SLRY Salary.Com (MM)

Salary.com, Inc. (NASDAQ: SLRY), a leading provider of on-demand compensation management solutions, today announced financial results for its first quarter of fiscal 2008, which ended June 30, 2007. First quarter revenue was $7.5 million, an increase of 46% from the first quarter of fiscal 2007 and 18% sequentially. Cash flow from operations was $1.6 million for the first quarter of 2008, compared to negative $0.7 million in the prior year and $1.1 million in the prior quarter. Bookings (defined as change in deferred revenue added to revenue) were $8.1 million for the quarter compared to $5.9 million in the prior year and $7.4 million in the prior quarter. �We�re very pleased with our first quarter results� stated Kent Plunkett, founder and chief executive officer. �We exceeded financial expectations and continued our record of strong revenue growth and positive operating cash flow. We substantially grew our customer base and increased our footprint with many existing customers through wider deployments across our enterprise product portfolio. Additionally, we continued to execute on plans to expand our proprietary datasets and capabilities in the talent management market through strategic acquisitions and partnerships. Our growth and momentum in the first quarter, together with our strong financial results, underscore the leadership position we have secured in the compensation category.� Financial Highlights Revenue of $7.5 million Cash flow from operations of $1.6 million Bookings of $8.1 million On a GAAP basis, Salary.com reported a net loss attributable to common stockholders of $1.4 million in the first quarter of fiscal 2008, compared to a net loss of $963,000 in the first quarter of fiscal 2007 On a non-GAAP basis, excluding the impact of stock-based compensation expense, amortization of intangibles, and accretion of preferred stock, Salary.com reported a net loss attributable to common stockholders of $556,000 in the first quarter of fiscal 2008, compared to a net loss of $538,000 in the first quarter of fiscal 2007 Cash and equivalents of at the end of the first quarter of 2008 were $39.9 million, compared to $49.0 million at the end of fiscal 2007, primarily due to cash flow generated in the quarter offset by the $10.3 million paid for the acquisition of ICR Limited, L.C. in May 2007 Current deferred revenue grew to $16.1 million at the end of the first quarter, an increase from $15.5 million at the end of fiscal 2007. Total deferred revenue was $17.0 million at the end of the first quarter, which represented an increase from $16.4 million at the end of fiscal 2007 Ken Goldman, Salary.com�s senior vice president and chief financial officer said, �Strong order activity and synergies from our acquisition of ICR helped us achieve revenue that was better than anticipated in the first quarter. Our operating cash flow results also benefited from this activity, providing an accent on our record of positive operating cash flow. Because of our high-visibility subscription revenue model and market dynamics that are working in our favor, we believe this momentum can continue.� Business Highlights As announced on May 15, 2007, Salary.com acquired ICR Limited, L.C. and ICR International Ltd. (ICR), a premier provider of specialty consumer goods and global technology compensation data and software � thereby expanding Salary.com�s global reach with proprietary datasets across over 70 countries worldwide. During the first quarter 225 net new enterprise subscribers were added, not including new customer additions from the ICR acquisition or small and medium business customers; bringing the total enterprise subscriber count to more than 2,100 and total subscription customers to above 4,100. New customer additions in the first quarter included marquee names such as AmerisourceBergen Corporation; Comcast Corporation; CSX Corporation; Elizabeth Arden, Inc.; Expedia, Inc.; Hitachi Computer Products (America), Inc.; John Hancock Life Insurance Company; The Motley Fool, Inc.; The Pepsi Bottling Group, Inc.; The Rockefeller Foundation; and Sony Ericsson Mobile Communications (USA), Inc. �Market demand and awareness is building in the compensation management market as increased recruiting pressure forces companies to take new approaches to attracting and retaining talent. Salary.com is benefiting from positive market momentum due to our leadership position, domain expertise, proprietary data sets and on-demand technology, and this success is reflected in our financial and business results�, commented Plunkett. �We also announced strategic agreements earlier today that expand our capabilities in the emerging talent management segment�, he continued. �With the acquisition of ITG Competency Group and the licensing agreement with Schoonover Associates, Salary.com will significantly broaden the capabilities and advantages of its talent management suite, developing one of the most robust competency offerings in the industry and providing the content foundation to support competency-driven human resources and talent management products and services.