2020 Revenue of $194.6 million
2020 GAAP Net Loss of $18.5 million; 2020
Non-GAAP Net Loss of $2.3 million
2020 Adjusted EBITDA of $4.3 million
ServiceSource (NASDAQ: SREV), the customer journey experience
company, today announced financial results for the three months and
year ended December 31, 2020.
“Throughout the disruption and uncertainty of 2020,
market-leading technology companies relied on ServiceSource to
preserve the value of their existing customer relationships and
enhance the return on their go-to-market investments. Customer
success and renewals became board-level priorities, while
digitally-enabled, virtual selling became the dominant form of B2B
customer acquisition and engagement,” said Gary B. Moore,
ServiceSource’s chairman and chief executive officer. “In the
fourth quarter and over the course of the year, we delivered for
our clients through a prolonged period of constrained technology
industry spend in nearly every sector. Against this backdrop, we
grew closer to the world-class brands we serve and improved the
health of our partnerships. We fully committed to a virtual first
operating model that will define how and where we deliver our
solutions going forward. And importantly, we demonstrated the
strength and resilience of our people and our business with solid
operating and financial results.”
Key Financial Results – Fourth Quarter
2020
- GAAP revenue was $51.1 million, compared with $54.9 million
reported for Q4 2019.
- GAAP net loss was $1.7 million or $0.02 per diluted share,
compared with GAAP net loss of $2.5 million or $0.03 per diluted
share reported for Q4 2019.
- Non-GAAP net income was $2.3 million or $0.02 per diluted
share, compared with non-GAAP net income of $0.6 million or $0.01
per diluted share reported for Q4 2019.
- Adjusted EBITDA, a non-GAAP financial measure, was $4.8
million, compared with $2.7 million reported for Q4 2019.
Key Financial Results – Full-Year Ended
December 31, 2020
- GAAP revenue was $194.6 million, compared with $216.1 million
reported for the year ended December 31, 2019.
- GAAP net loss was $18.5 million or $0.19 per diluted share,
compared with GAAP net loss of $18.7 million or $0.20 per diluted
share reported for the year ended December 31, 2019.
- Non-GAAP net loss was $2.3 million or $0.02 per diluted share,
compared with non-GAAP net loss of $3.3 million or $0.04 per
diluted share reported for the year ended December 31, 2019.
- Adjusted EBITDA, a non-GAAP financial measure, was $4.3
million, compared with $4.2 million reported for the year ended
December 31, 2019.
- Ended the year with $36.3 million of cash and cash equivalents
and restricted cash, including $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 – Full-Year
Ended December 31, 2020
- Grew revenue year-over-year with four of our five largest
clients and signed expansion wins with seven of our top ten
clients.
- Won two new clients in the fourth quarter and six for the full
year, all within the higher growth software and cloud sectors.
- Signed a one-year contract in the fourth quarter to provide
customer acquisition and conversion services for a rapidly growing
Unified Communications as a Service (UCaaS) company.
- Secured a one-year contract in the fourth quarter with a
market-leading digital operations management platform provider to
drive higher ARR retention rates through a proactive customer
success and renewals management program.
- Successfully renewed or extended approximately 81% of the
annual contract value that was up for renewal during the year.
“We executed well throughout 2020 and finished the year strong,”
commented Chad Lyne, executive vice president and chief financial
officer of ServiceSource. “Despite a challenging operating
environment and some client-specific headwinds from the global
pandemic, we expanded non-GAAP gross profit margins by 130 basis
points and generated higher Adjusted EBITDA year-over-year. The
investments we made in our client relationships, go-to-market
teams, technology infrastructure, and virtual first operating model
position us well for success in a market with attractive growth
potential. With a solid balance sheet, ample liquidity, disciplined
financial management, and strong operating fundamentals, we are
confident in our ability to execute our long-term strategy to build
value for our stockholders.”
Business Outlook for Full-Year 2021
There are encouraging signs that the pace of economic activity
and global technology spend will accelerate over the course of
2021. However, there remains a high degree of uncertainty regarding
the timing of the recovery and how it may impact ServiceSource’s
clients, as well as the mid-market and small-to-midsize businesses
that ServiceSource supports on behalf of its clients. Due to these
factors, the Company will not be issuing guidance for fiscal 2021
at this time. Management will provide forward-looking contextual
commentary during the earnings call and webcast that will accompany
this release.
