccessFactors has proven we have the ability to act quickly and nimbly, always focused on building a highly profitable company. Now with greater than $125 million in an annual recurring revenue base, we continue to maintain customer focus, producing a record 1,000 go-lives in 2008. In just 90 days, we were able to increase non-GAAP gross margin above 70% for the first time, from 67% to 71%, and up 18 full percentage points from 53% in Q407. We also were able to improve non-GAAP operating margin by 51 full percentage points from minus 61% in Q308 and by 99 full percentage points in total for 2008 from minus 109% in Q407 to minus 10% in Q408 - putting GAAP profitability on the horizon.”
“SuccessFactors has the largest individual SaaS deployments and the largest user base, with more than 4.5 million paying and unique users across 185 countries, up a record 1.5 million users in 2008. Our customers around the world in more than 60 industries are improving their businesses and driving increased shareholder value through increased employee alignment, motivation, and collaboration. Despite that, there remain more than a billion workers that can be monetized, which is why SuccessFactors continues to invest in this huge opportunity, having only penetrated less than 0.25% of a potential multi-billion dollar market. SuccessFactors has the leadership position to unlock this value.”
SuccessFactors’ results for the fourth quarter and fiscal year 2008:

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  Q4 FY08 Revenue: Q408 revenue was $33.0 million, compared to prior guidance of $31.0 million to $31.5 million, and $19.2 million for the same period last year, an increase of 72% year-over-year, and an increase of 11% sequentially from Q308.
  FY 2008 Revenue: Fiscal 2008 revenue was $111.9 million, compared to prior guidance of $109.9 million to $110.4 million, and $63.4 million for FY 2007, an increase of 77%.
  Q4 FY08 Cash Flows Generated from Operations: For the quarter ended December 31, 2008, the Company generated approximately $0.7 million of cash from operating activities which includes receipt of one-time payments upon settlements of litigation matters totaling $3.7 million, compared to the $12.3 million used in the quarter ended December 31, 2007.
  FY 2008 Cash Flows Used in Operations: For the fiscal year ended December 31, 2008, the Company used $12.0 million of cash in operating activities, an improvement of 58% from the $28.5 million used in fiscal 2007. Total cash, cash equivalents and marketable securities at December 31, 2008 are $102.4 million, up $11.6 million and 13% from the same period last year, and an increase of 1% sequentially from Q308.
  Q4 FY08 Net Loss per Share: On a GAAP basis, for the quarter ended December 31, 2008, the net loss per common share, basic and diluted, was $0.11. The non-GAAP net loss per common share, basic and diluted, was $0.06, which excludes approximately $2.7 million in stock-based compensation expense, compared to a non-GAAP net loss per share, basic and diluted, of $0.33 in Q308 and $0.49 in Q407, an improvement of 82% quarter-over-quarter and 88% year-over-year. GAAP and non-GAAP net loss per common share calculations are based on 55.8 million weighted average shares outstanding during the fourth quarter of 2008.
  FY 2008 Net Loss per Share: On a GAAP basis, the net loss per common share, basic and diluted, was $1.21. The non-GAAP net loss per common share, basic and diluted, was $1.05, which excludes approximately $8.6 million in stock-based compensation, compared to a non-GAAP loss per share of $1.73 in fiscal 2007, an improvement of 39% year-over-year. The fiscal 2007 non-GAAP loss per share excludes approximately $4.4 million in stock-based compensation, $2.5 million of other expense related to the fair value of our previously outstanding warrants and $1.9 million of debt issuance and related costs associated with these warrants. For the basis of GAAP and non-GAAP net loss calculations, there were 53.8 million weighted average shares outstanding during 2008 and 38.5 million for 2007.

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Additional Highlights:
  SuccessFactors launched SuccessFactors Stack Ranker, enabling executives and managers to quickly and effortlessly assess their team and create a visual and intuitive stack ranking of employees to help them make better and immediate business decisions: http://www.successfactors.com/stack-rank/enterprise/ or http://www.successfactors.com/press-releases/detail/?id=1227130
  SuccessFactors became SAP Certified and delivered the SuccessFactors Connector Toolkit 2.0 for SAP, enabling customers to quickly pull master data from any SAP instance: http://www.successfactors.com/press-releases/detail/?id=1238339
  SuccessFactors launched Business Performance Accelerators in January to enable global organizations from the C-suite down to optimize workforce performance and drive increased shareholder value for our customers: http://www.successfactors.com/business-performance-accelerators/enterprise/ or http://www.successfactors.com/press-releases/detail/?id=1243893
  SuccessFactors advanced the next phase of its relationship with IBM by making available a set of integrations between the SuccessFactors Performance and Talent Management Suite and IBM Lotus Connections and IBM WebSphere portal. These integrations will help drive higher levels of employee performance via collaboration and social networking: http://www.successfactors.com/press-releases/detail/?id=1245967
FY 2009 Guidance:
    SuccessFactors is providing guidance for its first quarter and full fiscal year 2009 as of February 9, 2009.
 
