SuccessFactors Announces 52 Percent Revenue Growth In First Quarter Fiscal 2011

SAN MATEO, Calif., April 26, 2011 /PRNewswire/ -- SuccessFactors, Inc. (NASDAQ: SFSF) today announced results for its first quarter fiscal 2011 which ended March 31, 2011.

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"Despite very strong compares, SuccessFactors delivered strong growth in Q1, while hiring aggressively for future growth and customer investment," said Lars Dalgaard, founder and CEO of SuccessFactors. "SuccessFactors leads the very large market that we created in BizX cloud-computing. We continue to win market share while simultaneously expanding our total available market through new innovations and acquisitions. By acquiring Plateau Systems Ltd., which was eagerly requested by our sales reps and many customers, we will add learning to SuccessFactors' scalable and secure platform and further expand our total available market. Plateau Systems Ltd. brings us a spectacular group of enterprise customers with one of the highest renewal rates in the industry at approximately 99%. By combining Plateau's products with our Jambok social mobile video learning acquisition, we will be able to provide customers a truly unique offering, further solidifying SuccessFactors' position as an innovator."

Results for the First Quarter Fiscal 2011:

• Q1 FY11 Non-GAAP Revenue: For the quarter ended March 31, 2011, non-GAAP revenue was $68.0 million, compared to the company's prior guidance of $62.5 million to $63.5 million, and compared to $44.7 million in the quarter ended March 31, 2010, an increase of approximately 52 percent year-over-year and an increase of 10 percent sequentially from Q410.
• Q1 FY11 Non-GAAP Operating Income: For the quarter ended March 31, 2011, the Company recognized non-GAAP operating income of $0.5 million and GAAP operating income from operations of $0.8 million. The non-GAAP operating income excludes $11.0 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs and a gain of approximately $11.7 million revaluation of contingent consideration for the quarter ended March 31, 2011.
• Q1 FY11 Total Deferred Revenue: Total deferred revenue as of March 31, 2011 was $229.6 million, compared to $234.4 million at December 31, 2010 and up approximately 24 percent year-over-year from $184.9 million at March 31, 2010.
• Q1 FY11 Cash Flow Generated from Operations: For the quarter ended March 31, 2011, cash flow generated from operating activities was $10.4 million, compared to $13.1 million in the quarter ended March 31, 2010.
• Q1 FY11 Net Income per Common Share: For the quarter ended March 31, 2011, on a GAAP basis, net income per common share basic and diluted were $0.04 and $0.03, respectively. On a non-GAAP basis, net income per common share, basic and diluted, was $0.01. Non-GAAP net income per common share, both basic and diluted, excludes $11.0 million in stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, approximately $11.7 million revaluation gain of contingent consideration related to business combinations, $0.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and approximately $1.2 million tax benefit related to Jambok. This compares to non-GAAP net income per common share of $0.00 in the fourth quarter of 2010 which excluded approximately $9.1 million of stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and deal related costs, a $4.8 million revaluation gain of contingent consideration related to business combinations and $1.5 million unrealized foreign exchange gain on an intercompany acquisition loan related to Inform, and non-GAAP net income per common share of $0.02 in the first quarter of 2010 which excluded approximately $5.0 million of stock-based compensation. For the first quarter of 2011, GAAP net income per common share calculation assumed a weighted average share count of approximately 77.5 million for basic and 83.0 million for diluted. For the fourth quarter of 2010, GAAP net loss per common share calculation assumed a weighted average share count of approximately 76.4 million. For the first quarter of 2010, GAAP net loss per common share calculation assumed average weighted share count of approximately 72.0 million.

Plateau Systems Ltd. Acquisition:

Today, SuccessFactors announced it has entered into a definitive agreement to acquire Plateau Systems Ltd. the leading learning management system (LMS), a Next Generation Portal technology, and CaaS- Content as a Service. This acquisition forms a symbiotic combination with SuccessFactors' acquisition of social video mobile learning provider Jambok.

Customers will now have the ability to further increase employee development and business execution by implementing a comprehensive social and traditional learning strategy that includes evangelizing internal experts, utilizing easy-to-use video creation and sharing tools, as well as managing, developing, and deploying online, instructor-led, and self-study training.

