8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): November 2, 2010

SuccessFactors, Inc.

(Exact Name of the Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-33755	94-3398453
(Commission File Number)	(IRS Employer Identification No.)
1500 Fashion Island Blvd., Suite 300, San Mateo, CA	94404
(Address of Principal Executive Offices)	(Zip Code)

(650) 645-2000

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

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

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

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

Item 2.02. Results of Operations and Financial Condition

On November 2, 2010, SuccessFactors, Inc. issued a press release announcing its results for the quarter ended September 30, 2010. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein.

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

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. 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 attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Number	Description
99.1	Press release dated November 2, 2010

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.

Dated: November 2, 2010	SUCCESSFACTORS, INC.
	By:	/S/    HILLARY SMITH
		Hillary Smith
		General Counsel and Secretary

EXHIBIT INDEX

Number	Description
99.1	Press release dated November 2, 2010

EX-99.1

Exhibit 99.1

CONTACTS: Dominic Paschel SuccessFactors, Inc. Global Public & Investor Relations 415-262-4641 dpaschel@successfactors.com

SuccessFactors Announces Record Third Quarter Fiscal 2010 Results

• Billings grow to $65.9 million, an increase of 32% year-over-year

• Non-GAAP revenues grow to $53.4 million, an increase of 38% year-over-year

• Cash flow from operations grows to $13 million, an increase of 264% year-over-year

• Raises 2010 non-GAAP revenue guidance from $198 million to $200 million, to $203.2 million to $203.7 million

SAN MATEO, Calif. – November 02, 2010 – SuccessFactors, Inc. (NASDAQ: SFSF) today announced results for its third quarter fiscal 2010 which ended September 30, 2010.

“We believe the era of Business Execution Software is here. In Q3 2010, SuccessFactors saw strong performance from our sales organization with impressive transactions from current and new customers, contributing to all-time high in quarterly billings at $65.9 million, which grew 32% year-over-year – we were really proud we broke above 30%. It feels really strong, a lot harder to do 30% than 10% and 20%, each point is so hard given the denominator has become large, we are just so proud of the team,” said Lars Dalgaard, founder and CEO for SuccessFactors.

“SuccessFactors also hit an all-time high in quarterly non-GAAP revenue at $53.4 million growing 38% year-over-year. SuccessFactors posted record 3rd quarter cash flow from operations of $13 million, expanding 264% year-over-year. And SuccessFactors billings margin expanded from 12% in Q210 to 19% in Q310.

“SuccessFactors continues to see increased adoption and tangible value generated to customers using our software. Our leadership in the new category of Business Execution Software, which we created, is fueling our growth.”

Results for the Third Quarter Fiscal 2010:

• Q3 FY10 Non-GAAP Revenue: For the quarter ended September 30, 2010, non-GAAP revenue was $53.4 million, compared to the company’s prior guidance of $52.5 million to $53.5 million, and compared to $38.7 million in the quarter ended September 30, 2009, an increase of approximately 38% year-over-year and an increase of 8% sequentially from Q210.

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• Q3 FY10 Non-GAAP Operating Profit: For the quarter ended September 30, 2010, non-GAAP operating profit was $80,000. Non-GAAP operating profit excludes approximately $8.5 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs and a $3.1 million revaluation of contingent consideration for the quarter ended September 30, 2010.

• Q3 FY10 Total Deferred Revenue: Total deferred revenue as of September 30, 2010 was $206.1 million, up approximately 10% sequentially from $188.2 million at June 30, 2010 and up approximately 28% year-over-year from $161.0 million at September 30, 2009.

• Q3 FY10 Cash Flow Generated from Operations: For the quarter ended September 30, 2010, cash flow generated from operating activities was $13 million, up approximately 264% from $3.6 for the quarter ended September 30, 2009.