� Business Outlook Salary.com expects total revenue in fiscal 2008 to be in the range of $33.7 million to $34.9 million, an increase from prior guidance. Cash flow from operations is expected to be in the range of $7.8 million to $8.2 million for the full fiscal year, also an increase from prior guidance. Non-GAAP loss, which excludes the non-cash impact of stock-based compensation expense and amortization of intangibles, is expected to be in the range of $5.0 million to $5.4 million. On a GAAP basis, net loss for fiscal 2008 is expected to be in the range of $8.8 to $9.2 million. Weighted average basic shares for the year are estimated to be approximately 13.7 million shares. For the second quarter of fiscal 2008, Salary.com expects total revenue in the range of $7.7 million to $8.1 million. Non-GAAP loss, which excludes the non-cash impact of stock-based compensation expense and amortization of intangibles, is expected to be in the range of $1.3 million to $1.7 million. GAAP loss for the second quarter of fiscal 2008, is expected to be in the range of $2.3 million to $2.7 million. Weighted average shares for the quarter are estimated to be approximately 13.6 million shares. Conference call What: Salary.com first quarter 2008 financial results conference call and webcast When: Tuesday, July 31, 2007 Time: 5:00 PM ET Live Call: (800) 819-9193, domestic (913) 981-4911, international Replay: (888) 203-1112, conference ID 3594155 (719) 457-0820, conference ID 3594155, international Webcast: http://investor.salary.com/events.cfm (live and replay) About Salary.com, Inc. Salary.com is a leading provider of on-demand compensation management solutions helping businesses and individuals manage pay and performance. Salary.com provides companies of all sizes comprehensive on-demand software applications that are tightly integrated with its own proprietary compensation data sets, thereby automating the essential elements of the compensation management process and significantly improving the effectiveness of its client�s compensation spend. For more information, visit www.salary.com. Safe Harbor Statement This release contains "forward-looking" statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "may," "will," "expects," "projects," "anticipates," "estimates," "believes," "intends," "plans," "should," "seeks," and similar expressions. This press release contains forward-looking statements relating to, among other things, Salary.com�s expectations and assumptions concerning future financial performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in Salary.com�s filings with the Securities and Exchange Commission. The risks and uncertainties referred to above include, but are not limited to, risks associated with possible fluctuations in our operating results and rate of growth, our history of operating losses, the possibility that we will not achieve GAAP profitability, our ability to close the ITG acquisition on a timely basis, interruptions or delays in our service or our Web hosting, our business model, breach of our security measures, the emerging market in which we operate, our ability to hire, retain and motivate our employees and manage our growth, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, successful customer deployment and utilization of our services, fluctuations in the number of shares outstanding, foreign currency exchange rates and interest rates. (SLRY-F) Salary.com, Inc. Condensed Consolidated Balance Sheets June 30, March 31, 2007 2007 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 39,928,841 $ 49,016,389 Accounts receivable, net of allowance for doubtful accounts 3,690,123 3,364,931 Prepaid expenses and other current assets 604,226 891,483 Deferred customer acquisition costs, current portion � 853,176 � 870,224 Total current assets � 45,076,366 � 54,143,027 � Property, equipment and software, net 1,992,205 1,937,250 Goodwill and intangibles assets, net 12,384,990 2,189,632 Other assets � 440,433 � 405,564 Total assets $ 59,893,994 $ 58,675,473 � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued compensation $ 3,551,674 $ 2,506,311 Accrued expenses and other current liabilities 1,365,332 1,104,714 Subscription payable 628,089 693,638 Deferred revenue, current portion � 16,082,157 � 15,506,966 Total current liabilities � 21,627,252 � 19,811,629 � Deferred revenue, net of current portion � 902,953 � 880,688 Total liabilities � 22,530,205 � 20,692,317 � Stockholders' equity: Common stock 1,341 1,331 Additional paid-in capital 68,125,184 67,378,802 Accumulated deficit (30,761,344) (29,396,311) Accumulated other comprehensive loss � (1,392) � (666) Total stockholders' equity � 37,363,789 � 37,983,156 Total liabilities and stockholders' equity $ 59,893,994 $ 58,675,473 Salary.com, Inc. Consolidated Statements of Operations Three Months Ended June 30, 2007 2006 (unaudited) Revenue: � � Subscription revenues $ 6,758,499 $ 