Revenue of $48.6 million, up 6.1%
year-over-year
GAAP Net Loss of $3.4 million; Non-GAAP Net
Income of $0.4 million
Adjusted EBITDA of positive $2.0 million
ServiceSource (NASDAQ: SREV), the customer journey experience
company, today announced financial results for the three months
ended September 30, 2021.
“Our ongoing commitment to client success and focus on
operational excellence enabled a pronounced inflection in our
financial results in the third quarter,” said Gary B. Moore,
ServiceSource’s chairman and chief executive officer. “We delivered
on our previous commitment to return the business to year-over-year
revenue growth in the second half of the year, while also making
notable gains in profitability. Our results show that when we bring
differentiated solutions to bear for future-focused growth
enterprises and when we execute with a clients-for-life mentality,
we can win in the market and accelerate our profile. Looking
forward, we will continue to invest in our people and capabilities
to ensure we are positioned to capture a market opportunity that we
believe still remains in the early stages of longer-term adoption
and expansion.”
Key Financial Results –Third Quarter
2021
- GAAP revenue was $48.6 million, compared with $45.8 million
reported for Q3 2020.
- GAAP net loss was $3.4 million or $0.03 per diluted share,
compared with GAAP net loss of $5.6 million or $0.06 per diluted
share reported for Q3 2020.
- Non-GAAP net income was $0.4 million or $0.00 per diluted
share, compared with non-GAAP net loss of $1.6 million or $0.02 per
diluted share reported for Q3 2020.
- Adjusted EBITDA, a non-GAAP financial measure, was positive
$2.0 million, compared with negative $0.2 million reported for Q3
2020.
- Ended the quarter with $32.5 million of cash and cash
equivalents and restricted cash and $10.0 million of borrowings
under the Company's $35.0 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 –Third Quarter
2021
- Successfully renewed or extended approximately 94% of the
contract value that was up for renewal through the first three
quarters of the year.
- Generated strong sales activity with an approximately 22%
year-over-year increase in new bookings on a trailing twelve-month
basis.
- Signed a new contract with Dropbox, a global leader in cloud
storage and content collaboration, to become a strategic extension
of the Dropbox go-to-market team through the deployment of a
virtual inside sales solution across ServiceSource’s NALA, EMEA,
and APJ regions.
- Secured an expansion in excess of $5 million of expected
contract value with one of the world’s largest software companies
to support the renewal, upsell, and cross-sell of enterprise
service contracts across more than a dozen of the client’s
subsidiaries and operating units in Europe and North America.
- Enhanced the company’s liquidity with a new three-year, $35
million revolving credit facility with Bank of America.
“We are proud of the improved execution and enhanced outcomes
being generated by our teams,” commented Chad Lyne, executive vice
president and chief financial officer of ServiceSource. “Our
transformation initiatives and the repositioning efforts we have
undertaken in the business are beginning to generate the returns we
expected. As a company, we remain committed to our longer-term
financial objectives and are unified in our drive to extend on the
important progress that has been made throughout the
organization.”
