CallidusCloud Announces First Quarter 2013 Results

PLEASANTON, CA--(Marketwired - May 2, 2013) -  Callidus Software Inc. ( NASDAQ : CALD )

• Record Q1 SaaS Billings Growth of 51% Year over Year
• Record SaaS Revenues, up 23% Year over Year
• Record Q1 New Subscription Customers, up 32% Year over Year
• Record level of Total Contracted Backlog in excess of $120 Million at quarter-end

Callidus Software Inc. ( NASDAQ : CALD ), a leading provider of hiring, learning, marketing and selling cloud software today announced financial results for the first quarter ended March 31, 2013.

"I am pleased with our first quarter performance, our 10 ^th consecutive double-digit revenue growth quarter," said Leslie Stretch, President and CEO, CallidusCloud. "We had record billings growth, record SaaS revenues and added 158 new subscription customers in the quarter. We reduced net DSO's again down 14 days to 73 days. This strong performance is a great lead in to our CallidusCloud C3 Customer Conference starting Monday where we are expecting record attendance!"

Financial Highlights for the First Quarter 2013

• Total revenue was $25.5 million for the first quarter, representing an increase of 16% compared to the same quarter last year. Total recurring revenues, which include SaaS revenues and maintenance and support, were $19.6 million, up 16% compared to the first quarter of 2012. Service and other revenues of $5.9 million were up 15% as compared to the same quarter of 2012.
• Total GAAP gross margin was 50% for the first quarter up from 46% in the same quarter in 2012.
• Non-GAAP gross margin was 55% for the first quarter of 2013 up from 53% for the first quarter of 2012. Non-GAAP gross margin for the first quarter of 2013 excludes $0.6 million of stock-based compensation expense and $0.5 million of amortization of acquired intangibles.
• First quarter 2013 GAAP recurring revenue gross margin was 62% up from 55% for the first quarter of 2012. First quarter non-GAAP recurring revenue gross margin, which excludes $0.2 million of stock-based compensation and $0.5 million of amortization of acquired intangibles was 66%, up from 61% for the first quarter of 2012.
• GAAP net loss was $6.6 million, or ($0.18) per share, for the first quarter of 2013, which included $2.6 million of stock-based compensation expense, $0.8 million of convertible note related interest and amortization expense, $0.8 million of amortization of acquired intangibles, $0.3 million of patent litigation defense costs and $1.2 million of restructuring costs. This compares to a GAAP net loss of $7.0 million, or ($0.20) per share, for the first quarter of 2012, which included $3.2 million of stock-based compensation expense, $0.8 million of convertible note related expense items, $0.4 million of acquisition related expense, a tax benefit from release of valuation allowance of $0.2 million, $0.6 million of patent litigation defense costs, $0.8 million of amortization of acquired intangible assets and $0.4 million of restructuring costs.
• Non-GAAP net loss was $0.8 million, or ($0.02) per fully diluted share, for the quarter, compared to non-GAAP net loss of $1.0 million, or ($0.03) per fully diluted share for the same period last year excluding the items identified above.
• Cash and short term investments ended the quarter at $22.9 million down from $29.2 million in fourth quarter of 2012 primarily due to payment of acquisition related earn-outs and escrows. Cash in the first quarter of 2013 was impacted by the timing of a couple of large deals that became multiyear deals and closed later in the quarter.

Business Highlights for the First Quarter 2013

• CallidusCloud released a version of SalesSelector, Spring 2013, which combines video interviewing, sales assessments and social networks to streamline and improve the accuracy of talent selection. The new release gives recruiters the ability to promote jobs and screen candidates across social channels such as LinkedIn and Twitter.
• CallidusCloud sponsored key industry events including the Forrester Sales Enablement Forum 2013, Marketing Sherpa, Sales Management Association Chapter Events, DevLearn, eLearning DevCon, mLearningCon and Training 2013.
• CallidusCloud expanded its partner ecosystem with 5 new partners. Market Evolve and Sputnik-3 in South Africa and Business Intelligence Solutions, Navagate and Praxis Sales Consulting in North America.

Financial Outlook Total revenue for the second quarter of 2013 is expected to be between $24.5 million and $25.5 million. GAAP operating expenses are expected to be between $17.5 million and $18.5 million in the second quarter of 2013, which includes stock-based compensation expense of approximately $2.4 million, amortization of acquired intangibles of $0.8 million, restructuring costs of $0.6 million, and $0.4 million of patent litigation defense costs.

