Total Revenue of $46.3 million
GAAP Net Loss of $5.1 million; Non-GAAP Net
Loss of $1.4 million
Adjusted EBITDA of negative $0.2 million
ServiceSource (NASDAQ: SREV), the customer journey experience
company, today announced financial results for the three months
ended June 30, 2021.
“In the second quarter, our alignment to areas of industry
growth and strengthening client demand contributed to acceleration
throughout our business and a return to sequential revenue growth,”
said Gary B. Moore, ServiceSource’s chairman and chief executive
officer. “Companies are recognizing and embracing the importance of
generating organizational value and positive outcomes across the
entire customer journey experience. Our expertise supporting the
priorities of recurring revenue business models, combined with our
ability to become a seamless extension of our clients’ go-to-market
teams, positions us at the forefront of an attractive long-term
market shift. We are pleased with our results in the quarter and
expect our trajectory to continue to improve through the remainder
of the year.”
Key Financial Results – Second Quarter
2021
- GAAP revenue was $46.3 million, compared with $47.6 million
reported for Q2 2020.
- GAAP net loss was $5.1 million or $0.05 per diluted share,
compared with GAAP net loss of $5.4 million or $0.06 per diluted
share reported for Q2 2020.
- Non-GAAP net loss was $1.4 million or $0.01 per diluted share,
compared with non-GAAP net loss of $1.2 million or $0.01 per
diluted share reported for Q2 2020.
- Adjusted EBITDA, a non-GAAP financial measure, was negative
$0.2 million, compared with negative $0.4 million reported for Q2
2020.
- Ended the quarter with $34.8 million of cash and cash
equivalents and restricted cash and $15.0 million of borrowings
under the Company's $40.0 million revolving line of credit.
A reconciliation of GAAP to non-GAAP financial measures is
provided following the Condensed Consolidated Financial Statement
tables contained within this press release.
Key Business Highlights – Second
Quarter 2021
- Successfully renewed or extended approximately 97% of the
contract value that was up for renewal during the first six months
of the year.
- Delivered another strong quarter of sales activity with an
approximately 7% year-over-year increase in new bookings on a
trailing twelve-month basis.
- Announced our second new client win of the year to deploy a
revenue retention program for a leader in the SaaS-based team
collaboration market and tripled the size and scope of an inside
digital sales program for a cloud-based business communications
platform provider.
- Signed expansions with three of our top ten clients each in
excess of $1 million of expected contract value.
- Broadened our virtual-first operating model to scale our U.S.
delivery footprint across ten states.
“We are encouraged by the headway we are making in the business
and our stronger positioning to capitalize on a large and growing
market opportunity for our solutions,” commented Chad Lyne,
executive vice president and chief financial officer of
ServiceSource. “The strategic changes and investments we have made
throughout the company are beginning to enhance our momentum in the
marketplace. We continue to see improvement in the trending of our
operational KPIs, the health of our client relationships, and the
direction of our financial results. We expect to build on this
progress and believe we are tracking favorably to report
year-over-year revenue growth in the third or fourth quarter.”
Quarterly Conference Call
ServiceSource will discuss its second quarter 2021 results on
July 28, 2021, via teleconference at 4:35 p.m. Eastern Time. To
access the call within the U.S., please dial (877) 293-5486, or
outside the U.S. (914) 495-8592, at least five minutes prior to the
start time. Conference ID number: 7343248. In addition, a live
webcast of the call will also be available on the Investor
Relations section of the ServiceSource website under Events and
Presentations. The related slide presentation and a replay of the
webcast will also be available on the Company's website at
http://ir.servicesource.com.
Forward-Looking Statements
This press release contains forward-looking statements,
including statements regarding our financial management and our
expectation to improve our trajectory or return to year-over-year
revenue growth in the third or fourth quarter. These
forward-looking statements are based on our current assumptions and
beliefs and involve risks and uncertainties that could cause our
results to differ materially from our forward-looking statements.
Those risks and uncertainties include: a decline in client
renewals, the loss of one or more of our key clients, the
contraction in our revenue from one or more of our key clients -
either in the ordinary course of business or as a result of
macroeconomic conditions resulting from the COVID-19 pandemic - in
each case resulting in churn, or our clients not expanding their
relationships with us; economic or other adverse events or
conditions affecting the technology industry, including as a result
of the COVID-19 pandemic; and other risks and uncertainties
described more fully in our periodic reports filed with the
Securities and Exchange Commission, which can be obtained online at
the Commission's website at http://www.sec.gov. All forward-looking
statements in this press release are based on information currently
available to us, and except as may be legally required we assume no
obligation to update these forward-looking statements.