    Q1 FY09: Revenue for the Company’s first fiscal quarter is projected to be in the range of approximately $34.0 million to $34.5 million. Non-GAAP net loss per common share, basic and diluted, is expected to be in the range of approximately ($0.10) to ($0.12). Non-GAAP net loss per common share estimates exclude the effects of stock-based compensation expense and assume an average weighted share count of 56.3 million shares. The Company plans to maintain ongoing positive cash flow from operations.
  Full Year FY 2009: The Company expects full year revenue for fiscal 2009 to be in the range of approximately $145 million to $146 million, reflecting approximate 30% year-over-year total revenue growth. The Company also expects non-GAAP net loss per common share, basic and diluted, for fiscal 2009 to be in the range of ($0.23) to ($0.27). Non-GAAP net loss per common share estimates exclude the effects of estimated stock-based compensation expense and assume an average weighted share count of approximately 57.0 million shares.

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“Our guidance shows we expect healthy revenue growth during a period when many software companies are showing negative growth,” said Bruce Felt, chief financial officer for SuccessFactors. “We have begun to moderate our spending in favor of reaching our profitability targets sooner, and we remain significantly invested in the strategic talent management category we created. As our guidance reflects, we remain cautiously optimistic about 2009 and expect to achieve annual revenue growth and an improved bottom line at the same time.”
Conference Call
SuccessFactors will host a conference call to discuss its fourth quarter and fiscal 2008 results on Monday, February 9th, 2009 at 2:00 p.m. Pacific Standard Time. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company’s Investor Relations website at http://www.successfactors.com/investor. In addition, an archive of the webcast can be accessed through the same link until February 27, 2009. Participants who choose to call into the conference call can do so by dialing domestically at 866-923-9739 and internationally at 706-634-0915. A domestic replay will be available at 800-642-1687 or 706-645-9291 internationally, passcode 80384407, until February 27, 2009.
Use of Non-GAAP Financial Information
SuccessFactors provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). To help understand SuccessFactors’ past financial performance and future results, SuccessFactors has supplemented its financial results that it provides in accordance with GAAP, with non-GAAP financial measures. The method SuccessFactors uses to produce non-GAAP financial results is not computed according to GAAP and may differ from the methods used by other companies. The non-GAAP measures used by SuccessFactors exclude the impact of stock-based compensation expense recorded under SFAS 123(R). SuccessFactors’ reference to these non-GAAP financial results should be considered in addition to results that are prepared under current accounting standards but should not be considered as a substitute for, or superior to, the financial results that are presented as consistent with GAAP. SuccessFactors’ management uses the supplemental non-GAAP financial measures internally to understand, manage and evaluate SuccessFactors’ business and make operating decisions. These non-GAAP financial measures are among the factors SuccessFactors’ management uses in planning for and forecasting future periods. Reconciliation to the nearest GAAP financial measures of the non-GAAP financial measures is included in this press release.
About SuccessFactors, Inc.
SuccessFactors is one of the fastest growing public software companies and the leading provider of on-demand employee performance and talent management solutions. The company enables organizations

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of every size, and across every industry and geography, to achieve high-performing workforces through goal alignment and execution, talent development and planning, and pay-for-performance initiatives. From 92 customers and approximately 282,000 end users in 2003 to more than 2,500 customers and more than 4.5 million end users today, SuccessFactors’ solutions are widely deployed across 60 industries in over 185 countries in 31 languages. Founded in 2001 with offices around the world, the company employs passionate people focused on revolutionizing the future of work. For more information, visit: http://www.successfactors.com.
###
“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are SuccessFactors’ current expectations and beliefs.
These forward-looking statements include statements about expected revenue and non-GAAP loss per share for the first fiscal quarter of 2009, the full fiscal year 2009, future cash flow, potential market size, growth and related items. Factors that could cause actual results to differ materially include: our ability to continue to experience high customer renewal rates; whether customers renew their agreements for additional modules or users; levels of new customers; pricing pressures; the uncertain impact of the overall global economic slowdown, including on our customers, prospective customers and partners; the fact that our market is at an early stage of development, and it may not develop as rapidly as we anticipate; competitive factors; outages or security breaches; our ability to develop, and market acceptance of, new services; our ability to manage our growth; our ability to improve our internal controls; our ability to successfully expand our sales force and its effectiveness; our ability to continue to manage expenses; the impact of unforeseen expenses; and general economic conditions worldwide. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
Further information on these and other factors that could affect our financial results is included in the section entitled “Risk Factors” in our Annual Report on Form 10-K, and as amended on Form 10-K/A, for 2007 and in the reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission from time to time.
These documents are or will be available on the SEC Filings section of the Investor Relations section of our website at www.successfactors.com/investor.