Conference Call

A conference call to discuss the first quarter results and outlook is scheduled for 1:30 p.m. Pacific Daylight Time (PDT) today. The conference call will be available via live webcast at the Investor Relations section of CallidusCloud's website.

Webcast site: http://www.calliduscloud.com/about-us/investor-relations/ Dial-in: 866-383-8119 (International callers: 617-597-5344) Passcode: 90618271 Replay information: A webcast replay will be available on the Investor Relations section of our website under Calendar of Events.

For more information, please visit: http://www.calliduscloud.com/about-us/investor-relations/

About CallidusCloud Callidus Software Inc. ( NASDAQ : CALD ), doing business as CallidusCloud, is a leading provider of cloud software. CallidusCloud enables organizations to drive performance and productivity across their business with our hiring, learning, marketing and selling clouds. From back office to the field, from desktop to mobile, we ensure organizations have the right tools to be more effective and perform better. The combined power of our clouds, our people, and our partners fuels growth, empowers the work force and delivers real value. CallidusCloud drives performance and productivity for over 1,800 leading organizations. Small, medium and large enterprises across multiple industries and geographies rely on CallidusCloud for quicker hiring, simpler learning, better marketing, and smarter selling.

For more information, please visit www.calliduscloud.com .

Note on Forward-Looking Statements

The forward-looking statements included in this press release, including discussion of our commercial prospects, estimates of second quarter 2013 revenues, operating expenses, stock-based compensation expense, amortization of acquired intangibles, restructuring, and patent litigation defense costs reflect management's best judgment based on factors currently known and involve risks and uncertainties. These risks and uncertainties include, but are not limited to, potential disruption of customer purchase decisions resulting from global economic conditions, timing and size of orders, potential material fluctuations in financial results and future growth rates, decreases in customer spending, uncertainty regarding purchasing trends in the SPM market, customer cancellations or non-renewal of maintenance contracts or on-demand services, our potential inability to manage effectively any growth we experience, uncertainty regarding the demand for and profitability of our on-demand services, increased competition or new entrants in the marketplace, and other risks detailed in Callidus' reports filed with the Securities and Exchange Commission, including its Form 10-K for 2012 which may be obtained by contacting CallidusCloud's Investor Relations department at 925-251-2248, or from the Investor Relations section of Callidus Software's website ( CallidusCloud Investor Relations ). Actual results may differ materially from those presently reported. We assume no obligation to update the information contained in this release.

Non-GAAP Financial Measures

Callidus has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP gross margin, non-GAAP recurring revenue gross margin, non-GAAP net loss, non-GAAP net loss per share. Callidus uses non-GAAP measures internally in analyzing its financial results and believes that they are useful to investors, as a supplement to GAAP measures, in evaluating Callidus' operating performance. Callidus believes that the use of these non-GAAP measures provides additional insight for investors to use in evaluation of ongoing operating results and trends and in comparing its financial measures with other companies in Callidus' industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial measures exclude stock-based compensation expense, a benefit from a purchase acquisition-related adjustment, restructuring expense, acquisition related expense, patent litigation defense cost, convertible note interest expense, amortization of convertible note issuance cost and amortization of acquired intangibles. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

©2013. Callidus Software Inc. All rights reserved. Callidus, Callidus Software, the Callidus Software logo, CallidusCloud, the CallidusCloud logo, TrueComp Manager, ActekSoft, ACom3, ForceLogix, Salesforce Assessments, iCentera, Webcom, LeadFormix, Litmos, the Litmos logo, Rapid Intake, and 6FigureJobs are trademarks, service marks, or registered trademarks of Callidus Software Inc. and its affiliates in the United States and other countries. All other brand, service or product names are trademarks or registered trademarks of their respective companies or owners.

