ServiceSource Q4 fiscal year_2013_earnings_call_v_finalforwebsite

388 views

Published on

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
388
On SlideShare
0
From Embeds
0
Number of Embeds
107
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

ServiceSource Q4 fiscal year_2013_earnings_call_v_finalforwebsite

  1. 1. Q4 & Fiscal Year 2013 Earnings Call February 6th 2014
  2. 2. ServiceSource Confidential Information11 Important Information • This presentation contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, without limitation, statements regarding: predictions for future growth, our possible or assumed future results of operations; estimates of service revenue opportunity under management and annual contract value; our ability to improve our customers’ renewal rates, margins and profitability; our ability to increase our revenue and contribution margin over time from new and existing customers; business strategies; technology and product development; competitive position; the effects of competition; third party and company estimates of market sizes; our long term business model; economic, industry and market trends; potential growth vectors and opportunities; comparative models; and statements about partnerships or acquisitions. • Typically, these statements contain words such as “if,” "believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “opportunity” and similar expressions. . • You are cautioned that the forward-looking statements in this presentation are based on estimates and information available to us at the time of this presentation. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially and are not guarantees of future performance. We undertake no obligation, and to not currently intend to update the forward-looking statements to reflect subsequent events or circumstances. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our periodic reports and registration statements filed with the Securities and Exchange Commission, which can be accessed at http://www.sec.gov. • This presentation refers to certain non-GAAP financial metrics. See the GAAP to non-GAAP reconciliation tables contained herein and our earnings release posted on the Investor Relations portion of the ServiceSource website for a reconciliation of the non-GAAP metrics to the closest GAAP financial measures.
  3. 3. ServiceSource Confidential Information Mike Smerklo Chairman and CEO
  4. 4. ServiceSource Confidential Information33 2013 In Summary… Q4 2013 • Revenue: $77.2M, +15% y/y • Adj. EBITDA: $8.6M • Non-GAAP EPS: $0.04 • Significant technology subscription expansion • Expanded with three Fortune 50 Customers • Successful presence at Dreamforce • New alliances with Accenture and Aria FY 2013 • Revenue: $272.5M, +12% y/y • Adj. EBITDA: $17.7M • Non-GAAP EPS: $0.06 • Free cash flow $11.0M • $275.1M of cash on the balance sheet as of year end • Unbundled our solution • Brought 15 customers live on Renew OnDemand • Launched new Sales Center in Japan
  5. 5. ServiceSource Confidential Information44 2013 was a Pivotal Year Challenges Going Into the Year Revenue Growth Deceleration Introduction of SaaS Offering as New Platform for Growth New Capabilities Required For Success Five Key Initiatives to Reposition Ourselves for Reacceleration Move to an “Unbundled Offering” Improve Sales Execution Product Scale & Standardization Increase Capacity to Implement Renew OnDemand Customer Retention
  6. 6. ServiceSource Confidential Information55 Rapidly Changing Market Environment Benefits ServiceSource • Cloud • Internet of Things • Installed base selling for traditional and subscription businesses • New recurring revenue business models Focus shifts from customer acquisition to maximizing customer lifetime value
  7. 7. ServiceSource Confidential Information66 Acquisition of Scout Analytics • Provides usage-based, predictive analytics • Adds more than $300B in TAM • Extends our solutions for subscription customers • Highly scalable solution • $32.5M* transaction value • $7M Subscription ARR (2013) • $5.4M 2013 Revenue • Anticipated EPS accretive in 6-8 quarters Strategic Rationale Transaction Overview $14.5B under management, 200 customer engagements, 400 million devices, 25 million subscription users, $600B+ TAM * On a cash-free, debt-free basis Combined Company TM