Under the terms of the acquisition agreement, SuccessFactors will pay $145 million in cash plus $145 million in stock, of which $15 million is for employee stock options and RSUs, for Plateau Systems Ltd.. The acquisition is subject to various closing conditions, including filings under the Hart-Scott-Rodino Antitrust Improvements Act and the issuance of a permit from the California Department of Corporations, and is currently expected to close during summer 2011.

For Additional First Quarter Fiscal 2011 Highlights please visit: http://www.successfactors.com/press-releases/

Guidance:

SuccessFactors is initiating guidance for its second quarter fiscal 2011 and updating its outlook for the full fiscal year 2011, as of April 26, 2011.

• Q2 FY11: Non-GAAP revenue for the company's second fiscal quarter is projected to be in the range of approximately $69.0 million to $70.0 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. This guidance does not take into account the proposed acquisition of Plateau Systems Ltd. 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, deal related 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 78.6 million shares and 85.4 million shares, respectively.
• Full Year 2011: Non-GAAP revenue for the company's full fiscal 2011 is now expected to be in the approximate range of $275 million to $280 million, which is an increase of approximately 30 percent when compared to fiscal 2010. The company expects non-GAAP net income per common share for fiscal 2011 to be approximately breakeven. This guidance does not take into account the proposed acquisition of Plateau Systems Ltd. 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, deal related 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 79.3 million shares and 85.7 million shares, respectively.

Q1 FY11 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 first quarter and fiscal 2011 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 [phone] or [phone] internationally. A domestic replay will be available at [phone] or [phone] internationally, passcode 58088990, and available via webcast replay until May 6th, 2011.

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, any unrealized foreign exchange gain/loss on an intercompany loan related to the acquisition of Inform, and a tax benefit related to the acquisition of Jambok. The company defines 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.

About SuccessFactors, Inc.

SuccessFactors is the leading provider of cloud-based Business Execution (BizX) software solutions to organizations of all sizes, with more than 8 million users across multiple industries and geographies. We strive to delight our customers by delivering innovative solutions, a broad range of content, process expertise and best practices knowledge gained from serving our large and varied customer base. Today,we have more than 3,200 customers inmore than 168 countries using our application suite in 34 languages.

Execution Is The Difference'

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Join us for SuccessConnect in San Francisco, May 11-12, Amsterdam, May 19-20 and Sydney, Aug. 24-25: http://www.successfactors.com/successconnect/ .

"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 future growth prospects, financial results and benefits of acquisitions. 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 the business execution market is 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, unforeseen liabilities 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; and the impact of unforeseen expenses, including as a result of integrating acquisitions.. If any such risks or uncertainties materialize or if any of the assumptions prove 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 these forward-looking statements is included in the section entitled "Risk Factors" in our Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission from time to time.

CONTACT:
Investors
Karen Moran
SuccessFactors, Inc.
Investor Relations
650-645-4439
[e-mail]

Media
Andrea Meyer
SuccessFactors, Inc.
Public Relations
415-370-7329
[e-mail]

SuccessFactors, Inc.
Condensed Consolidated Statement of Operations
(unaudited, in thousands)
		Three Months Ended
		March 31,
		2011		2010
				With Adoption
				of ASU 2009-13
Revenue
Subscription and support		$ 51,192		$ 36,480
Professional services and other		16,406		8,255
Total revenue		67,598		44,735
Cost of revenue (1)
Subscription and support		9,435		5,145
Professional services and other		10,635		5,444
Total cost of revenue		20,070		10,589
Total gross profit		47,528		34,146
Operating expenses: (1)
Sales and marketing		30,971		22,242
Research and development		13,766		7,725
General and administrative		13,660		7,494
Revaluation of contingent consideration		(11,659)		-
Total operating expenses		46,738		37,461
Income (loss) from operations		790		(3,315)
Unrealized foreign exchange gain on intercompany loan		536		-
Interest income (expense) and other, net		784		(268)
Income (loss) before provision for income taxes		2,110		(3,583)
Benefit for (provision of) income taxes		609		(127)
Net income (loss)		$ 2,719		$ (3,710)
Basic net income (loss) per common share		$ 0.04		$ (0.05)
Diluted net income (loss) per common share		$ 0.03		$ (0.05)
Shares used in per common share calculation:
Basic *		77,542		72,008
Diluted		82,982		72,008
_____________
(1) Amounts include stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs as follows:

		Three Months Ended
		March 31,
		2011		2010
Cost of revenue		$ 2,363		$ 603
Sales and marketing		3,228		1,955
Research and development		1,427		875
General and administrative		4,020		1,593
		$ 11,038		$ 5,026
* Excludes 561,883 shares held in escrow in connection with Inform and Cubetree acquisitions

SuccessFactors, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
		As of March 31,		As of December 31,
		2011		2010
		(unaudited)		(1)
Assets:
Current assets:
Cash and cash equivalents		$ 158,232		$ 75,384
Marketable securities		209,259		281,073
Accounts receivable, net of allowance for doubtful accounts		62,661		80,440
Deferred commissions		7,677		7,106
Prepaid expenses and other current assets		10,727		8,022
Total current assets		448,556		452,025
Restricted cash		918		913
Property and equipment, net		9,353		8,737
Deferred commissions, less current portion		10,604		12,854
Goodwill		67,391		64,077
Intangible assets		39,863		37,832
Other assets		936		975
Total assets		$ 577,621		$ 577,413
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable		$ 5,540		$ 7,254
Accrued expenses and other current liabilities		15,471		11,433
Accrued employee compensation		18,829		23,467
Deferred revenue		217,335		219,868
Acquisition-related contingent consideration		2,222		5,200
Total current liabilities		259,397		267,222
Deferred revenue, less current portion		12,236		14,577
Long-term income taxes payable		2,056		1,987
Acquisition-related contingent consideration, less current portion		12,435		21,050
Other long-term liabilities		2,350		1,248
Total liabilities		288,474		306,084
Stockholders' equity:
Common stock		79		77
Additional paid-in capital		513,536		499,343
Accumulated other comprehensive income		4,162		3,258
Accumulated deficit		(228,630)		(231,349)
Total stockholders' equity		289,147		271,329
Total liabilities and stockholders' equity		$ 577,621		$ 577,413
_____________
(1) The condensed consolidated balance sheet as of December 31, 2010 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 Cash Flows
(unaudited, in thousands)
		Three Months Ended
		March 31,
		2011		2010
				With Adoption
				of ASU 2009-13
Cash flow from operating activities:
Net income (loss)		$ 2,719		$ (3,710)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,741		1,273
Amortization of deferred commissions		4,164		2,100
Stock-based compensation expense		7,648		5,026
Amortization of intangible assets		1,645		-
Gain on revaluation of contingent consideration		(11,659)		-
Unrealized foreign exchange gain on intercompany loan		(536)		-
Changes in assets and liabilities:
Accounts receivable		17,803		15,149
Deferred commissions		(2,485)		(1,892)
Prepaid expenses and other current assets		(2,691)		(1,508)
Other assets		39		(396)
Accounts payable		(1,714)		(335)
Accrued expenses and other current liabilities		3,230		244
Accrued employee compensation		(4,638)		(6,024)
Long-term income taxes payable		69		(35)
Other liabilities		(49)		(87)
Deferred revenue		(4,874)		3,326
Net cash provided by operating activities		10,412		13,131
Cash flow from investing activities:
Restricted cash		(5)		3
Capital expenditures		(1,867)		(632)
Proceeds from sale of assets		-		1
Acquisitions, net of cash acquired		(2,823)		-
Purchases of available-for-sale securities		(28,643)		(34,459)
Proceeds from maturities of available-for-sale securities		69,507		26,100
Proceeds from sales of available-for-sale securities		30,423		20,000
Net cash provided by investing activities		66,592		11,013
Cash flow from financing activities:
Proceeds from exercise of stock options, net		5,362		1,936
Principal payments on capital lease obligations		-		10
Net cash provided by financing activities		5,362		1,946
Effect of exchange rate changes on cash and cash equivalents		482		(104)
Net increase in cash and cash equivalents		82,848		25,986
Cash and cash equivalents at beginning of period		75,384		76,618
Cash and cash equivalents at end of period		$ 158,232		$ 102,604