4,441,198 Advertising revenues � 780,508 � � 714,408 � Total revenues 7,539,007 5,155,606 � Cost of revenues (1) � 1,622,312 � � 1,051,548 � Gross profit � 5,916,695 � � 4,104,058 � � Operating expenses: Research and development (1) 882,267 727,658 Sales and marketing (1) 3,898,480 2,687,204 General and administrative (1) 2,927,139 1,447,856 Amortization of intangible assets � 134,818 � � 53,249 � Total operating expenses � 7,842,704 � � 4,915,967 � � Loss from operations � (1,926,009 ) � (811,909 ) � Other income (expense): Interest income 560,675 4,385 Interest expense - (24,268 ) Other income (expense) � 297 � � (2,500 ) Total other income (expense) � 560,972 � � (22,383 ) � Net loss (1,365,037 ) (834,292 ) Accretion of preferred stock � - � � (128,999 ) Net loss attributable to common stockholders $ (1,365,037 ) $ (963,291 ) � Net loss attributable to common stockholders per share - basic and diluted $ (0.10 ) $ (0.20 ) � Weighted average shares outstanding - basic and diluted 13,358,488 4,724,163 � (1) Amounts include stock-based compensation expense, as follows: � Three Months Ended June 30, 2007 � 2006 � � Cost of revenues $ 94,806 $ 28,295 Research and development 2,126 19,236 Sales and marketing 201,918 69,373 General and administrative � 375,173 � � 126,562 � $ 674,023 � $ 243,466 � Salary.com, Inc. Condensed Consolidated Statements of Cash Flows Three Months Ended June 30, 2007 2006 (unaudited) Cash flows from operating activities: Net loss $ (1,365,037 ) $ (834,292 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 403,977 222,132 Stock-based compensation 674,023 243,466 Other non-cash items 59,070 49,589 Change in operating assets and liabilities � 1,840,546 � � (338,947 ) Net cash provided by (used in) operating activities � 1,612,579 � � (658,052 ) � Cash flows from investing activities: Cash paid for acquisition of business (10,197,962 ) (367,500 ) Cash paid for intangible assets (214,152 ) - Purchases of property and equipment (115,404 ) (311,071 ) Capitalization of software development costs � (162,392 ) � (93,156 ) Net cash used in investing activities � (10,689,910 ) � (771,727 ) � Cash flows from financing activities: Net proceeds from exercise (buyback) of common stock options and warrants � (9,492 ) � 161,970 � Net cash provided by (used in) financing activities � (9,492 ) � 161,970 � � Effect of exchange rate changes on cash and cash equivalents � (725 ) � - � Decrease in cash and cash equivalents (9,087,548 ) (1,267,809 ) � Cash and cash equivalents, beginning of period � 49,016,389 � � 1,813,715 � � Cash and cash equivalents, end of period $ 39,928,841 � $ 545,906 � Salary.com, Inc. Reconciliation of Non-GAAP Measures Three Months Ended June 30, 2007 2006 (unaudited) (unaudited) Reconciliation of GAAP loss from operations to non-GAAP loss from operations: � Loss from operations $ (1,926,009 ) $ (811,909 ) Amortization of intangible assets 134,818 53,249 Stock-based compensation � 674,023 � � 243,466 � Non-GAAP loss from operations $ (1,117,168 ) $ (515,194 ) � Reconciliation of GAAP net loss attributable to common stockholders to non-GAAP net loss attributable to common stockholders: � GAAP net loss attributable to common stockholders $ (1,365,037 ) $ (963,291 ) Accretion of preferred stock - 128,999 Amortization of intangible assets 134,818 53,249 Stock-based compensation � 674,023 � � 243,466 � Non-GAAP net loss attributable to common stockholders $ (556,196 ) $ (537,577 ) � Non-GAAP net loss attributable to common stockholders per share $ (0.04 ) $ (0.11 ) � Weighted average shares outstanding - basic and diluted 13,358,488 4,724,163 The non-GAAP financial measures in the text of this press release and accompanying non-GAAP supplemental information represent financial measures used by Salary.com�s management to evaluate the operating performance of the Company and to conduct its business operations. Non-GAAP financial measures discussed in the press release exclude amortization of intangible assets, stock-based compensation and the accretion of preferred stock. By excluding these non-cash charges, Salary.com can evaluate its operations and can compare its results on a more consistent basis to the results of other companies in the industry. Management uses the non-GAAP financial measures for planning purposes, including the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company�s financial and operational performance and in assisting investors in comparing the Company�s financial performance to those of other companies in the Company�s industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures are not intended to be an alternative to financial measures prepared in accordance with GAAP and should not be considered in isolation from our GAAP results of operations. Pursuant to the requirements of the SEC Regulation G, a detailed reconciliation between the Company�s GAAP and non-GAAP financial results is provided in this press release and investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company�s SEC filings.