ServiceSource Reports Fourth Quarter and Fiscal Year 2016 Financial Results Signed
12 new clients in 2016Expanded FY2016 gross margins by 3 percentage points
SAN FRANCISCO--(BUSINESS WIRE)-- ServiceSource® (Nasdaq: SREV), a global leader in customer success and revenue lifecycle management solutions, today announced financial results for the fourth quarter and full year ended December 31, 2016.
"Our investments in 2016 in our people, platforms, and global Revenue Delivery Centers improved the results we delivered for our clients and helped us win 12 new logos last year. As we accelerate our digital transformation in 2017, we believe our solutions around customer success, inside sales, channel management, and renewals will drive even deeper value for new and existing clients. While we were strengthening our foundation with these investments, we also drove a 3 percentage point improvement to gross margin for the second year in a row and increased adjusted EBITDA by $11.5 million," said Christopher M. Carrington, CEO of ServiceSource. "The foundation we built this past year will serve us well moving forward as we expand our offerings to help clients find, convert, grow, and retain revenue at all points along their customers' journey."
GAAP revenue was $68.7 million in the fourth quarter, representing a 5.7% increase from the $65.0 million delivered in the same period in the prior year. Non-GAAP revenue was $68.7 million, reflecting a 5.6% increase from the same period in the prior year.
For the fourth quarter of fiscal year 2016, GAAP net loss in the quarter was $8.5 million, or $0.10 per share, compared with GAAP net loss of $6.0 million, or $0.07 per share, for the same period last year. Non-GAAP net income in the quarter was $1.7 million compared with Non-GAAP net income of $0.3 million for the same period last year. Non-GAAP net income was $0.02 per basic and diluted share, compared with non-GAAP net income of $0.00 per basic and diluted share for the same period last year. Adjusted EBITDA was $5.7 million, compared with $2.3 million for the same period last year.
For the full year 2016, GAAP revenue was $252.9 million, compared with $252.2 million for fiscal year 2015. GAAP net loss for the year was $32.1 million, or $0.37 per share, compared with a GAAP net loss of $40.6 million, or $0.48 per share for 2015. Non-GAAP net income for the year was $3.6 million, compared with non-GAAP net loss of $4.2 million in 2015. Non-GAAP net income for the year was $0.04 per basic and diluted share, compared with non-GAAP net loss of $0.05 per basic and diluted share for 2015. Adjusted EBITDA was $12.9 million, compared with adjusted EBITDA of $1.4 million for fiscal year 2015.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release.
With respect to Q1 and full year guidance, while ServiceSource remains confident in its market position and future growth prospects, in the first quarter of 2017 the Company has experienced churn substantially above industry norms driven by several clients. This churn is having an impact on revenue in Q1 and will materially affect 2017 growth expectations.
For the first quarter of fiscal 2017, ServiceSource is providing the following guidance:
- Revenue of $55 million to $58 million
- GAAP gross margin of 26% to 29%; non-GAAP gross margin of 31% to 34%
- GAAP operating expenses of approximately $27 million; non-GAAP operating expenses of approximately $23 million
- GAAP net loss of $11.5 million to $14.5 million; non-GAAP net loss of $1.5 million to $3.5 million
- Adjusted EBITDA loss of $1 million to $4 million
For the fiscal 2017, ServiceSource is providing the following guidance:
- Revenue of $248 million to $258 million
- GAAP gross margin of 32% to 34%; non-GAAP gross margin of 38% to 40%
- GAAP operating expenses of $109 million to $117 million; non-GAAP operating expenses of $92 million to $98 million
- GAAP net loss of $35.5 million to $39.5 million; non-GAAP net income of $2 million to $5 million
- Adjusted EBITDA of $11 million to $15 million
Please see the fourth quarter presentation on the Events and Presentations section of the Investor Relations web site (http://ir.servicesource.com/events) for a reconciliation between GAAP and non-GAAP measures in our guidance.
Quarterly Conference Call
ServiceSource will discuss its fourth quarter 2016 results and financial guidance today via teleconference at 1:30 p.m. Pacific 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: 56067655. In addition, a live webcast of the call will also be available on the Investor Relations section of the ServiceSource web site under Events & Presentations. A replay of the webcast will also be available on the Company's website at http://ir.servicesource.com.
For condensed financial data, visit http://ir.servicesource.com/releasedetail.cfm?ReleaseID=1012800. There you will find statements of operations, consolidated balance sheets, statements of cash flow, and GAAP to non-GAAP Reconciliation.
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 our forward-looking statements. Those risks and uncertainties include: a decline in client renewals, the loss of one or more of our key clients or the contraction in our revenue from one or more of our key clients, in each case resulting in churn, or our clients not expanding their relationships with us; the risk of problems implementing our technologies or that our technologies will not meet customer expectations; that the market for our solution is underdeveloped and may not grow; errors in estimates as to the renewal rate improvements and/or service revenue we can generate for our customers; 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; 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; problems encountered by our clients in their business cause them to cancel or reduce their business with us our ability to achieve our expected benefits from international expansion; economic or other adverse events or conditions affecting the technology industry; our ability to protect our intellectual property rights; the risk of claims that our offerings infringe the intellectual property rights of others; 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.
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 15 years of exclusive focus on customer success and revenue growth, global deployments across 35 languages, and a powerful, purpose-built Revenue Lifecycle Management technology platform. For more information, go to http://www.servicesource.com.