Revenue of $48.9 million, up 8.6%
year-over-year
GAAP Net Loss of $4.4 million; Non-GAAP Net
Income of $1.1 million
Adjusted EBITDA of $2.6 million
Free cash flow of $1.4 million
ServiceSource (NASDAQ: SREV), the customer journey experience
company, today announced financial results for the three months
ended March 31, 2022.
“We had a strong start to the year on many fronts, maintaining
healthy revenue growth and expanded profitability year-over-year,”
said Gary B. Moore, ServiceSource’s chairman and chief executive
officer. “Our results clearly show the impact of the work we’ve
done to strengthen our operating model and refine our solution
offerings. We continue to attract new logos, our existing
relationships are expanding nicely, and we are more effectively
serving them at a level of delivery excellence that builds clients
for life.”
Key Financial Results – First Quarter
2022
- GAAP revenue was $48.9 million, compared with $45.0 million
reported for Q1 2021.
- GAAP net loss was $4.4 million or $0.04 per diluted share,
compared with GAAP net loss of $8.8 million or $0.09 per diluted
share reported for Q1 2021.
- Non-GAAP net income was $1.1 million or $0.01 per diluted
share, compared with non-GAAP net loss of $2.1 million or $0.02 per
diluted share reported for Q1 2021.
- Adjusted EBITDA, a non-GAAP financial measure, was $2.6
million, compared with negative $0.2 million reported for Q1
2021.
- Cash, cash equivalents, and restricted cash of $31.8 million
and borrowings under the Revolver of $10.0 million as of March 31,
2022.
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 – First Quarter
2022
- Won two new client logos in the quarter, including a
market-leading graphing database company and a growing cloud
computing and services company.
- Executed on recent program expansions and drove higher levels
of productivity, contributing to approximately 16% year-over-year
revenue growth on a combined basis from the company’s ten largest
clients in the quarter.
- Renewed or extended approximately 94% of the contract value
that was up for renewal in the quarter.
- Maintained strong go-to-market momentum and sales activity,
including an approximately 7% year-over-year increase in new
bookings on a trailing twelve-month basis.
- Successfully went live and ramped engagements worldwide for new
clients that were signed at the end of the fourth quarter.
“We built on our momentum from last year and began 2022 with a
very successful first quarter,” commented Chad Lyne, executive vice
president and chief financial officer of ServiceSource. “With 8.6%
year-over-year revenue growth, we delivered the strongest first
quarter comparison since 2014. Our non-GAAP gross profit margins
expanded 340 basis points year-over-year, Adjusted EBITDA was up
$2.8 million year-over-year, and we generated $1.4 million of free
cash flow in the quarter. We are incredibly proud of how our teams
continue to execute at a high level and the positive impact this
performance is having on all of our stakeholders.”
Quarterly Conference Call
In light of the pending transaction announced yesterday, the
earnings conference call that was scheduled for Tuesday, May 10th,
2022 at 9:30 a.m. MDT (11:30 a.m. EDT) will no longer be held.
Forward-Looking Statements
This press release contains forward-looking statements,
including statements regarding our operating model and solutions
offerings, our ability to attract new logos and expand existing
relationships, our ability to serve our clients, and the impact of
our performance on stakeholders. 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, including, but not limited to,
the COVID-19 pandemic and Russia's invasion of Ukraine - 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, but not
limited to, as a result of the COVID-19 pandemic or Russia's
invasion of Ukraine; 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 March 31,
2022
2021
Net revenue
$
48,893
$
45,023
Cost of revenue(1)
35,745
34,067
Gross profit
13,148
10,956
Operating expenses: Sales and marketing(1)
3,996
4,030
Research and development(1)
1,386
1,160
General and administrative(1)
11,321
12,190
Restructuring and other related costs
-
920
Total operating expenses
16,703
18,300
Loss from operations
(3,555
)
(7,344
)
Interest and other expense, net
(178
)
(1,160
)
Loss before provision for income taxes
(3,733
)
(8,504
)
Provision for income tax expense
(649
)
(331
)
Net loss
$
(4,382
)
$
(8,835
)
Net loss per share, basic and diluted
$
(0.04
)
$
(0.09
)
Weighted-average common shares outstanding, basic and diluted
99,398
97,234
(1) Reported amounts include stock-based compensation
expense as follows:
For the Three Months Ended March
31,
2022
2021
Cost of revenue
$
138
$
130
Sales and marketing
346
191
Research and development
24
15
General and administrative
2,112
2,139
Total stock-based compensation
$
2,620
$
2,475
ServiceSource International,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
March 31, 2022
December 31, 2021
Assets Current assets: Cash and cash equivalents
$
29,518
$
28,507
Accounts receivable, net
37,938
43,571
Prepaid expenses and other
7,858
8,995
Total current assets
75,314
81,073
Property and equipment, net
15,898
18,721
ROU assets
23,110
23,043
Contract acquisition costs
497
558
Goodwill
6,334
6,334
Other assets
2,717
2,719
Total assets
$
123,870
$
132,448
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable
$
1,612
$
832
Accrued expenses
3,299
4,152
Accrued compensation and benefits
13,955
19,999
Revolver