	SuccessFactors, Inc.
	Reconciliation of GAAP to Non-GAAP Measures
	(unaudited, in thousands, except per share data)
			Three Months Ended
			March 31,
			2011		2010
Non-GAAP Revenue
	Revenue		$ 67,598		$ 44,735
	(a) Net impact of acquisition related deferred revenue before fair value adjustment		352		-
	Non-GAAP Revenue		$ 67,950		$ 44,735
Billings reconciliation:
	GAAP Revenue		$ 67,598		$ 44,735
	Ending total deferred revenue		229,571		184,950
	Less: Beginning total deferred revenue		234,445		181,624
	Change in total deferred revenue		(4,874)		3,326
	Billings (revenue plus change in total deferred revenue)		$ 62,724		$ 48,061
Billings (loss) profit and margin reconciliation:
	Billings revenue		$ 62,724		$ 48,061
	Non-GAAP total cost of revenue and operating expenses (total spend)		67,429		43,024
	Billings (loss) profit		$ (4,705)		$ 5,037
	Billings margin		-8%		10%
Net income (loss) and net income (loss) per share reconciliations:
	GAAP net income (loss)		$ 2,719		$ (3,710)
	(a) Net impact of acquisition related deferred revenue before fair value adjustment		352		-
	(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		11,038		5,026
	(c) Revaluation of contingent consideration		(11,659)		-
	(d) Foreign exchange unrealized gain on intercompany acquisition loan related to Inform		(536)		-
	(e) Tax benefit related to Jambok		(1,151)		-
	Non-GAAP net income excluding stock-based compensation expense and other items		$ 763		$ 1,316
	GAAP net income (loss) per common share - basic		$ 0.04		$ (0.05)
	GAAP net income (loss) per common share - diluted		$ 0.03		$ (0.05)
	Non-GAAP net income per common share (excluding stock-based compensation expense and other items) - basic		$ 0.01		$ 0.02
	Non-GAAP net income per common share (excluding stock-based compensation expense and other items) - diluted		$ 0.01		$ 0.02
	GAAP shares used in computing net loss per common share, basic		77,542		72,008
	GAAP shares used in computing net loss per common share, diluted		82,982		72,008
Total spend reconciliation:
	GAAP total cost of revenue and operating expenses		$ 66,808		$ 48,050
	(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		11,038		5,026
	(c) Revaluation of contingent consideration		(11,659)		-
	Non-GAAP total cost of revenue and operating expenses (total spend)		$ 67,429		$ 43,024
Gross profit and gross margin reconciliations:
	GAAP gross profit		$ 47,528		$ 34,146
	(a) Net impact of acquisition related deferred revenue before fair value adjustment		352		-
	(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,363		603
	Non-GAAP gross profit		$ 50,243		$ 34,749
	GAAP gross margin percentage		70%		76%
	Non-GAAP gross margin percentage		74%		78%
Cost of revenue reconciliation:
	GAAP cost of revenue		$ 20,070		$ 10,589
	(b1) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		2,363		603
	Non-GAAP cost of revenue		$ 17,707		$ 9,986
Total operating expenses reconciliation:
	GAAP operating expenses		$ 46,738		$ 37,461
	(b2) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		8,675		4,423
	(c) Revaluation of contingent consideration		(11,659)		-
	Non-GAAP operating expenses		$ 49,722		$ 33,038
Total sales and marketing reconciliation:
	GAAP sales and marketing		$ 30,971		$ 22,242
	(b3) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		3,228		1,955
	Non-GAAP sales and marketing		$ 27,743		$ 20,287
Total research and development reconciliation:
	GAAP research and development		$ 13,766		$ 7,725
	(b4) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions and integration costs		1,427		875
	Non-GAAP research and development		$ 12,339		$ 6,850
Total general and administrative reconciliation:
	GAAP general and administrative expenses		$ 13,660		$ 7,494
	(b5) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		4,020		1,593
	Non-GAAP general and administrative		$ 9,640		$ 5,901
Operating margin reconciliation:
	GAAP income (loss) from operations		$ 790		$ (3,315)
	(a) Net impact of acquisition related deferred revenue before fair value adjustment		352		-
	(b) Stock-based compensation expense, amortization of intangibles, future cash consideration of acquisitions, and due diligence and integration costs		11,038		5,026
	(c) Revaluation of contingent consideration		(11,659)		-
	Non-GAAP income from operations less stock-based compensation and other items		$ 521		$ 1,711
	Non-GAAP Revenue		$ 67,950		$ 44,735
	Non-GAAP operating margin percentage		1%		4%
Free cash flow reconciliation:
	Net cash provided by operating activities		$ 10,412		$ 13,131
	Less: Capital expenditures		(1,867)		(632)
	Free cash flow		$ 8,545		$ 12,499

SOURCE SuccessFactors, Inc.