CALLIDUS SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(unaudited)
				Three Months Ended March 31,
				2013				2012
Revenues:
	Recurring			$	19,624			$	16,886
	Services and other				5,918				5,127
		Total revenues			25,542				22,013
Cost of revenues:
	Recurring (1) (2)				7,453				7,549
	Services and other (1) (2)				5,222				4,380
		Total cost of revenues			12,675				11,929
Gross profit					12,867				10,084
Operating expenses:
	Sales and marketing (1) (2)				7,644				6,929
	Research and development (1) (2)				4,429				4,018
	General and administrative (1) (2) (3) (4)				5,186				5,005
	Restructuring				1,243				442
		Total operating expenses			18,502				16,394
Operating loss					(5,635	)			(6,310	)
Interest income and other income (expense) (5) (6)					(844	)			(795	)
Loss before provision (benefit) for income taxes (7)					(6,479	)			(7,105	)
Provision (benefit) for income taxes					124				(122	)
Net loss				$	(6,603	)		$	(6,983	)
Net loss per share - basic and diluted
	Net loss per share			$	(0.18	)		$	(0.20	)
Shares used in basic and diluted per share computation					37,139				34,112
(1) Stock-based compensation included in amounts above by category:
	Cost of recurring				174				547
	Cost of services				406				477
	Sales and marketing				573				775
	Research and development				466				414
	General and administrative				972				989
		Total stock-based compensation			2,591				3,202
(2) Acquisition, acquired and settlement related asset amortization
	Cost of recurring				512				486
	Cost of services				12				6
	Sales and marketing				228				211
	General and administrative				58				63
		Total acquisition related asset amortization			810				766
(3) Acquisition related expense					-				370
(4) Patent litigation costs					314				613
(5) Interest expense on convertible notes					703				703
(6) Amortization of convertible note issuance costs					134				134
(7) Tax benefit from release of valuation allowance					-				(224	)

CALLIDUS SOFTWARE INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
				March 31,				December 31,
				2013				2012
ASSETS
Current assets:
	Cash and cash equivalents			$	14,498			$	16,400
	Short-term investments				8,359				12,771
	Accounts receivable, net				26,764				22,567
	Deferred income taxes				40				40
	Prepaid and other current assets				7,208				6,718
		Total current assets			56,869				58,496
Property and equipment, net					12,517				10,580
Goodwill					31,207				31,207
Intangible assets, net					20,093				21,196
Deferred income taxes, noncurrent					392				392
Deposits and other assets					3,027				2,872
		Total assets		$	124,105			$	124,743
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	1,863			$	4,705
	Accrued payroll and related expenses				5,637				5,854
	Accrued expenses				6,647				8,164
	Deferred income taxes				944				944
	Deferred revenue				37,429				35,483
	Capital lease obligations				1,473				921
		Total current liabilities			53,993				56,071
Deferred revenue, noncurrent					6,823				3,702
Deferred income taxes, noncurrent					199				160
Other liabilities					2,071				2,159
Capital lease obligations, noncurrent					1,772				8
Convertible notes					59,215				59,215
		Total liabilities			124,073				121,315
Stockholders' equity:
	Common stock				34				34
	Additional paid-in capital				258,584				255,331
	Treasury stock				(14,430	)			(14,430	)
	Accumulated other comprehensive income				194				239
	Accumulated deficit				(244,350	)			(237,746	)
		Total stockholders' equity			32				3,428
		Total liabilities and stockholders' equity		$	124,105			$	124,743

CALLIDUS SOFTWARE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
					Three Months Ended
					March 31,
					2013				2012
Cash flows from operating activities:
	Net loss				$	(6,603	)		$	(6,983	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation expense				987				738
		Amortization of intangible assets				1,228				1,246
		Provision for doubtful accounts and service remediation reserves				157				32
		Stock-based compensation				2,591				3,202
		Release of valuation allowance				-				(224	)
		Gain on disposal of property and equipment				-				(2	)
		Amortization of convertible notes issuance cost				134				134
		Net amortization on investments				26				123
		Changes in operating assets and liabilities:
			Accounts receivable			(4,354	)			(807	)
			Prepaid and other current assets			(503	)			(480	)
			Other assets			(289	)			205
			Accounts payable			(2,712	)			(1,215	)
			Accrued expenses			1,673				60
			Accrued payroll and related expenses			(510	)			(821	)
			Accrued restructuring			284				464
			Deferred revenue			5,067				287
			Deferred income taxes			39				39
Net cash used in operating activities						(2,785	)			(4,002	)
Cash flows from investing activities:
	Purchases of investments					(3,319	)			(9,823	)
	Proceeds from maturities and sale of investments					7,700				12,650
	Purchases of property and equipment					(604	)			(638	)
	Proceeds from disposal of property and equipment					-				2
	Purchases of intangible assets					(126	)			(3,610	)
	Acquisitions, net of cash acquired					-				(6,964	)
Net cash used in investing activities						3,651				(8,383	)
Cash flows from financing activities:
	Proceeds from issuance of common stock					1,002				4,240
	Repurchases of common stock					-				-
	Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units					(341	)			(1,171	)
	Payment of consideration related to acquisitions					(3,078	)			(123	)
	Proceeds from issuance of convertible notes, net of issuance costs					-				(30	)
	Payment of principal under capital leases					(311	)			(290	)
Net cash provided by financing activities						(2,728	)			2,626
Effect of exchange rates on cash and cash equivalents						(40	)			40
Net increase (decrease) in cash and cash equivalents						(1,902	)			(9,719	)
Cash and cash equivalents at beginning of period						16,400				17,383
Cash and cash equivalents at end of period					$	14,498			$	7,664