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SuccessFactors, Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
“SuccessFactors” is a trademark of SuccessFactors, Inc., San Mateo, California. Other names used may be trademarks of their respective owners.

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SuccessFactors, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
                 
    As of December 31,     As of December 31,  
    2008     2007  
    (unaudited)     (1)  
Assets:
               
Current assets:
               
Cash and cash equivalents
  $ 69,859     $ 82,274  
Marketable securities
    32,505       8,513  
Accounts receivable, net of allowance for doubtful accounts
    44,446       42,072  
Deferred commissions
    5,721       4,199  
Prepaid expenses and other current assets
    3,224       2,347  
 
           
Total current assets
    155,755       139,405  
Restricted cash
    1,248       964  
Property and equipment, net
    6,933       6,532  
Deferred commissions, net of current portion
    6,292       7,343  
Other assets
    198       300  
 
           
Total assets
  $ 170,426     $ 154,544  
 
           
 
               
Liabilities and stockholders’ equity (deficit):
               
Current liabilities:
               
Accounts payable
  $ 1,960     $ 3,595  
Accrued expenses and other current liabilities
    9,632       7,016  
Accrued employee compensation
    12,159       18,265  
Deferred revenue
    128,940       84,624  
Current portion of capital lease obligations
    37       34  
 
           
Total current liabilities
    152,728       113,534  
Capital lease obligations, net of current portion
    19       56  
Deferred revenue, net of current portion
    20,858       16,386  
Other long-term liabilities
    2,197       4,625  
 
           
Total liabilities
    175,802       134,601  
 
               
Stockholders’ equity (deficit):
               
Common stock
    56       51  
Additional paid-in capital
    200,907       161,150  
Accumulated other comprehensive income
    (74 )     55  
Accumulated deficit
    (206,265 )     (141,313 )
 
           
Total stockholders’ equity (deficit)
    (5,376 )     19,943  
 
           
Total liabilities and stockholders’ equity (deficit)
  $ 170,426     $ 154,544  
 
           
 
(1)   The condensed consolidated balance sheet as of December 31, 2007 has been derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 


 

SuccessFactors, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Revenue
  $ 33,026     $ 19,211     $ 111,913     $ 63,350  
Cost of revenue (1)
    10,069       9,128       38,836       26,341  
 
                       
Gross profit
    22,957       10,083       73,077       37,009  
 
                       
Operating expenses: (1)
                               
Sales and marketing
    22,066       21,536       92,187       70,963  
Research and development
    5,110       5,312       23,085       16,725  
General and administrative
    4,839       6,028       24,744       19,091  
Gain on settlement of litigation, net
    (3,132 )           (971 )      
 
                       
Total operating expenses
    28,883       32,876       139,045       106,779  
 
                       
 
                               
Loss from operations
    (5,926 )     (22,793 )     (65,968 )     (69,770 )
 
                               
Interest income (expense) and other, net
    155       (3,193 )     1,780       (5,259 )
 
                       
Loss before provision for income taxes
    (5,771 )     (25,986 )     (64,188 )     (75,029 )
 
                               
Provision for income taxes
    (208 )     (305 )     (764 )     (425 )
 
                       
Net loss
  $ (5,979 )   $ (26,291 )   $ (64,952 )   $ (75,454 )
 
                       
 
                               
Net loss per common share, basic and diluted
  $ (0.11 )   $ (1.11 )   $ (1.21 )   $ (8.35 )
 
                       
 
                               
Shares used in computing net loss per common share, basic and diluted
    55,794       23,688       53,803       9,036  
 
                       
 
(1)   Amounts include stock-based compensation expenses as follows:
                                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2008   2007   2008   2007
Cost of revenue
  $ 362     $ 189     $ 1,053     $ 448  
Sales and marketing
    1,376       879       4,084       2,269  
Research and development
    308       208       1,099       512  
General and administrative
    651       501       2,368       1,189  
 