  8. 8. ServiceSource Confidential Information77 Expanding TAM and Subscription Portfolio Low High SubscriptionTraditional Business Model Complexity
  9. 9. ServiceSource Confidential Information88 • High Churn • Low Adoption and Customer Satisfaction • Limited Visibility into Application Usage • Low Renewal Rates • Limited Visibility • Inefficient Renewals and Channel Management • Multiple Data Sources We Can Uniquely Solve Our Customer’s Biggest Business Challenges Traditional Subscription • Increased Complexity From Mixed Models • No Complete View of Customer • Higher Cost of Sale and Difficulty Cross Selling Combined
  10. 10. ServiceSource Confidential Information99 Industry’s Only Combined Offering with Managed Services and SaaS Applications Renewal Sales Renewal management and analytics Predictive analytics for subscription businesses Customer Success Enablement Implementation Training Data Services Applications Professional Services Managed Services Put Partners & Ecosystem
  11. 11. ServiceSource Confidential Information1010 2014: Our Growth Pillars Strengthen the Power of Our People Extend Go To Market Reach & Partner Ecosystem Help Customers Unlock Data as a Strategic Asset Sell into Base & Expand Market With Cloud Applications Reinforce Managed Services Leadership Position
  12. 12. ServiceSource Confidential Information1111 Subscriptions Become Larger Part of ACV 178 281 31 2011 2014 21% Total ACV Growth CAGR BOP Managed Services ACV BOP Subscription ARR $312M $178M 10%
  13. 13. ServiceSource Confidential Information Ashley Johnson CFO
  14. 14. ServiceSource Confidential Information1313 2013 Revenue Summary • Q4 2013 Revenue grew 15% year-over-year • FY 2013 Revenue grew 12% year-over-year reaching $272.5M • Cloud & Data Services represented ~6% of revenue $67.3 $77.2 $243.7 $272.5 Q4 13Q4 12 FY 13FY 12 +15% +12%$ millions
  15. 15. ServiceSource Confidential Information Non-GAAP Operating Expenses* • Continued investment in the business to drive growth and market adoption for Renew OnDemand 14 * All metrics exclude stock-based compensation and amortization of internally developed software. Net income excludes non-cash interest expense and assumes a 40% tax rate. Q4 2012 Q4 2013 FY2012 FY 2013 % growth Non-GAAP Operating Expenses Cost of Revenue 34,020 44,050 132,082 156,170 18% Sales and Marketing 13,328 12,448 48,229 48,519 1% Research and Development 5,436 4,629 17,030 21,129 24% General and Administration 8,154 9,532 32,374 36,206 12% Total operating expenses 60,938 70,659 229,715 262,024 14% Adjusted EBITDA 8,339$ 8,578$ 20,933$ 17,711$ % of Revenue 12% 11% 9% 6% Non-GAAP Net Income 3,563$ 3,236$ 7,928$ 5,252$ Non-GAAP EPS 0.05$ 0.04$ 0.10$ 0.06$ Diluted shares on a non-GAAP basis 77,831 84,615 79,093 82,268
  16. 16. ServiceSource Confidential Information Key Balance Sheet and Cash Flow Metrics 15 • Improved cash flow metrics and raised convertible debt, significantly strengthening our balance sheet in 2013 12/31/2012 12/31/2013 Balance Sheet Metrics Cash & Cash Equivalents 109.4 275.1 DSOs 87 85 Deferred Revenues 3.2 6.3 Cash Flow Metrics Cash Flow from Operations 10.5 15.7 Capital Expenditures 20.3 5.2 Free Cash Flow (10.0) 11.0
  17. 17. ServiceSource Confidential Information1616 Managed Services Key Drivers and Guidance KEY DRIVERS • Modest growth in new Managed Services ACV as business focus shifts to SaaS, weighted to H2 • 2 – 3 quarters to ramp new ACV, compressing gross margins • Quarterly seasonality – Lighter Q1 and Q3 (particularly international business), stronger Q4 • Target ACV retention historical average of 90% (or better) GUIDANCE TABLES Q1 2014 Q1 Low Q1 High Managed Services Revenue Range 59.0 61.0 y/y growth 1% 5% Estimated Gross Margin* 34% 36% FY 2014 FY Low FY High Managed Services Revenue Range 270.0 274.0 y/y growth 5% 7% Estimated Gross Margin* 37% 40% • Strong customer base and leadership position in recurring revenue management provides leverage to emerging subscription business * Non-GAAP metrics exclude stock-based compensation and amortization of internally developed software.