• Q3 FY10 Net Income (Loss) per Common Share: On a GAAP basis, for the quarter ended September 30, 2010, net loss per common share, basic and diluted, was $(0.04). Non-GAAP net income per common share, basic and diluted was $0.01, which excludes approximately $8.5 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs, $3.1 million revaluation of contingent consideration related to business combinations and a $3.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, compared to breakeven at $0.00 in Q210 which excluded approximately $4.5 million of stock-based compensation and $0.01 in Q309 which excluded approximately $2.6 million of stock-based compensation. For the third quarter of 2010, GAAP and non-GAAP net income (loss) per common share calculations assume average weighted basic and diluted share counts of approximately 74.6 million shares and 81.7 million shares, respectively.

For Additional Third Quarter Fiscal 2010 Highlights please visit:

http://www.successfactors.com/press-releases/

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Guidance:

SuccessFactors is raising guidance for full fiscal year 2010 and initiating guidance for its fourth quarter fiscal 2010, as of November 2^nd, 2010.

• Q4 FY10: Non-GAAP revenue for the company’s fourth fiscal quarter is projected to be in the range of approximately $55.5 million to $56.0 million. Note that non-GAAP revenue includes the effect of deferred revenue from acquired companies that is required to be written down for GAAP purposes under purchase accounting rules. Non-GAAP net income per common share, basic and diluted, is expected to be breakeven. Non-GAAP net income per common share estimates exclude the effects of estimated stock-based compensation expense, amortization of intangible assets, future cash consideration of acquisitions, integration costs and revaluation of contingent consideration related to business combinations and any unrealized foreign exchange gains/losses on an intercompany acquisition loan and assumes average weighted basic and diluted share counts of approximately 75.9 million shares and 82.9 million shares, respectively.

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• Full Year 2010: Non-GAAP revenue for the company’s full fiscal 2010 is now expected to be in the approximate range of $203.2 million to $203.7 million, raised from the non-GAAP revenue range of approximately $198 million to $200 million given going into in Q310 which was raised from the approximate GAAP range of $178 million to $180 million going into 2010. The company now expects non-GAAP net income per common share for fiscal 2010 to be between $0.06 and $0.07 from prior guidance of around breakeven. Non-GAAP net income per common share estimates exclude the effects of estimated stock-based compensation expense, amortization of intangible assets, future cash consideration of acquisitions, integration costs and revaluation of contingent consideration related to business combinations and any unrealized foreign exchange gains/losses on an intercompany acquisition loan and assumes average weighted basic and diluted share counts of approximately 73.8 million shares and 80.8 million shares, respectively.

Q310 Financial Results Conference Call:

SuccessFactors will host a conference call today at 2:00 p.m. (PT) / 5:00 p.m. (ET) to discuss the third quarter fiscal 2010 financial results with the investment community. A live web broadcast of the event will be available on SuccessFactors’ Investor Relations website at http://www.successfactors.com/investor. A live domestic dial-in is available at (877) 398-2615 or (702) 495-1086 internationally. A domestic replay will be available at (800) 642-1687 or (706) 645-9291 internationally, passcode 16437811, and available via webcast replay until November 19^th, 2010.

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 in this press release exclude the impact of stock-based compensation expense, the amortization of intangible assets, integration costs, future cash consideration and any revaluation of contingent consideration or write-downs for fair value accounting related to business combinations and any unrealized foreign exchange gain/loss on an intercompany loan related to the acquisition of Inform. The company defines bookings or billings as revenue plus change in total deferred revenue. Non-GAAP revenue includes revenue from acquired companies that is required to be written down for GAAP purposes under purchase accounting rules.

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About SuccessFactors, Inc.

SuccessFactors is a global leader in Business Execution Software. The SuccessFactors Business Execution (BizX) Suite, which is delivered through the cloud, improves business alignment, team execution and people performance to drive results for companies of all sizes. Across 168 countries and 34 languages, more than 8 million users and 3,000 companies leverage SuccessFactors every day, up from approximately 300,000 users and 100 companies in 2003. BizX bridges the gap between strategy and success by allowing every person in an organization to execute against their goals better and faster. SuccessFactors’ recent acquisitions of YouCalc, Inform and CubeTree supplement SuccessFactors’ core BizX strategy with solutions that align with SuccessFactors’ mission of helping companies get work done by delivering robust business insights and improved collaboration. To learn more, visit:www.successfactors.com.