About ServiceSource
ServiceSource International, Inc. (NASDAQ: SREV) is a global
outsourced go-to-market services provider that accelerates B2B
digital sales and customer success transformation. Our expert sales
professionals, data-powered insights and proven methodologies scale
and reimagine customer journey experiences (CJX™) into profitable
business outcomes. Backed by more than 20 years of experience,
ServiceSource drives billions of dollars in client value annually,
conducting commerce in 45 languages and 175 countries. To learn
more about how we design, develop and manage CJX solutions that
transform the agility, speed, efficiency and value of our clients’
growth initiatives, visit www.servicesource.com.
Trademarks
ServiceSource®, and any ServiceSource product or service names
or logos above are trademarks of ServiceSource International, Inc.
All other trademarks used herein belong to their respective
owners.
Connect with ServiceSource:
http://www.facebook.com/ServiceSource
http://twitter.com/servicesource
http://www.linkedin.com/company/servicesource
http://www.youtube.com/user/ServiceSourceMKTG
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except per share
amounts)
(unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net revenue
$
46,307
$
47,638
$
91,330
$
97,752
Cost of revenue(1)
35,395
34,645
69,462
70,205
Gross profit
10,912
12,993
21,868
27,547
Operating expenses:
Sales and marketing(1)
4,059
6,142
8,089
13,410
Research and development(1)
1,181
1,516
2,341
2,697
General and administrative(1)
10,624
10,619
22,814
21,307
Restructuring and other related costs
54
236
974
703
Total operating expenses
15,918
18,513
34,218
38,117
Loss from operations
(5,006
)
(5,520
)
(12,350
)
(10,570
)
Interest and other (expense) income,
net
(364
)
324
(1,524
)
(550
)
Loss before provision for income taxes
(5,370
)
(5,196
)
(13,874
)
(11,120
)
Provision for income tax benefit
(expense)
279
(161
)
(52
)
(179
)
Net loss
$
(5,091
)
$
(5,357
)
$
(13,926
)
$
(11,299
)
Net loss per share, basic and diluted
$
(0.05
)
$
(0.06
)
$
(0.14
)
$
(0.12
)
Weighted-average common shares
outstanding, basic and diluted
97,601
95,369
97,424
95,169
(1) Reported amounts include stock-based
compensation expense as follows:
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Cost of revenue
$
288
$
90
$
418
$
135
Sales and marketing
168
444
359
821
Research and development
17
1
32
19
General and administrative
601
740
2,740
1,345
Total stock-based compensation
$
1,074
$
1,275
$
3,549
$
2,320
ServiceSource International,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
June 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
32,464
$
34,006
Accounts receivable, net
34,596
38,890
Prepaid expenses and other
7,403
9,275
Total current assets
74,463
82,171
Property and equipment, net
24,583
29,948
ROU assets
25,290
29,798
Contract acquisition costs
675
872
Goodwill
6,334
6,334
Other assets
4,184
3,490
Total assets
$
135,529
$
152,613
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
2,246
$
1,204
Accrued expenses
2,568
3,217
Accrued compensation and benefits
16,129
18,342
Revolver
15,000
15,000
Operating lease liabilities
10,008
10,797
Other current liabilities
1,015
1,209
Total current liabilities
46,966
49,769
Operating lease liabilities, net of
current portion
21,408
25,975
Other long-term liabilities
1,742
1,593
Total liabilities
70,116
77,337
Stockholders' equity:
Preferred stock
-
-
Common stock
10
10
Treasury stock
(441
)
(441
)
Additional paid-in capital
383,403
379,696
Accumulated deficit
(318,533
)
(304,607
)
Accumulated other comprehensive income
974
618
Total stockholders' equity
65,413
75,276
Total liabilities and stockholders'
equity
$
135,529
$
152,613
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
For the Six Months Ended June
30,
2021
2020
Cash flows from operating
activities:
Net loss
$
(13,926
)
$
(11,299
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
7,299
6,819
Amortization of contract acquisition
costs
314
515
Amortization of ROU assets
4,745
4,690
Stock-based compensation
3,549
2,320
Restructuring and other related costs
935
645
Other
353
35
Net changes in operating assets and
liabilities:
Accounts receivable, net
4,160
1,704
Prepaid expenses and other assets
551
1,299
Contract acquisition costs
(117
)
(129
)
Accounts payable
1,061
(2,452
)
Accrued compensation and benefits
(2,948
)
(1,431
)
Operating lease liabilities
(5,532
)
(4,385
)
Accrued expenses
(653
)
(823
)
Other liabilities
286
(578
)
Net cash provided by (used in) operating
activities
77
(3,070
)
Cash flows from investing
activities:
Purchases of property and equipment
(2,092
)
(2,596
)
Net cash used in investing activities
(2,092
)
(2,596
)
Cash flows from financing
activities:
Repayment on finance lease obligations
(315
)
(481
)
Proceeds from Revolver
-
27,000
Repayment of Revolver
-
(7,000
)
Proceeds from issuance of common stock
136
76
Net cash (used in) provided by financing
activities
(179
)
19,595
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
626
(68
)
Net change in cash and cash equivalents
and restricted cash
(1,568
)
13,861
Cash and cash equivalents and restricted
cash, beginning of period
36,326
29,383
Cash and cash equivalents and restricted
cash, end of period
$
34,758
$
43,244
Use of Non-GAAP Financial Measures
To supplement its Condensed Consolidated Financial Statements
presented in accordance with generally accepted accounting
principles, or GAAP, ServiceSource provides investors with non-GAAP
gross profit, non-GAAP net income (loss), non-GAAP net income
(loss) per diluted share and Adjusted EBITDA. A reconciliation of
these non-GAAP financial measures to the closest GAAP financial
measure is presented in the following financial tables.