                       
 
  $ 2,697     $ 1,777     $ 8,604     $ 4,418  
 
                       

 


 

SuccessFactors, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
                                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2008   2007   2008   2007
Cash flow from operating activities:
                               
Net loss
  $ (5,979 )   $ (26,291 )   $ (64,952 )   $ (75,454 )
Adjustments to reconcile net loss to net cash used in operating activities:
                               
Depreciation and amortization
    1,208       796       3,885       2,173  
Loss on retirement/impairment of fixed asset
    257       156       193       156  
Amortization of deferred commissions
    1,659       1,453       6,572       4,063  
Stock-based compensation expense
    2,697       1,777       8,604       4,418  
Amortization of debt issuance costs
          1,616             1,916  
Adjustment to fair value of convertible preferred stock warrants
          1,200             2,510  
Changes in assets and liabilities:
                               
Accounts receivable
    (3,867 )     (18,664 )     (2,374 )     (19,268 )
Deferred commissions
    (2,028 )     (5,123 )     (7,043 )     (9,958 )
Prepaid expenses and other current assets
    1,010       (1,238 )     (877 )     (1,309 )
Other assets
    82       388       102       (296 )
Accounts payable
    (2,429 )     (1,681 )     (1,635 )     1,791  
Accrued expenses and other current liabilities
    (535 )     550       2,997       4,165  
Accrued employee compensation
    (5,102 )     6,475       (6,106 )     6,699  
Other liabilities
    (35 )     (193 )     (179 )     1,270  
Deferred revenue
    13,741       26,524       48,788       48,656  
         
Net cash provided by (used in) operating activities
    679       (12,255 )     (12,025 )     (28,468 )
         
 
                               
Cash flow from investing activities:
                               
Restricted cash
    176       307       (284 )     (30 )
Capital expenditures
    (279 )     (1,595 )     (4,479 )     (5,475 )
Purchases of available-for-sale securities
    (3,044 )     (8,513 )     (78,086 )     (11,218 )
Proceeds from maturities of available-for-sale securities
    30,659       715       46,160       2,705  
Proceeds from sales of available-for-sale securities
                7,983        
         
Net cash provided by (used in) investing activities
    27,512       (9,086 )     (28,706 )     (14,018 )
         
 
                               
Cash flow from financing activities:
                               
Proceeds from exercise of stock options, net
    272       178       1,480       553  
Proceeds from early exercise of stock options, net
          4,674       162       4,674  
Proceeds from initial public offering, net of offering costs
          104,602       (545 )     104,602  
Proceeds from follow-on offering, net of offering costs
                27,430        
Proceeds from exercise of preferred stock warrants
                      20  
Proceeds from advance of line of credit
                      10,000  
Repayment of line of credit
          (21,408 )           (21,272 )
Principal payments on capital lease obligations
    (9 )     (9 )     (34 )     (36 )
         
Net cash provided by financing activities
    263       88,037       28,493       98,541  
         
 
                               
Effect of exchange rate changes on cash and cash equivalents
    (87 )     20       (177 )     47  
         
Net increase (decrease) in cash and cash equivalents
    28,367       66,716       (12,415 )     56,102  
Cash and cash equivalents at beginning of period
    41,492       15,558       82,274       26,172  
         
Cash and cash equivalents at end of period
  $ 69,859     $ 82,274     $ 69,859     $ 82,274  
         

 


 

SuccessFactors, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited, in thousands, except per share data)
Annual recurring revenue is defined as the amount we invoiced for subscriptions to our hosted service during the prior four quarters.
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Net loss and net loss per share reconciliations:
                               
GAAP net loss
  $ (5,979 )   $ (26,291 )   $ (64,952 )   $ (75,454 )
(a) Stock-based compensation as measured under SFAS123R
    2,697       1,777       8,604       4,418  
(g) Adjustment to fair value of convertible preferred stock warrants
          1,200             2,510  
(h) Amortization of debt issuance costs
          1,616             1,916  
 
                       
Non-GAAP net loss excluding stock-based compensation expense
  $ (3,282 )   $ (21,698 )   $ (56,348 )   $ (66,610 )
 
                       
 
                               
GAAP net loss per common share — basic and diluted
  $ (0.11 )   $ (1.11 )   $ (1.21 )   $ (8.35 )
 
                       
Non-GAAP net loss per common share (excluding stock-based compensation expense) — basic and diluted
  $ (0.06 )   $ (0.92 )   $ (1.05 )   $ (7.37 )
 