  18. 18. ServiceSource Confidential Information1717 • Continued investment in fast-growing subscription business Cloud & Data Services Key Drivers and Guidance KEY DRIVERS • ARR of $31M at the beginning of 2014, including Scout acquisition • New subscription ACV weighted to H2 as sales teams integrate and go to market with full suite of apps • Revenue recognized ratably starting month post signing • Subscription gross margins expand as business scales • Professional Services a loss-leader to drive Renew success GUIDANCE TABLES Q1 2014 Q1 Low Q1 High Subscription Revenue Range 7.0 8.0 y/y growth 204% 248% Estimated Gross Margin* 61% 65% Professional Services Revenue Range ~1.0 ~1.0 Estimated Gross Margin* -250% -250% FY 2014 FY Low FY High Subscription Revenue Range 35.0 38.0 y/y growth 178% 202% Estimated Gross Margin* 65% 68% Professional Services Revenue Range ~3.0 ~4.0 Estimated Gross Margin* -200% -200% * Non-GAAP metrics exclude stock-based compensation and amortization of internally developed software. Revenues do not reflect the write-down of acquired deferred revenue.
  19. 19. ServiceSource Confidential Information1818 Consolidated SREV Guidance • Investing in leadership and growth of SaaS business through R&D, implementation & adoption and sales & marketing investments * Non-GAAP metrics exclude stock-based compensation and amortization of internally developed software. Revenues do not reflect the write-down of acquired deferred revenue. $ millions Q1 Low Q1 High FY Low FY High Total ServiceSource Revenue Range 67.0 70.0 308.0 316.0 y/y growth 10% 15% 13% 16% Non-GAAP Gross Margin 33% 35% 38% 40% Non-GAAP Operating Expenses Sales & Marketing 20% 19% 19% 20% Research & Development 9% 9% 9% 9% General & Administrative 15% 14% 14% 13% Depreciation 2.0 2.0 9.0 9.0 Adjusted EBITDA (6.0) (3.0) (4.0) 4.0 Non-GAAP Net Income (4.8) (3.0) (7.8) (3.0) Non-GAAP E.P.S. (0.06) (0.04) (0.09) (0.04) Free Cash Flow - 3.0 (15.0) (7.0)
  20. 20. ServiceSource Confidential Information1919 For Your Reference…. • An archive of today’s call will be posted on the IR portion of our website, under “Events & Presentations” • If you’d like more information on the Scout acquisition, we will be hosting a webinar on Thursday, February 13th @ 8am PT. – Registration information will be available on our IR site.
  21. 21. ServiceSource Confidential Information Non-GAAP to GAAP Reconciliation Tables
  22. 22. Q1 and Full Year Guidance Reconciliation Three Months Ended Twelve Months Ended March 31, December 31, 2014 2014 $20,700 - $23,000 $111,500 - $121,000 Stock-based compensation ( A ) 900 3,500 Amortization of internally-developed software ( B ) 500 2,000 Non-GAAP gross margin $22,100 - $24,500 $117,000 - $126,400 31% - 33% 36% - 38% Stock-based compensation ( A ) 1% 1% Amortization of internally-developed software ( B ) 1% 1% Non-GAAP gross margin % 33% - 35% 38% - 40% Certain totals do not add due to rounding ServiceSource International, Inc. GROSS MARGIN - GAAP TO NON-GAAP RECONCILIATION (In thousands) (Unaudited) GAAP gross margin Non-GAAP adjustments: Gross Margin GAAP gross margin Non-GAAP adjustments: Gross Profit %