ServiceSource believes non-GAAP financial information provided
in this release can assist investors in understanding and assessing
its on-going core operations and prospects for the future and
provides an additional tool for investors to use in comparing
ServiceSource's financial results with other companies in the
industry, many of which present similar non-GAAP financial measures
to investors.
Non-GAAP gross profit consists of gross profit plus adjustments
to stock-based compensation and amortization of internally
developed software.
Non-GAAP net income (loss) consists of net income (loss) plus
stock-based compensation, amortization of internally developed
software, restructuring and other related costs, amortization of
contract acquisition costs related to the initial adoption of
Accounting Standards Update No. 2014-09, Revenue from Contracts
with Customers (Topic 606) (“ASC 606”), non-cash interest expense
and applying an income tax rate of 26.5% on non-GAAP adjustments.
Stock-based compensation expense is expected to vary depending on
the number of new grants issued, changes in the Company's stock
price, stock market volatility, expected option lives and risk-free
interest rates, all of which are difficult to estimate.
EBITDA consists of net income (loss) plus provision for income
tax expense (benefit), interest and other expense (income), net and
depreciation and amortization. Adjusted EBITDA consists of EBITDA
plus stock-based compensation, restructuring and other related
costs, and amortization of contract acquisition costs related to
the initial adoption of ASC 606.
These non-GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with GAAP.
ServiceSource International,
Inc.
GAAP To Non-GAAP
Reconciliation
(in thousands, except per share
amounts)
(unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net revenue
$
46,307
$
47,638
$
91,330
$
97,752
Gross profit
GAAP gross profit
$
10,912
$
12,993
$
21,868
$
27,547
Non-GAAP adjustments:
Stock-based compensation
(A)
288
90
418
135
Amortization of internally developed
software
(B)
1,947
1,313
3,779
2,566
Non-GAAP gross profit
$
13,147
$
14,396
$
26,065
$
30,248
Gross profit %
GAAP gross profit
23.6
%
27.3
%
23.9
%
28.2
%
Non-GAAP adjustments:
Stock-based compensation
(A)
0.6
%
0.2
%
0.5
%
0.1
%
Amortization of internally developed
software
(B)
4.2
%
2.8
%
4.1
%
2.6
%
Non-GAAP gross profit
28.4
%
30.2
%
28.5
%
30.9
%
Certain totals do not add due to
rounding
Operating expenses
GAAP operating expenses
$
15,918
$
18,513
$
34,218
$
38,117
Non-GAAP adjustments:
Stock-based compensation
(A)
(786
)
(1,185
)
(3,131
)
(2,185
)
Amortization of internally developed
software
(B)
(349
)
(536
)
(709
)
(1,048
)
Restructuring and other related costs
(C)
(54
)
(236
)
(974
)
(703
)
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
(68
)
(162
)
(152
)
(380
)
Non-GAAP operating expenses
$
14,661
$
16,394
$
29,252
$
33,801
Net loss
GAAP net loss
$
(5,091
)
$
(5,357
)
$
(13,926
)
$
(11,299
)
Non-GAAP adjustments:
Stock-based compensation
(A)
1,074
1,275
3,549
2,320
Amortization of internally developed
software
(B)
2,296
1,849
4,488
3,614
Restructuring and other related costs
(C)
54
236
974
703
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
68
162
152
380
Non-cash interest expense
(E)
17
17
35
35
Income tax effect on non-GAAP
adjustments
(F)
214
600
1,291
1,256
Non-GAAP net loss
$
(1,368
)
$
(1,218
)
$
(3,437
)
$
(2,991
)
Diluted net loss per share
GAAP diluted net loss per share
$
(0.05
)
$
(0.06
)
$
(0.14
)
$
(0.12
)
Non-GAAP adjustments:
Stock-based compensation
(A)
0.01
0.01
0.04
0.02
Amortization of internally developed
software
(B)
0.02
0.02
0.05
0.04
Restructuring and other related costs
(C)
0.00
0.00
0.01
0.01
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
0.00
0.00
0.00
0.00
Non-cash interest expense
(E)
0.00
0.00
0.00
0.00
Income tax effect on non-GAAP
adjustments
(F)
0.00
0.01
0.01
0.01
Non-GAAP diluted net loss per share
$
(0.01
)
$
(0.01
)
$
(0.04
)
$
(0.03
)
Certain totals do not add due to
rounding
Shares used in calculating diluted net
loss per share on a non-GAAP basis