                       
 
                               
GAAP shares used in computing net loss per common share, basic and diluted
    55,794       23,688       53,803       9,036  
 
                       
Non-GAAP net loss per common share (excluding stock-based compensation expense and other items) — basic and diluted
  $ (0.06 )   $ (0.49 )   $ (1.05 )   $ (1.73 )
 
                       
Non-GAAP shares used in computing net loss per common share-basic and diluted
    55,794       43,855       53,803       38,463  
 
                       
 
                               
Total spend reconciliation:
                               
GAAP total cost of revenue and operating expenses
  $ 38,952     $ 42,004     $ 177,881     $ 133,120  
(a) Stock-based compensation as measured under SFAS123R
    2,697       1,777       8,604       4,418  
 
                       
Non-GAAP total cost of revenue and operating expenses (total spend)
  $ 36,255     $ 40,227     $ 169,277     $ 128,702  
 
                       
 
                               
Gross profit and gross margin reconciliation:
                               
GAAP gross profit
  $ 22,957     $ 10,083     $ 73,077     $ 37,009  
(b) Stock-based compensation in cost of revenue as measured under SFAS123R
    362       189       1,053       448  
 
                       
Non-GAAP gross profit
  $ 23,319     $ 10,272     $ 74,130     $ 37,457  
 
                       
 
                               
GAAP gross margin percentage
    70 %     52 %     65 %     58 %
 
                       
Non-GAAP gross margin percentage
    71 %     53 %     66 %     59 %
 
                       
 
                               
Cost of revenue reconciliation:
                               
GAAP cost of revenue
  $ 10,069     $ 9,128     $ 38,836     $ 26,341  
(b) Stock-based compensation in cost of revenue as measured under SFAS123R
    362       189       1,053       448  
 
                       
Non-GAAP cost of revenue
  $ 9,707     $ 8,939     $ 37,783     $ 25,893  
 
                       
 
                               
Total operating expenses reconciliation:
                               
GAAP operating expenses
  $ 28,883     $ 32,876     $ 139,045     $ 106,779  
(c) Stock-based compensation in operating expenses as measured under SFAS123R
    2,335       1,588       7,551       3,970  
 
                       
Non-GAAP operating expenses
  $ 26,548     $ 31,288     $ 131,494     $ 102,809  
 
                       
 
                               
Total sales and marketing reconciliation:
                               
GAAP sales and marketing
  $ 22,066     $ 21,536     $ 92,187     $ 70,963  
(d) Stock-based compensation in sales and marketing as measured under SFAS123R
    1,376       879       4,084       2,269  
 
                       
Non-GAAP sales and marketing
  $ 20,690     $ 20,657     $ 88,103     $ 68,694  
 
                       
 
                               
Total research and development reconciliation:
                               
GAAP research and development
  $ 5,110     $ 5,312     $ 23,085     $ 16,725  
(e) Stock-based compensation in research and development as measured under SFAS123R
    308       208       1,099       512  
 
                       
Non-GAAP research and development
  $ 4,802     $ 5,104     $ 21,986     $ 16,213  
 
                       
 
                               
Total general and administrative reconciliation:
                               
GAAP general and administrative expenses
  $ 4,839     $ 6,028     $ 24,744     $ 19,091  
(f) Stock-based compensation in general and administrative as measured under SFAS123R
    651       501       2,368       1,189  
 
                       
Non-GAAP general and administrative
  $ 4,188     $ 5,527     $ 22,376     $ 17,902  
 
                       
 
                               
Operating margin reconciliation:
                               
GAAP loss from operations
  $ (5,926 )   $ (22,793 )   $ (65,968 )   $ (69,770 )
(b) Stock-based compensation in cost of revenue as measured under SFAS123R
    362       189       1,053       448  
(d) Stock-based compensation in sales and marketing as measured under SFAS123R
    1,376       879       4,084       2,269  
(e) Stock-based compensation in research and development as measured under SFAS123R
    308       208       1,099       512  
(f) Stock-based compensation in general and administrative as measured under SFAS123R
    651       501       2,368       1,189  
 
                       
Non-GAAP loss from operations less SFAS123R
  $ (3,229 )   $ (21,016 )   $ (57,364 )   $ (65,352 )
 
                       
 
                               
Revenue
  $ 33,026     $ 19,211     $ 111,913     $ 63,350  
 
                       
Non-GAAP operating margin percentage
    (10 %)     (109 %)     (51 %)     (103 %)