  23. 23. Q1 and Full Year Guidance Reconciliation Three Months Ended Twelve Months Ended March 31, December 31, 2014 2014 GAAP net loss $(17,000) - $(14,000) $(50,000) - $(42,000) Stock-based compensation ( A ) 6,500 26,000 Amortization of internally-developed software ( B ) 600 2,400 Non-cash interest expense ( C ) 1,700 7,500 ( D ) $2,200 - $3,400 $3,000 - $6,200 Non-GAAP net income $(4,800) - $(3,000) $(7,800) - $(3,000) GAAP diluted net loss per share $(0.21) - $(0.17) $(0.60) - $(0.50) Stock-based compensation ( A ) 0.08 0.31 Amortization of internally-developed software ( B ) 0.01 0.03 Non-cash interest expense ( C ) 0.02 0.09 ( D ) 0.03 - 0.04 0.04 - 0.07 Non-GAAP diluted net income per share ( E ) $(0.06) - $(0.04) $(0.09) - $(0.04) Certain totals do not add due to rounding 82,500 84,500 (In thousands, except per share data) (Unaudited) GAAP to Non-GAAP Reconciliation Net Income (Loss) Per Share Net Income (Loss) Non-GAAP adjustments: Income taxeffect on non-GAAP adjustments and impact of normalizing the effective income taxrate Non-GAAP adjustments: Income taxeffect on non-GAAP adjustments and impact of normalizing the effective income taxrate Shares used in calculating diluted net income per share on a non-GAAP basis
  24. 24. Q1 and Full Year Guidance Reconciliation Business Outlook Reconciliation of Net Loss to AdjustedEBITDA (In thousands) (Unaudited) Three Months Ended Twelve Months Ended March 31, December 31, 2014 2014 Net loss range………………………………….. $(17,000) - $(14,000) $(50,000) - $(42,000) Income tax(benefit) provision…………………………… 200 1,000 Interest & other expense, net……………………………. 1,700 7,500 Depreciation & Amortization……………………...……. 2,600 11,500 EBITDA range……………………………………………. $(12,500) - $(9,500) $(30,000)- $(22,000) Stock-based compensation……………………………… 6,500 26,000 Adjusted EBITDA range………………………………… $(6,000) - $(3,000) $(4,000) - $4,000
  25. 25. Q1 and Full Year Guidance Reconciliation Three Months Ended Twelve Months Ended March 31, December 31, 2014 2014 $2,000 - $4,000 $(5,000) - $1,000 Less: 1,000 - 2,000 8,000 - 10,000 - - $0 - $3,000 $(15,000) - $(7,000)Free cash flow ServiceSource International, Inc. Supplemental Cash FlowInformation Free cash flowanalysis, a non-GAAP measure (in thousands) Operating cash flow GAAP net cash provided by operating activities Capital expenditures FX adjustment
  26. 26. Q1 and Full Year Guidance Reconciliation Footnotes to GAAP to Non-GAAP Reconciliation ( A ) ( B ) ( C ) ( D ) ( E ) For this per share reconciliation, basic shares were used for the above calaculation. Income tax effect on non-GAAP adjustments and impact of normalizing the effective income tax rate. This adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (C) on non- GAAP net income and adjusts the income taxrate to a normalized effective taxrate of 40%. Stock-based compensation. Included in our GAAP presentation of cost of revenue and operating expenses, stock-based compensation consists of expenses for stock options and awards and purchase rights under our stock purchase plan. We exclude stock-based compensation expense fromour non- GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense. Amortization of internally-developed software . Included in our GAAP presentation of cost of revenue and operating expenses, amortization of internally-developed software reflects amortization of expense for certain software purchases and software developed or obtained for internal use and are non-cash in nature. We exclude these expenses fromour non-GAAP measures because we believe they are not indicative of our core operating performance. Non-cash interest expense . Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the $150 million convertible senior notes that were issued in August 2013. Accordingly, for GAAP purposes we are required to recognize effective interest expense on our convertible senior notes which includes interest cost related to the amortization of debt issuance costs and the contractual 1.5% interest rate of the note. The difference between the effective interest expense and the contractual interest expense is excluded fromour assessment of our operating performance because we believe that 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.

×