Quarterly Conference Call
ServiceSource will discuss its fourth quarter and full-year 2020
results on February 25, 2021, via teleconference at 9:30 a.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: 7582178. 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 continue to invest in our strategic priorities and
digital transformation initiatives. 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
December 31,
For the Year Ended December
31,
2020
2019
2020
2019
Net revenue
$
51,059
$
54,871
$
194,601
$
216,135
Cost of revenue(1)
33,626
37,459
137,041
153,155
Gross profit
17,433
17,412
57,560
62,980
Operating expenses:
Sales and marketing(1)
5,951
7,075
24,999
30,009
Research and development(1)
1,416
1,146
5,602
4,848
General and administrative(1)
10,126
11,127
41,970
43,208
Restructuring and other related costs
839
93
1,542
1,929
Total operating expenses
18,332
19,441
74,113
79,994
Loss from operations
(899
)
(2,029
)
(16,553
)
(17,014
)
Interest and other expense, net
(229
)
(259
)
(1,279
)
(1,226
)
Loss before provision for income taxes
(1,128
)
(2,288
)
(17,832
)
(18,240
)
Provision for income tax expense
(536
)
(204
)
(709
)
(443
)
Net loss
$
(1,664
)
$
(2,492
)
$
(18,541
)
$
(18,683
)
Net loss per share, basic and diluted
$
(0.02
)
$
(0.03
)
$
(0.19
)
$
(0.20
)
Weighted-average common shares
outstanding, basic and diluted
96,821
94,608
95,787
93,882
(1) Reported amounts include stock-based
compensation expense as follows:
For the Three Months Ended
December 31,
For the Year Ended December
31,
2020
2019
2020
2019
Cost of revenue
$
144
$
124
$
389
$
538
Sales and marketing
395
382
1,416
1,772
Research and development
24
17
57
41
General and administrative
716
654
3,003
2,811
Total stock-based compensation
$
1,279
$
1,177
$
4,865
$
5,162
ServiceSource International,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
December 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
34,006
$
27,089
Accounts receivable, net
38,890
41,754
Prepaid expenses and other
9,275
7,296
Total current assets
82,171
76,139
Property and equipment, net
29,948
36,149
ROU assets
29,798
36,396
Contract acquisition costs
872
1,602
Goodwill
6,334
6,334
Other assets
3,490
4,844
Total assets
$
152,613
$
161,464
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
1,204
$
4,392
Accrued expenses
3,217
3,366
Accrued compensation and benefits
18,342
16,700
Revolver
15,000
—
Operating lease liabilities
10,797
9,652
Other current liabilities
1,209
2,218
Total current liabilities
49,769
36,328
Operating lease liabilities, net of
current portion
25,975
33,716
Other long-term liabilities
1,593
2,983
Total liabilities
77,337
73,027
Stockholders’ equity:
Preferred stock
—
—
Common stock
10
9
Treasury stock
(441
)
(441
)
Additional paid-in capital
379,696
374,525
Accumulated deficit
(304,607
)
(286,066
)
Accumulated other comprehensive income
618
410
Total stockholders’ equity
75,276
88,437
Total liabilities and stockholders’
equity
$
152,613
$
161,464
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
For the Year Ended December
31,
2020
2019
Cash flows from operating
activities:
Net loss
$
(18,541
)
$
(18,683
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
13,925
13,449
Amortization of contract acquisition
costs
1,003
1,504
Amortization of ROU assets
9,841
9,715
Stock-based compensation
4,865
5,162
Restructuring and other related costs
1,460
1,866
Other
71
(168
)
Net changes in operating assets and
liabilities:
Accounts receivable, net
3,232
12,449
Prepaid expenses and other assets
(82
)
(1,558
)
Contract acquisition costs
(266
)
(442
)
Accounts payable
(3,213
)
2,441
Accrued compensation and benefits
(97
)
(646
)
Operating lease liabilities
(10,195
)
(8,678
)
Accrued expenses
(107
)
(102
)
Other liabilities
(1,495
)
(3,864
)
Net cash provided by operating
activities
401
12,445
Cash flows from investing
activities:
Purchases of property and equipment
(7,855
)
(10,106
)
Net cash used in investing activities
(7,855
)
(10,106
)
Cash flows from financing
activities:
Repayment on finance lease obligations
(952
)
(900
)
Proceeds from Revolver
27,000
—
Repayment of Revolver
(12,000
)
—
Proceeds from issuance of common stock
414
223
Payments related to minimum tax
withholdings on RSU releases
(161
)
(182
)
Net cash provided by (used in) financing
activities
14,301
(859
)
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
96
124
Net change in cash and cash equivalents
and restricted cash
6,943
1,604
Cash and cash equivalents and restricted
cash, beginning of period
29,383
27,779
Cash and cash equivalents and restricted
cash, end of period
$
36,326
$
29,383
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”), costs attributable to
establishing a litigation reserve, 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, amortization of contract acquisition costs related to the
initial adoption of ASC 606 and costs attributable to establishing
a litigation reserve.
