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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Kenexa Corp. Common Stock (MM) | NASDAQ:KNXA | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 30.54 | 0 | 01:00:00 |
From Jul 2019 to Jul 2024
Kenexa (Nasdaq: KNXA), a global provider of business solutions for human resources, today announced operating results for the third quarter ended September 30, 2010.
For the third quarter of 2010, Kenexa reported total revenue of $50.8 million, an increase of 26% compared to $40.3 million for the third quarter of 2009. Within total revenue, subscription revenue was $39.8 million for the third quarter of 2010, an increase of 20% compared with $33.2 million in the third quarter of 2009. Professional services and other revenue was $11.0 million for the third quarter of 2010, an increase of 55% compared to $7.1 million for the third quarter of 2009.
“Kenexa’s growing business momentum continued in the third quarter, leading to revenue and profitability that were ahead of our expectations. Each area of our business delivered a solid performance, including our software, content and RPO business,” said Rudy Karsan, Chief Executive Officer of Kenexa. “While we continue to have a cautious stance on the pace of economic recovery, we are encouraged by Kenexa’s growing success with the world’s largest organizations. Customer interest levels remain high and we saw a significant increase in attendance at our World Conference in September, the combination of which provides us with optimism regarding Kenexa’s outlook.”
Karsan added, “We are excited to have successfully completed the cash tender process related to the acquisition of Salary.com, which establishes Kenexa as the leading provider of on-demand compensation management solutions. Kenexa is already highly differentiated based on our unique business model focused on delivering a broad range of best-in-class solutions, proprietary content, services and RPO. The addition of Salary.com’s software and content is highly synergistic with Kenexa’s existing suite of solutions and further differentiates our value proposition to large, global organizations.”
Non-GAAP income from operations, which excludes share-based compensation expense, amortization of acquired intangibles and fees related to our acquisitions was $4.2 million for the three months ended September 30, 2010, above the Company’s guidance of $3.4 million to $3.6 million and compared to $4.3 million for the three months ended September 30, 2009. Non-GAAP net income available to common shareholders, which excludes the items listed above, was $3.7 million for the three months ended September 30, 2010, compared to $4.0 million for the three months ended September 30, 2009. Non-GAAP net income available to common shareholders was $0.16 per diluted share for the quarter ended September 30, 2010, above the Company’s guidance of $0.12 to $0.13 and compared to $0.18 per diluted share in the third quarter of 2009.
Kenexa’s income from operations for the three months ended September 30, 2010, determined in accordance with GAAP, was $1.5 million, compared to $1.9 million for the same period of 2009. GAAP net income allocable to common shareholders was approximately $150,000, or $0.01 per diluted share for the three months ended September 30, 2010, compared to net income of $1.6 million, or $0.07 per diluted share in the same period of 2009.
A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Kenexa had cash, cash equivalents and investments of $90.4 million at September 30, 2010, an increase from $65.5 million at the end of the prior quarter. The increase in cash was primarily the result of drawing $25 million against a line of credit to partially fund the acquisition of Salary.com shortly after the close of the quarter. The Company also generated cash from operations of $6.6 million during the third quarter, which was partially offset by capital expenditures and the purchase of CHPD. Deferred revenue was $58.7 million at September 30, 2010, an increase of 33% from September 30, 2009.
On October 1, 2010, Kenexa announced the completion of the acquisition of Salary.com. In consideration of the acquisition, Kenexa used approximately $55 million of cash and approximately $25 million of long-term debt. The Company’s fourth quarter 2010 balance sheet will reflect the consideration used for the Salary.com acquisition.
Other Third Quarter and Recent Highlights
Business Outlook
Based on information as of today, November 2, 2010, the Company is issuing financial guidance as follows:
Fourth Quarter 2010*: The Company expects non-GAAP revenue to be $58 million to $60 million, which includes contribution of approximately $8 million to $9 million from Salary.com, and non-GAAP operating income to be $6.0 million to $6.9 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 23.6 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.19 to $0.22.
Full Year 2010*: The Company expects non-GAAP revenue to be $193 million to $195 million, which includes contribution of approximately $8 million to $9 million from Salary.com, and non-GAAP operating income to be $16.3 million to $17.2 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 23.5 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.55 to $0.59.
Full Year 2011*: The Company expects non-GAAP revenue to be $235 million to $245 million, which assumes a contribution from Salary.com in the low-to-mid $30 million range, and non-GAAP operating income to be $19.0 million to $27.0 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 24 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.58 to $0.85.
* Kenexa is not providing guidance on GAAP revenue at this time due to the uncertainty around its acquired deferred revenue analysis. Kenexa’s non-GAAP results will exclude stock based compensation expense, amortization of intangibles associated with acquisitions, fees related to closing the Salary.com acquisition and the purchase accounting reduction to Salary.com’s revenue.
Conference Call Information
Kenexa will host a conference call today, November 2, 2010, at 5:00 pm (Eastern Time) to discuss the Company's financial results. To access this call, dial 877-407-9039 (domestic) or 201-689-8470 (international). A replay of this conference call will be available through November 9, 2010, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 358386. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's Web site, (www.kenexa.com) and a replay will be archived on the Web site as well.