Quarterly Conference Call
ServiceSource will discuss its third quarter 2021 results on
November 2, 2021, via teleconference at 4:30 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: 6688496. 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 ability to win in the market,
accelerate our profile, and deliver on our longer-term financial
objectives. 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
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except per share
amounts)
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Net revenue
$
48,578
$
45,790
$
139,908
$
143,542
Cost of revenue(1)
35,030
33,210
104,492
103,415
Gross profit
13,548
12,580
35,416
40,127
Operating expenses:
Sales and marketing(1)
4,174
5,638
12,263
19,048
Research and development(1)
1,338
1,489
3,679
4,186
General and administrative(1)
10,801
10,537
33,615
31,844
Restructuring and other related costs
—
—
974
703
Total operating expenses
16,313
17,664
50,531
55,781
Loss from operations
(2,765
)
(5,084
)
(15,115
)
(15,654
)
Interest and other expense, net
(267
)
(500
)
(1,791
)
(1,050
)
Loss before provision for income taxes
(3,032
)
(5,584
)
(16,906
)
(16,704
)
Provision for income tax (expense)
benefit
(359
)
6
(411
)
(173
)
Net loss
$
(3,391
)
$
(5,578
)
$
(17,317
)
$
(16,877
)
Net loss per share, basic and diluted
$
(0.03
)
$
(0.06
)
$
(0.18
)
$
(0.18
)
Weighted-average common shares
outstanding, basic and diluted
98,253
95,963
97,703
95,437
(1) Reported amounts include stock-based
compensation expense as follows:
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Cost of revenue
$
245
$
110
$
663
$
245
Sales and marketing
141
200
500
1,021
Research and development
2
14
34
33
General and administrative
712
942
3,452
2,287
Total stock-based compensation
$
1,100
$
1,266
$
4,649
$
3,586
ServiceSource International,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands) (unaudited)
September 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
30,170
$
34,006
Accounts receivable, net
35,464
38,890
Prepaid expenses and other
8,599
9,275
Total current assets
74,233
82,171
Property and equipment, net
21,540
29,948
ROU assets
22,706
29,798
Contract acquisition costs
604
872
Goodwill
6,334
6,334
Other assets
4,109
3,490
Total assets
$
129,526
$
152,613
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
3,003
$
1,204
Accrued expenses
3,203
3,217
Accrued compensation and benefits
19,147
18,342
Revolver
10,000
15,000
Operating lease liabilities
9,503
10,797
Other current liabilities
973
1,209
Total current liabilities
45,829
49,769
Operating lease liabilities, net of
current portion
18,931
25,975
Other long-term liabilities
1,893
1,593
Total liabilities
66,653
77,337
Stockholders' equity:
Preferred stock
—
—
Common stock
10
10
Treasury stock
(441
)
(441
)
Additional paid-in capital
384,337
379,696
Accumulated deficit
(321,924
)
(304,607
)
Accumulated other comprehensive income
891
618
Total stockholders' equity
62,873
75,276
Total liabilities and stockholders'
equity
$
129,526
$
152,613
ServiceSource International,
Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
For the Nine Months Ended
September 30,
2021
2020
Cash flows from operating
activities:
Net loss
$
(17,317
)
$
(16,877
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
10,969
10,331
Amortization of contract acquisition
costs
434
798
Amortization of ROU assets
7,046
7,255
Stock-based compensation
4,649
3,586
Restructuring and other related costs
935
633
Other
364
54
Net changes in operating assets and
liabilities:
Accounts receivable, net
3,193
8,544
Prepaid expenses and other assets
(553
)
1,226
Contract acquisition costs
(167
)
(195
)
Accounts payable
1,810
(3,597
)
Accrued compensation and benefits
185
317
Operating lease liabilities
(8,154
)
(7,299
)
Accrued expenses
(6
)
(831
)
Other liabilities
573
(1,081
)
Net cash provided by operating
activities
3,961
2,864
Cash flows from investing
activities:
Purchases of property and equipment
(2,682
)
(5,124
)
Net cash used in investing activities
(2,682
)
(5,124
)
Cash flows from financing
activities:
Repayment on finance lease obligations
(485
)
(730
)
Debt issuance costs
(97
)
—
Proceeds from Revolver
13,500
27,000
Repayment of Revolver
(18,500