Execution Is The Difference(TM)

Follow us: http://twitter.com/SuccessFactors

Like us: http://facebook.com/SuccessFactors

“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 non-GAAP revenue, non-GAAP net income, impact of acquisitions and product performance. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: our ability to retain customers and to experience high customer renewal rates; whether customers renew their agreements for additional modules or users; pricing pressures; the uncertain impact of the overall global economic conditions, including on customers, prospective customers and partners, renewal rates and length of sales cycles; the fact that both the business execution and the social business markets are at an early stage of development, and may not develop as rapidly as we anticipate; risks related to the integration of the acquisitions, including retaining customers and employees and managing geographically-dispersed operations; competitive factors; outages or security breaches; our ability to develop, and market acceptance of, new services; the impact of any discovered product defects or outages; our ability to continue to sell our services outside the HR area; our ability to manage our growth; our ability to successfully expand our sales force and its effectiveness; whether our resellers and other partners will be successful in marketing our products; our ability to continue to manage expenses; the impact of unforeseen expenses, including as a result of integrating acquisitions; 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.

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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 in our most recent report 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 in the SEC Filings section of the Investor Relations section of our website at www.successfactors.com/investor. Information on our website is not part of this release.

###

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SuccessFactors, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

	As of September 30, 2010			As of December 31, 2009
	(unaudited)			(1)
Assets:
Current assets:
Cash and cash equivalents	$	66,572		$	76,618
Marketable securities		267,782			246,629
Accounts receivable, net of allowance for doubtful accounts		56,118			57,611
Deferred commissions		6,329			5,950
Prepaid expenses and other current assets		8,671			5,679
Total current assets		405,472			392,487
Restricted cash		1,033			931
Property and equipment, net		6,992			5,787
Deferred commissions, less current portion		10,968			9,233
Goodwill		63,041			—
Intangible assets		38,253			—
Other assets		477			259
Total assets	$	526,236		$	408,697
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	2,328		$	794
Accrued expenses and other current liabilities		11,074			7,220
Accrued employee compensation		16,468			14,546
Deferred revenue		190,119			160,356
Contingent consideration		5,557			—
Total current liabilities		225,546			182,916
Capital lease obligations, less current portion		45			—
Deferred revenue, less current portion		15,968			21,268
Long-term taxes payable		1,678			1,643
Contingent consideration, less current portion		25,209			—
Other long-term liabilities		1,009			367
Total liabilities		269,455			206,194
Stockholders’ equity:
Common stock		76			72
Additional paid-in capital		480,986			421,419
Accumulated other comprehensive income		3,017			(89	)
Accumulated deficit		(227,298	)		(218,899	)
Total stockholders’ equity		256,781			202,503
Total liabilities and stockholders’ equity	$	526,236		$	408,697

