ServiceSource Announces Operational Changes and Updates Q2 Revenue and Profitability Guidance

SAN FRANCISCO – (BUSINESS WIRE) – ServiceSource (NASDAQ:SREV), the global leader in customer success and revenue lifecycle management solutions, today announced that two executives are departing the company and, due to continued strong progress across the business, it is raising the lower end of Q2 revenue guidance, raising Q2 profitability guidance range, reaffirming annual ACV and revenue guidance and indicating strengthened annual non-GAAP gross margin and annual adjusted EBITDA expectations.

Gregory Hopkins, Chief Customer Officer, has resigned to pursue a specific opportunity outside of ServiceSource. Mr. Hopkin's last day with the Company will be June 30, 2016. Commenting on the change, Christopher Carrington, CEO of ServiceSource said, "I am thankful to Greg for his many contributions to ServiceSource over the past year. ServiceSource now has a deep bench of talent in our sales and account management organizations, and their collective efforts on customer centricity have resulted in measurable improvements across the board -- our client relationships have improved dramatically and our sales metrics continue to trend in a positive direction. While we wish Greg well in his next endeavor, we look forward to two of his key lieutenants - who possess over 18 years of collective ServiceSource experience - stepping into bigger and broader roles that position us well to deliver even stronger client outcomes and accelerated growth."

After successfully unifying and transforming multiple technology organizations, platforms, and roadmaps, Joe Kovach, Chief Transformation Officer, will be resigning effective July 15, 2016, and the IT organization will be brought together under Brian Delaney, Chief Operating Officer of ServiceSource. "As demonstrated by our operational improvements over the past year, Brian is a proven leader who will bring further alignment and integration between our global technology and operational delivery teams," said Carrington. "I am grateful for the tremendous progress Joe made on the critical work of transforming our technology approach and wish him the best with his future opportunities."

ServiceSource also announced today that it is updating the previously provided second quarter guidance. "The investments we have made over the past several quarters continue to result in meaningful and measurable performance improvements," commented Robert Pinkerton, CFO of ServiceSource. "As discussed in our first quarter 2016 earnings announcement, our sales pipeline is growing more robust, our client health scores continue to trend favorably, churn has returned to historic industry norms, and our revenue delivery centers are performing ahead of plan." In light of these sustained trends, the updates to the May 9, 2016 guidance include:

  • Raising the lower end of second quarter revenue expectations;
  • Increasing second quarter non-GAAP gross margin guidance as a result of improving operational efficiency;
  • Raising second quarter adjusted EBITDA estimates;
  • Reaffirming confidence in full-year 2016 expectations for ACV growth of 10% and revenue growth of 1%-3%; and,
  • Expecting gains in efficiency in the first half of the year to translate to stronger full-year improvement in non-GAAP gross margin and adjusted EBITDA.

A summary of the revised guidance is presented below and a GAAP to non-GAAP reconciliation of the revised guidance is attached.

 

In $ millions except EPS

Q2 Low / Q2 High

Revenue Range   $59.5 /  $61.5       

 y/y growth    -4% / 0%        

Non-GAAP Gross Margin   35% / 36.5%        

Operating Expense (% of revenue)   38% /  37%        

Adjusted EBITDA   $0.0 / $1.5        

Non-GAAP Net Income (Loss)   ($1.2) /  ($0.3)       

 Non-GAAP EPS   ($0.01) /  ($0.00)       

 Free Cash Flow   ($5.0) / ($3.5)        

As explained in more detail in the below language, all metrics are non-GAAP and exclude, where appropriate, stock-based compensation expense, acquisition related costs and amortization of internally developed software and purchased intangibles. Revenues do not reflect the adjustment relating to the write-down of acquired deferred revenue.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our expectations for financial and operational performance. 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 those expressed or implied in our forward-looking statements. Those risks and uncertainties include, without limitation, fluctuations in our quarterly results of operations; our technology; the risk of material defects or errors in our software offerings or their failure to meet customer expectations; the ability to integrate our SaaS technologies with other third-party applications used by our customers; errors in estimates as to the renewal rate improvements and/or service revenue we can generate for our customers; our ability to grow the market for service revenue management; changes in market conditions that impact our ability to sell our solutions and/or generate service revenue on our customers' behalf; the possibility that our estimates of service revenue opportunity under management and other metrics may prove inaccurate; demand for our offering that falls short of expectations; the potential effect of mergers and acquisitions on our customer base; our ability to keep customer data and other confidential information secure; our ability to adapt our solution to changes in the market or new competition; our ability to achieve our expected benefits from international expansion; our ability to protect our intellectual property rights; the risk of claims that our offerings infringe the intellectual property rights of others; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our periodic reports and registration statements 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 we assume no obligation to update these forward-looking statements.

About ServiceSource

ServiceSource (NASDAQ:SREV) provides the world's leading B2B companies with expert, technology-enabled solutions and best-practice processes proven to grow and retain revenue from existing customers. With a holistic approach to the entire revenue lifecycle, ServiceSource solutions help companies drive customer adoption, expansion and renewal. Only ServiceSource brings to market more than 17 years of exclusive focus on customer success and revenue growth, global deployments across 40 languages and 200 countries, and a powerful, purpose-built Revenue Lifecycle Management technology platform.For more information, go to www.servicesource.com.