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except for percentages and per share data)
(unaudited)
				Three months ended
				March 31,
				2013				2012
Non-GAAP gross profit reconciliation
Gross profit			$	12,867			$	10,084
	Profit margin, as a % of total revenues			50	%			46	%
Add back:
	Non-cash stock-based compensation			580				1,024
	Non-cash amortization of acquired intangible assets			524				492
Non-GAAP gross profit			$	13,971			$	11,600
	Profit margin, as a % of total revenues			55	%			53	%
Non-GAAP recurring revenue gross profit reconciliation
Recurring revenue gross profit			$	12,171			$	9,337
	Recurring revenue profit margin, as a % of recurring revenues			62	%			55	%
Add back:
	Non-cash stock-based compensation			174				547
	Non-cash amortization of acquired intangible assets			512				486
Non-GAAP Recurring revenue gross profit			$	12,857			$	10,370
	Recurring revenue profit margin, as a % of recurring revenues			66	%			61	%
Non-GAAP operating expense reconciliation:
Operating expenses			$	18,502				16,394
	Operating expenses, as a % of total revenues			72	%			74	%
Add back:
	Non-cash stock-based compensation			(2,011	)			(2,178	)
	Non-cash amortization of acquired intangible assets			(286	)			(274	)
	Acquisition-related expense			-				(370	)
	Patent litigation and settlement costs			(314	)			(613	)
	Restructuring			(1,243	)			(442	)
Non-GAAP Operating Expenses			$	14,648			$	12,517
	Non-GAAP Operating expenses, as a % of total revenues			57	%			57	%
Non-GAAP operating income (loss) reconciliation:
Operating loss			$	(5,635	)			(6,310	)
	Operating loss, as a % of total revenues			-22	%			-29	%
Add back:
	Non-cash stock-based compensation			2,591				3,202
	Non-cash amortization of acquired intangible assets			810				766
	Acquisition-related expense			-				370
	Patent litigation and settlement costs			314				613
	Restructuring			1,243				442
Non-GAAP Operating income (loss)			$	(677	)		$	(917	)
	Non-GAAP Operating income (loss), as a % of total revenues			-3	%			-4	%
CALLIDUS SOFTWARE INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except for percentages and per share data)
(unaudited)
				Three months ended
				March 31,
				2013				2012
Non-GAAP net loss reconciliation:
Net loss			$	(6,603	)		$	(6,983	)
	Net loss, as a % of total revenues			-26	%			-32	%
Add back:
	Non-cash stock-based compensation			2,591				3,202
	Non-cash amortization of acquired intangible assets			810				766
	Acquisition related expenses			-				370
	Patent litigation and settlement costs			314				613
	Restructuring			1,243				442
	Interest expense on convertible notes			703				703
	Amortization of convertible note issuance cost			134				134
	Tax benefit from release of valuation allowance			-				(224	)
Non-GAAP Net income (loss)			$	(808	)		$	(977	)
	Non-GAAP Net income (loss), as a % of total revenues			-3	%			-4	%
Non-GAAP net income (loss) per share reconciliation:
Net loss per basic and diluted share			$	(0.18	)			(0.20	)
Add back:
	Non-cash stock-based compensation			0.08				0.09
	Non-cash amortization of acquired			-
	Non-cash amortization of acquired intangible assets			0.02				0.02
	Acquisition related expenses			-				0.01
	Patent litigation and settlement costs			0.01				0.02
	Restructuring			0.03				0.01
	Interest expense on convertible notes			0.02				0.02
	Amortization of convertible note issuance cost			-				-
	Tax benefit from release of valuation allowance			-				-
Non-GAAP net income (loss) per basic share			$	(0.02	)		$	(0.03	)
Non-GAAP net income (loss) per diluted share			$	(0.02	)		$	(0.03	)
Basic and fully diluted shares reconciliation:
Basic shares				37,139				34,112
Add back:
	Weighted average effect of dilutive securities			-				-
Diluted shares				37,139				34,112