10,000
10,000
Operating lease liabilities
7,740
8,614
Other current liabilities
648
793
Total current liabilities
37,254
44,390
Operating lease liabilities, net of current portion
20,481
19,869
Other long-term liabilities
1,180
1,155
Total liabilities
58,915
65,414
Stockholders’ equity: Preferred stock
-
-
Common stock
10
10
Treasury stock
(441
)
(441
)
Additional paid-in capital
388,213
385,827
Accumulated deficit
(323,710
)
(319,328
)
Accumulated other comprehensive income
883
966
Total stockholders’ equity
64,955
67,034
Total liabilities and stockholders’ equity
$
123,870
$
132,448
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
For the Three Months Ended
March 31,
2022
2021
Cash flows from operating activities: Net loss
$
(4,382
)
$
(8,835
)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization
3,522
3,657
Amortization of contract acquisition costs
90
167
Amortization of ROU assets
2,051
2,391
Stock-based compensation
2,620
2,475
Restructuring and other related costs
-
902
Other
15
265
Net changes in operating assets and liabilities: Accounts
receivable, net
5,557
4,131
Prepaid expenses and other assets
1,088
(2,099
)
Contract acquisition costs
(31
)
(51
)
Accounts payable
808
3,952
Accrued compensation and benefits
(5,913
)
(3,673
)
Operating lease liabilities
(2,359
)
(2,738
)
Accrued expenses
(828
)
(511
)
Other liabilities
(59
)
504
Net cash provided by operating activities
2,179
537
Cash flows from investing activities: Purchases of property
and equipment
(741
)
(1,019
)
Net cash used in investing activities
(741
)
(1,019
)
Cash flows from financing activities: Repayment on finance
lease obligations
(52
)
(161
)
Proceeds from Revolver
10,000
-
Repayment of Revolver
(10,000
)
-
Proceeds from issuance of common stock
-
132
Payments related to minimum tax withholdings on RSU releases
(247
)
-
Net cash used in financing activities
(299
)
(29
)
Effect of exchange rate changes on cash and cash equivalents and
restricted cash
(128
)
650
Net change in cash and cash equivalents and restricted cash
1,011
139
Cash and cash equivalents and restricted cash, beginning of period
30,801
36,326
Cash and cash equivalents and restricted cash, end of period
$
31,812
$
36,465
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 ongoing 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”), net, 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
March 31,
2022
2021
Net revenue
$
48,893
$
45,023
Gross profit GAAP gross profit
$
13,148
$
10,956
Non-GAAP adjustments: Stock-based compensation (A)
138
130
Amortization of internally developed software (B)
2,423
1,832
Non-GAAP gross profit
$
15,709
$
12,918
Gross profit % GAAP gross profit
26.9
%
24.3
%
Non-GAAP adjustments: Stock-based compensation (A)
0.3
%
0.3
%
Amortization of internally developed software (B)
5.0
%
4.1
%
Non-GAAP gross profit
32.1
%
28.7
%
Certain totals do not add due to rounding
Operating
expenses GAAP operating expenses
$
16,703
$
18,300
Non-GAAP adjustments: Stock-based compensation (A)
(2,482
)
(2,345
)
Amortization of internally developed software (B)
(173
)
(360
)
Restructuring and other related costs (C)
-
(920
)
Amortization of contract acquisition costs - ASC 606 initial
adoption (D)
(15
)
(84
)
Non-GAAP operating expenses
$
14,033
$
14,591
Net income (loss) GAAP net loss
$
(4,382
)
$
(8,835
)
Non-GAAP adjustments: Stock-based compensation (A)
2,620
2,475
Amortization of internally developed software (B)
2,596
2,192
Restructuring and other related costs (C)
-
920
Amortization of contract acquisition costs - ASC 606 initial
adoption (D)
15
84
Non-cash interest expense (E)
15
18
Income tax effect on non-GAAP adjustments (F)
246
1,077
Non-GAAP net income (loss)
$
1,110
$
(2,069
)
Diluted net income (loss) per share GAAP diluted net
loss per share
$
(0.04
)
$
(0.09
)
Non-GAAP adjustments: Stock-based compensation (A)
0.03
0.03
Amortization of internally developed software (B)
0.03
0.02
Restructuring and other related costs (C)
0.00
0.01
Amortization of contract acquisition costs - ASC 606 initial
adoption (D)
0.00
0.00
Non-cash interest expense (E)
0.00
0.00
Income tax effect on non-GAAP adjustments (F)
0.00
0.01
Non-GAAP diluted net income (loss) per share
$
0.01
$
(0.02
)
Certain totals do not add due to rounding Shares used in
calculating diluted net income (loss) per share on a non-GAAP basis
(G)
99,398
97,234
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 months ended March 31, 2022 and 2021.
ServiceSource International,
Inc.
Reconciliation of Net Loss to
Adjusted EBITDA
(in thousands)
(unaudited)
For the Three Months Ended
March 31,
2022
2021
Net loss
$
(4,382
)
$
(8,835
)
Provision for income tax expense
649
331
Interest and other expense, net
178
1,160
Depreciation and amortization(1)
3,522
3,657
EBITDA
(33
)
(3,687
)
Stock-based compensation
(A)
2,620
2,475
Restructuring and other related costs
(C)
-
920
Amortization of contract acquisition asset costs - ASC 606 initial
adoption
(D)
15
84
Adjusted EBITDA
$
2,602
$
(208
)
(1) Depreciation and amortization expense is comprised of
the following:
For the Three Months Ended March 31,
2022
2021
Internally developed software amortization
$
2,596
$
2,192
Property and equipment depreciation
926
1,465
Depreciation and amortization
$
3,522
$
3,657
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220510005359/en/
Investor Relations Contact for ServiceSource: Chad Lyne
ServiceSource International, Inc.
investorrelations@servicesource.com
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