(G)
97,601
95,369
97,424
95,169
Footnotes to GAAP to Non-GAAP Reconciliation
(A) Stock-based compensation. Included in our GAAP
presentation of cost of revenue and operating expenses, stock-based
compensation consists of expenses for stock options, stock unit
awards and purchase rights under our stock purchase plan. We
exclude stock-based compensation expense from our non-GAAP measures
because some investors may view it as not reflective of our core
operating performance as it is a non-cash expense.
(B) Amortization of internally developed software.
Included in our GAAP presentation of cost of revenue and operating
expenses, amortization of internally developed software reflects
non-cash expense for software developed or obtained for internal
use. We exclude these expenses from our non-GAAP measures because
we believe they are not indicative of our core operating
performance.
(C) Restructuring and other related costs. Included in
our GAAP presentation, we incurred expenses related to our
restructuring effort to better align our cost structure with
current revenue levels. Restructuring and other related costs
consist primarily of employees' severance payments, related
employee benefits, related legal fees and charges related to leases
and other contract termination costs. These are one-time in nature
costs that are not indicative of our core operating
performance.
(D) Amortization of contract acquisition costs - ASC 606
initial adoption. Upon adoption of ASC 606 using the modified
retrospective approach, we capitalized approximately $3.3 million
of previously expensed sales commissions from 2015, 2016 and 2017.
Amortization of these amounts are included in our GAAP presentation
as sales and marketing expense. We believe the non-cash
amortization expense is not related to or indicative of our ongoing
operating performance.
(E) Non-cash interest expense. Under GAAP, we recognize
interest expense at the effective interest rate which includes
interest costs related to the amortization of debt issuance costs.
The difference between the effective interest rate and the
contractual interest rate is excluded from our assessment of our
operating performance because we believe this non-cash expense is
not indicative of ongoing operating performance. We believe that
the exclusion of the non-cash interest expense provides investors a
view of our core operating performance.
(F) Income tax effect on non-GAAP adjustments. This
adjusts the provision for income taxes to reflect the effect of the
non-GAAP items A, B, C, D and E noted above on our non-GAAP net
income (loss).
(G) Shares used in calculating diluted net income (loss) per
share on a non-GAAP basis. The share count for basic and
diluted earnings per share is the same due to GAAP net losses for
the three and six months ended June 30, 2021 and 2020.
ServiceSource International,
Inc.
Reconciliation of Net Loss to
Adjusted EBITDA
(in thousands)
(unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net loss
$
(5,091
)
$
(5,357
)
$
(13,926
)
$
(11,299
)
Provision for income tax (benefit)
expense
(279
)
161
52
179
Interest and other expense (income),
net
364
(324
)
1,524
550
Depreciation and amortization(1)
3,642
3,423
7,299
6,819
EBITDA
(1,364
)
(2,097
)
(5,051
)
(3,751
)
Stock-based compensation
(A)
1,074
1,275
3,549
2,320
Restructuring and other related costs
(C)
54
236
974
703
Amortization of contract acquisition asset
costs - ASC 606 initial adoption
(D)
68
162
152
380
Adjusted EBITDA
$
(168
)
$
(424
)
$
(376
)
$
(348
)
(1) Depreciation and amortization expense
are comprised of the following:
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Internally developed software
amortization
$
2,296
$
1,849
$
4,488
$
3,614
Property and equipment depreciation
1,346
1,574
2,811
3,205
Depreciation and amortization
$
3,642
$
3,423
$
7,299
$
6,819
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210728005634/en/
Investor Relations Contact for ServiceSource: Chad Lyne
ServiceSource International, Inc.
investorrelations@servicesource.com
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