(1) The condensed consolidated balance sheet as of December 31, 2009 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						Three Months Ended September 30,						Nine Months Ended September 30,
	March 31,			June 30,
	2010			2010			2010			2009			2010			2009
	With Adoption of ASU 2009-13			With Adoption of ASU 2009-13			With Adoption of ASU 2009-13						With Adoption of ASU 2009-13
Revenue
Subscription and support	$	36,145		$	38,370		$	41,638		$	30,595		$	116,153		$	87,857
Professional services and other		8,590			11,133			9,898			8,090			29,621			22,988
Total revenue		44,735			49,503			51,536			38,685			145,774			110,845
Cost of revenue (1)
Subscription and support		5,297			5,991			7,613			4,539			18,901			12,699
Professional services and other		5,292			5,746			8,861			4,292			19,899			12,568
Total cost of revenue		10,589			11,737			16,474			8,831			38,800			25,267
Total gross profit		34,146			37,766			35,062			29,854			106,974			85,578
Operating expenses: (1)
Sales and marketing		22,242			22,177			25,166			19,573			69,585			59,125
Research and development		7,725			8,926			11,048			6,343			27,699			17,967
General and administrative		7,494			8,203			9,180			6,016			24,877			18,542
Revaluation of contingent consideration		—			—			(3,056	)		—			(3,056	)		—
Total operating expenses		37,461			39,306			42,338			31,932			119,105			95,634
Loss from operations		(3,315	)		(1,540	)		(7,276	)		(2,078	)		(12,131	)		(10,056	)
Interest income (expense) and other, net		(268	)		(268	)		4,754			210			4,218			823
Loss before provision for income taxes		(3,583	)		(1,808	)		(2,522	)		(1,868	)		(7,913	)		(9,233	)
Provision for income taxes		(127	)		(67	)		(292	)		(104	)		(486	)		(742	)
Net loss	$	(3,710	)	$	(1,875	)	$	(2,814	)	$	(1,972	)	$	(8,399	)	$	(9,975	)
Net loss per common share, basic and diluted	$	(0.05	)	$	(0.03	)	$	(0.04	)	$	(0.03	)	$	(0.11	)	$	(0.18	)
Shares used in computing net loss per common share, basic* and diluted		72,008			72,645			74,618			57,292			73,100			56,791
(1)    Amounts include stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs as follows:
	Three Months Ended						Three Months Ended September 30,						Nine Months Ended September 30,
	March 31,			June 30,
	2010			2010			2010			2009			2010			2009
Cost of revenue	$	603		$	677		$	2,322		$	291		$	3,602		$	989
Sales and marketing		1,955			1,794			2,408			1,143			6,157			3,233
Research and development		875			722			975			312			2,572			904
General and administrative		1,593			1,328			2,815			815			5,736			2,293
	$	5,026		$	4,521		$	8,520		$	2,561		$	18,067		$	7,419

* Excludes 561,883 shares held in escrow in connection with Inform and Cubetree acquisitions