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
December 31,
For the Year Ended December
31,
2020
2019
2020
2019
Net revenue
$
51,059
$
54,871
$
194,601
$
216,135
Gross profit
GAAP gross profit
$
17,433
$
17,412
$
57,560
$
62,980
Non-GAAP adjustments:
Stock-based compensation
(A)
144
124
389
538
Amortization of internally developed
software
(B)
1,493
1,144
5,467
4,119
Non-GAAP gross profit
$
19,070
$
18,680
$
63,416
$
67,637
Gross profit %
GAAP gross profit
34.1
%
31.7
%
29.6
%
29.1
%
Non-GAAP adjustments:
Stock-based compensation
(A)
0.3
%
0.2
%
0.2
%
0.2
%
Amortization of internally developed
software
(B)
2.9
%
2.1
%
2.8
%
1.9
%
Non-GAAP gross profit
37.3
%
34.0
%
32.6
%
31.3
%
Certain totals do not add due to
rounding
Operating expenses
GAAP operating expenses
$
18,332
$
19,441
$
74,113
$
79,994
Non-GAAP adjustments:
Stock-based compensation
(A)
(1,135
)
(1,053
)
(4,476
)
(4,624
)
Amortization of internally developed
software
(B)
(611
)
(468
)
(2,234
)
(1,683
)
Restructuring and other related costs
(C)
(839
)
(93
)
(1,542
)
(1,929
)
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
(91
)
(187
)
(605
)
(976
)
Litigation reserve
(E)
74
—
74
256
Non-GAAP operating expenses
$
15,730
$
17,640
$
65,330
$
71,038
Net loss
GAAP net loss
$
(1,664
)
$
(2,492
)
$
(18,541
)
$
(18,683
)
Non-GAAP adjustments:
Stock-based compensation
(A)
1,279
1,177
4,865
5,162
Amortization of internally developed
software
(B)
2,104
1,612
7,701
5,802
Restructuring and other related costs
(C)
839
93
1,542
1,929
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
91
187
605
976
Litigation reserve
(E)
(74
)
—
(74
)
(256
)
Non-cash interest expense
(F)
18
17
71
73
Income tax effect on non-GAAP
adjustments
(G)
(293
)
(7
)
1,537
1,650
Non-GAAP net income (loss)
$
2,300
$
587
$
(2,294
)
$
(3,347
)
Diluted net loss per share
GAAP net loss per share
$
(0.02
)
$
(0.03
)
$
(0.19
)
$
(0.20
)
Non-GAAP adjustments:
Stock-based compensation
(A)
0.01
0.01
0.05
0.05
Amortization of internally developed
software
(B)
0.02
0.02
0.08
0.06
Restructuring and other related costs
(C)
0.01
0.00
0.02
0.02
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
0.00
0.00
0.01
0.01
Litigation reserve
(E)
0.00
0.00
0.00
0.00
Non-cash interest expense
(F)
0.00
0.00
0.00
0.00
Income tax effect on non-GAAP
adjustments
(G)
0.00
0.00
0.02
0.02
Non-GAAP diluted net income (loss) per
share
$
0.02
$
0.01
$
(0.02
)
$
(0.04
)
Certain totals do not add due to
rounding
Shares used in calculating diluted net
loss per share on a non-GAAP basis
(H)
96,821
94,608
95,787
93,882
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) Litigation reserve. The Company records a contingent
liability when it is probable that a loss has been incurred and the
amount is reasonably estimable in accordance with accounting for
contingencies. These reserves are one-time in nature charges that
are not indicative of our core operating performance.
(F) 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.
(G) 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, E and F noted above on our non-GAAP net
income (loss).
(H) 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 year ended December 31, 2020 and 2019.
ServiceSource International,
Inc.
Reconciliation of Net Loss to
Adjusted EBITDA
(in thousands)
(unaudited)
For the Three Months Ended
December 31,
For the Year Ended December
31,
2020
2019
2020
2019
Net loss
$
(1,664
)
$
(2,492
)
$
(18,541
)
$
(18,683
)
Provision for income tax expense
536
204
709
443
Interest and other expense, net
229
259
1,279
1,226
Depreciation and amortization(1)
3,594
3,291
13,925
13,449
EBITDA
2,695
1,262
(2,628
)
(3,565
)
Stock-based compensation
(A)
1,279
1,177
4,865
5,162
Restructuring and other related costs
(C)
839
93
1,542
1,929
Amortization of contract acquisition asset
costs - ASC 606 initial adoption
(D)
91
187
605
976
Litigation reserve
(E)
(74
)
—
(74
)
(256
)
Adjusted EBITDA
$
4,830
$
2,719
$
4,310
$
4,246
(1) Depreciation and amortization expense
are comprised of the following:
For the Three Months Ended
December 31,
For the Year Ended December
31,
2020
2019
2020
2019
Internally developed software
amortization
$
2,104
$
1,612
$
7,701
$
5,802
Property and equipment depreciation
1,490
1,679
6,224
7,647
Depreciation and amortization
$
3,594
$
3,291
$
13,925
$
13,449
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224005898/en/
Investor Relations Contact for ServiceSource: Chad Lyne
ServiceSource International, Inc.
investorrelations@servicesource.com
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