)
(12,000
)
Proceeds from issuance of common stock
139
159
Payments related to minimum tax
withholdings on RSU releases
(178
)
—
Net cash (used in) provided by financing
activities
(5,621
)
14,429
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
480
(52
)
Net change in cash and cash equivalents
and restricted cash
(3,862
)
12,117
Cash and cash equivalents and restricted
cash, beginning of period
36,326
29,383
Cash and cash equivalents and restricted
cash, end of period
$
32,464
$
41,500
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”), 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
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Net revenue
$
48,578
$
45,790
$
139,908
$
143,542
Gross profit
GAAP gross profit
$
13,548
$
12,580
$
35,416
$
40,127
Non-GAAP adjustments:
Stock-based compensation
(A)
245
110
663
245
Amortization of internally developed
software
(B)
2,092
1,408
5,871
3,974
Non-GAAP gross profit
$
15,885
$
14,098
$
41,950
$
44,346
Gross profit %
GAAP gross profit
27.9
%
27.5
%
25.3
%
28.0
%
Non-GAAP adjustments:
Stock-based compensation
(A)
0.5
%
0.2
%
0.5
%
0.2
%
Amortization of internally developed
software
(B)
4.3
%
3.1
%
4.2
%
2.8
%
Non-GAAP gross profit
32.7
%
30.8
%
30.0
%
30.9
%
Certain totals do not add due to
rounding
Operating expenses
GAAP operating expenses
$
16,313
$
17,664
$
50,531
$
55,781
Non-GAAP adjustments:
Stock-based compensation
(A)
(855
)
(1,156
)
(3,986
)
(3,341
)
Amortization of internally developed
software
(B)
(315
)
(575
)
(1,024
)
(1,623
)
Restructuring and other related costs
(C)
—
—
(974
)
(703
)
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
(43
)
(134
)
(195
)
(514
)
Non-GAAP operating expenses
$
15,100
$
15,799
$
44,352
$
49,600
Net (loss) income
GAAP net loss
$
(3,391
)
$
(5,578
)
$
(17,317
)
$
(16,877
)
Non-GAAP adjustments:
Stock-based compensation
(A)
1,100
1,266
4,649
3,586
Amortization of internally developed
software
(B)
2,407
1,983
6,895
5,597
Restructuring and other related costs
(C)
—
—
974
703
Amortization of contract acquisition costs
- ASC 606 initial adoption
(D)
43
134
195
514
Non-cash interest expense
(E)
11
18
46
53
Income tax effect on non-GAAP
adjustments
(F)
218
574
1,509
1,830
Non-GAAP net income (loss)
$
388
$
(1,603
)
$
(3,049
)
$
(4,594
)
Diluted net (loss) income per
share
GAAP diluted net loss per share
$
(0.03
)
$
(0.06
)
$
(0.18
)
$
(0.18
)
Non-GAAP adjustments:
Stock-based compensation
(A)
0.01
0.01
0.05
0.04
Amortization of internally developed
software
(B)
0.02
0.02
0.07
0.06
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
0.01
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
0.02
0.02
Non-GAAP diluted net income (loss) per
share
$
0.00
$
(0.02
)
$
(0.03
)
$
(0.05
)
Certain totals do not add due to
rounding
Shares used in calculating diluted net
income (loss) per share on a non-GAAP basis
(G)
98,253
95,963
97,703
95,437
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 nine months ended September 30, 2021 and 2020.
ServiceSource International,
Inc.
Reconciliation of Net Loss to
Adjusted EBITDA
(in thousands)
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Net loss
$
(3,391
)
$
(5,578
)
$
(17,317
)
$
(16,877
)
Provision for income tax expense
(benefit)
359
(6
)
411
173
Interest and other expense, net
267
500
1,791
1,050
Depreciation and amortization(1)
3,670
3,512
10,969
10,331
EBITDA
905
(1,572
)
(4,146
)
(5,323
)
Stock-based compensation
(A)
1,100
1,266
4,649
3,586
Restructuring and other related costs
(C)
—
—
974
703
Amortization of contract acquisition asset
costs - ASC 606 initial adoption
(D)
43
134
195
514
Adjusted EBITDA
$
2,048
$
(172
)
$
1,672
$
(520
)
(1) Depreciation and amortization expense
are comprised of the following:
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Internally developed software
amortization
$
2,407
$
1,983
$
6,895
$
5,597
Property and equipment depreciation
1,263
1,529
4,074
4,734
Depreciation and amortization
$
3,670
$
3,512
$
10,969
$
10,331
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102005877/en/
Investor Relations Contact for ServiceSource: Chad Lyne
ServiceSource International, Inc.
investorrelations@servicesource.com
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