SuccessFactors, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,			June 30,			September 30,						September 30,
	2010			2010			2010			2009			2010			2009
	With Adoption of ASU 2009-13			With Adoption of ASU 2009-13			With Adoption of ASU 2009-13						With Adoption of ASU 2009-13
Cash flow from operating activities:
Net loss	$	(3,710	)	$	(1,875	)	$	(2,814	)	$	(1,972	)	$	(8,399	)	$	(9,975	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,273			1,332			1,469			955			4,074			2,915
Gain (loss) on retirement/impairment of fixed asset		—			—			76			2			76			(63	)
Amortization of deferred commissions		2,100			2,225			2,227			1,785			6,552			5,399
Stock-based compensation expense		5,026			4,521			5,841			2,561			15,388			7,419
Amortization of intangibles		—			—			1,482			—			1,482			—
Revaluation of contingent consideration		—			—			(3,056	)		—			(3,056	)		—
Changes in assets and liabilities:
Accounts receivable		15,149			(3,758	)		(8,113	)		(6,864	)		3,278			1,584
Deferred commissions		(1,892	)		(2,317	)		(4,457	)		(3,375	)		(8,666	)		(5,837	)
Prepaid expenses and other current assets		(1,508	)		323			(1,628	)		(2,587	)		(2,813	)		(3,771	)
Other assets		(396	)		(149	)		327			(220	)		(218	)		(324	)
Accounts payable		(335	)		615			305			(444	)		585			(1,751	)
Accrued expenses and other current liabilities		244			226			2,000			443			2,470			(2,135	)
Accrued employee compensation		(6,024	)		2,628			4,710			1,880			1,314			1,961
Long-term taxes payable		(35	)		(81	)		152			249			36			555
Other liabilities		(87	)		(129	)		208			(28	)		(8	)		8
Deferred revenue		3,326			3,244			14,285			11,193			20,855			11,219
Net cash provided by operating activities		13,131			6,805			13,014			3,578			32,950			7,204
Cash flow from investing activities:
Restricted cash		3			9			(14	)		173			(2	)		197
Prepaid acquisition costs		—			(2,175	)		2,175			—			—			—
Capital expenditures		(632	)		(1,150	)		(1,414	)		(1,176	)		(3,196	)		(1,524	)
Proceeds from sale of assets		1			—			—			—			1			88
Acquisitions, net of cash acquired		—			—			(26,089	)		—			(26,089	)		—
Purchases of available-for-sale securities		(34,459	)		(111,182	)		(127,092	)		(34,330	)		(272,733	)		(112,957	)
Proceeds from maturities of available-for-sale securities		26,100			66,003			62,250			34,185			154,353			73,989
Proceeds from sales of available-for-sale securities		20,000			23,244			53,256			—			96,500			546
Net cash provided by (used in) investing activities		11,013			(25,251	)		(36,928	)		(1,148	)		(51,166	)		(39,661	)
Cash flow from financing activities:
Offering costs		—			(111	)		—			—			(111	)		—
Proceeds from exercise of stock options, net		1,936			2,797			6,215			1,469			10,948			3,518
Principal payments on capital lease obligations		10			(10	)		—			(9	)		—			(27	)
Net cash provided by financing activities		1,946			2,676			6,215			1,460			10,837			3,491
Effect of exchange rate changes on cash and cash equivalents		(104	)		(163	)		(2,400	)		83			(2,667	)		145
Net increase (decrease) in cash and cash equivalents		25,986			(15,933	)		(20,099	)		3,973			(10,046	)		(28,821	)
Cash and cash equivalents at beginning of period		76,618			102,604			86,671			37,065			76,618			69,859
Cash and cash equivalents at end of period	$	102,604		$	86,671		$	66,572		$	41,038		$	66,572		$	41,038

SuccessFactors, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited, in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Non-GAAP Revenue
Revenue	$	51,536		$	38,685		$	145,774		$	110,845
(a) Net impact of acquisition related deferred revenue before fair value adjustment		1,892			—			1,892			—
Non-GAAP Revenue	$	53,428		$	38,685		$	147,666		$	110,845
Bookings reconciliation:
GAAP Revenue	$	51,536		$	38,685		$	145,774		$	110,845
Ending total deferred revenue		206,087			161,016			206,087			161,016
Less: Beginning total deferred revenue		188,194			149,824			181,624			149,798
Less: Beginning total deferred revenue from acquisitions		3,573			—			3,573			—
Change in total deferred revenue		14,320			11,192			20,890			11,218
Bookings (revenue plus change in total deferred revenue)	$	65,856		$	49,877		$	166,664		$	122,063
Billings profit and margin reconciliation:
Billings revenue	$	65,856		$	49,877		$	166,664		$	122,063
Non-GAAP total cost of revenue and operating expenses (total spend)		53,348			38,202			142,895			113,482
Billings profit	$	12,508		$	11,675		$	23,769		$	8,581
Billings margin		19	%		23	%		14	%		7	%
Net loss and net loss per share reconciliations:
GAAP net loss	$	(2,814	)	$	(1,972	)	$	(8,399	)	$	(9,975	)
(a) Net impact of acquisition related deferred revenue before fair value adjustment		1,892			—			1,892			—
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		8,520			2,561			18,066			7,419
(c) Revaluation of contingent consideration		(3,056	)		—			(3,056	)		—
(d) Foreign exchange unrealized gain on intercompany acquisition loan related to Inform		(3,464	)		—			(3,464	)		—
Non-GAAP net income (loss) excluding stock-based compensation expense and other items	$	1,078		$	589		$	5,039		$	(2,556	)
GAAP net loss per common share - basic and diluted	$	(0.04	)	$	(0.03	)	$	(0.11	)	$	(0.18	)
Non-GAAP net income (loss) per common share (excluding stock-based compensation expense and other items) - basic	$	0.01		$	0.01		$	0.07		$	(0.05	)
Non-GAAP net income (loss) per common share (excluding stock-based compensation expense and other items) - diluted	$	0.01		$	0.01		$	0.06		$	(0.05	)
GAAP shares used in computing net loss per common share, basic		74,618			57,292			73,100			56,791
GAAP shares used in computing net loss per common share, diluted		81,681			57,292			80,009			56,791
Total spend reconciliation:
GAAP total cost of revenue and operating expenses	$	58,812		$	40,763		$	157,905		$	120,901
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		8,520			2,561			18,066			7,419
(c) Revaluation of contingent consideration		(3,056	)		—			(3,056	)		—
Non-GAAP total cost of revenue and operating expenses (total spend)	$	53,348		$	38,202		$	142,895		$	113,482
Gross profit and gross margin reconciliations:
GAAP gross profit	$	35,062		$	29,854		$	106,974		$	85,578
(a) Net impact of acquisition related deferred revenue before fair value adjustment		1,892			—			1,892			—
(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,322			291			3,601			989
Non-GAAP gross profit	$	39,276		$	30,145		$	112,467		$	86,567
GAAP gross margin percentage		68	%		77	%		73	%		77	%
Non-GAAP gross margin percentage		74	%		78	%		76	%		78	%
Cost of revenue reconciliation:
GAAP cost of revenue	$	16,474		$	8,831		$	38,800		$	25,267
(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,322			291			3,601			989
Non-GAAP cost of revenue	$	14,152		$	8,540		$	35,199		$	24,278
Total operating expenses reconciliation:

SuccessFactors, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited, in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
GAAP operating expenses	$	42,338		$	31,932		$	119,105		$	95,634
(b2) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		6,198			2,270			14,465			6,430
(c) Revaluation of contingent consideration		(3,056	)		—			(3,056	)		—
Non-GAAP operating expenses	$	39,196		$	29,662		$	107,696		$	89,204
Total sales and marketing reconciliation:
GAAP sales and marketing	$	25,166		$	19,573		$	69,585		$	59,125
(b3) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,408			1,143			6,157			3,233
Non-GAAP sales and marketing	$	22,758		$	18,430		$	63,428		$	55,892
Total research and development reconciliation:
GAAP research and development	$	11,048		$	6,344		$	27,699		$	17,967
(b4) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		975			312			2,572			904
Non-GAAP research and development	$	10,073		$	6,032		$	25,127		$	17,063
Total general and administrative reconciliation:
GAAP general and administrative expenses	$	9,180		$	6,016		$	24,877		$	18,542
(b5) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,815			815			5,736			2,293
Non-GAAP general and administrative	$	6,365		$	5,201		$	19,141		$	16,249
Operating margin reconciliation:
GAAP loss from operations	$	(7,276	)	$	(2,078	)	$	(12,131	)	$	(10,056	)
(a) Net impact of acquisition related deferred revenue before fair value adjustment		1,892			—			1,892			—
(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		8,520			2,561			18,066			7,419
(c) Revaluation of contingent consideration		(3,056	)		—			(3,056	)		—
Non-GAAP income (loss) from operations less stock-based compensation and other items	$	80		$	483		$	4,771		$	(2,637	)
Non-GAAP Revenue	$	53,428		$	38,685		$	147,666		$	110,845
Non-GAAP operating margin percentage		0	%		1	%		3	%		(2	%)
Free cash flow reconciliation:
Net cash provided by operating activities	$	13,014		$	3,578		$	32,950		$	7,204
Less: Capital expenditures		(1,414	)		(1,176	)		(3,196	)		(1,524	)
Free cash flow	$	11,600		$	2,402		$	29,754		$	5,680