Forward-Looking Statements
This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These statements may contain, among other things, guidance as to future revenue and earnings, operations, expected benefits from acquisitions, prospects of the business generally, intellectual property and the development of products. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Kenexa’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by Kenexa’s quarterly reports on Form 10-Q. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors, Kenexa’s ability to implement business and acquisition strategies or to complete or integrate acquisitions. Kenexa does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. Kenexa believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Kenexa’s financial condition and results of operations. The Company’s management uses these non-GAAP results to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company’s Board of Directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in the Company’s industry, many of which present similar non-GAAP financial measures to investors.
Management of the Company does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which charges are excluded from the non-GAAP financial measures.
In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results. Kenexa urges investors and potential investors in the Company’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures which it includes in press releases announcing earnings information, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.
We have not provided a reconciliation of forward-looking non-GAAP financial measures to the directly comparable GAAP measures because, due primarily to variability and difficulty in making accurate forecasts and projections, not all of the information necessary for a quantitative reconciliation is available to us without unreasonable efforts.
Kenexa presents the following non-GAAP financial measures in this press release: non-GAAP income from operations; non-GAAP net income available to common shareholders’; non-GAAP gross profit; non-GAAP sales and marketing expense; non-GAAP general and administrative expense; non-GAAP research and development expense; non-GAAP operating margin, and non-GAAP net income per diluted share as described below.
The Company’s non-GAAP financial measures exclude the following:
Share-based compensation expense. Share-based compensation expense consists of expenses for stock options and stock awards that the Company began recording in accordance with ASC 718 during the first quarter of 2006. Share-based compensation was $1.0 million for the three months ended September 30, 2010 and $1.4 million for the three months ended September 30, 2009. Share-based compensation expenses are excluded in the Company’s non-GAAP financial measures because share-based compensation amounts are difficult to forecast. This is due in part to the magnitude of the charges which depends upon the volume and timing of stock option grants, which are unpredictable and can vary dramatically from period to period, and external factors such as interest rates and the trading price and volatility of the Company’s common stock. The Company believes that this exclusion provides meaningful supplemental information regarding the Company’s operating results because these non-GAAP financial measures facilitate the comparison of results for future periods with results from past periods. The dilutive effect of all outstanding options is included in the calculation of diluted earnings per share on both a GAAP and a non-GAAP basis.
Amortization of acquired intangible assets. In accordance with GAAP, operating expenses include amortization of acquired intangible assets which are amortized over the estimated useful lives of such assets. Amortization of acquired intangible assets was $0.8 million for the three months ended September 30, 2010, and $1.0 million for the three months ended September 30, 2009. Amortization of acquired intangible assets is excluded from the Company’s non-GAAP financial measures because the Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.
Acquisition-related fees. In accordance with ASC 805, Business Combinations, acquisition-related fees including advisory, legal, accounting and other professional fees are reported as expense in the periods in which the costs are incurred and the services are received. Acquisition-related fees of $0.9 million, for the three months ended September 30, 2010 include legal, travel, and other fees not expected to reoccur from the acquisitions of Salary.com and CHPD. Acquisition-related fees are excluded in the non-GAAP financial measures because the Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.
Accretion of variable interest entity. In accordance with ASC 810, Variable Interest Entities, the Chinese joint venture is subject to periodic adjustment in its fair market value. The accretion of the variable interest entity of $0.8 million for the three months ended September 30, 2010 is excluded in the non-GAAP financial measures because the Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.
About Kenexa
Kenexa® provides business solutions for human resources. We help global organizations multiply business success by identifying the best individuals for every job and fostering optimal work environments for every organization. For more than 20 years, Kenexa has studied human behavior and team dynamics in the workplace, and has developed the software solutions, business processes and expert consulting that help organizations impact positive business outcomes through HR. Kenexa is the only company that offers a comprehensive suite of unified products and services that support the entire employee lifecycle from pre-hire to exit. Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.
Note to editors: Kenexa is a registered trademark of Kenexa. Other company names, product names and company logos mentioned herein are the trademarks or registered trademarks of their respective owners.
Kenexa Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) September 30, December 31, 2010 2009 Assets (unaudited) Current assets Cash and cash equivalents $ 90,430 $ 29,221 Short-term investments - 29,570Accounts receivable, net of allowance for doubtful accounts of $1,896 and$2,090
34,918 26,782 Unbilled receivables 5,128 4,457 Income tax receivable 273 1,704 Deferred income taxes 6,319 8,685 Prepaid expenses and other current assets 10,813 8,428 Total current assets 147,881 108,847 Property and equipment, net of accumulated depreciation 18,542 19,530 Software, net of accumulated amortization 21,060 17,337 Goodwill 5,569 3,204 Intangible assets, net of accumulated amortization 8,602 9,143 Deferred income taxes, non-current 36,686 34,879 Deferred financing costs, net of accumulated amortization 81 - Other long-term assets 10,403 9,403 Total assets $ 248,824 $ 202,343 Liabilities and Shareholders' equity Current liabilities Accounts payable $ 9,352 $ 5,727 Notes payable, current 5 16 Commissions payable 2,047 671 Accrued compensation and benefits 6,387 4,820 Other accrued liabilities 7,042 6,376 Deferred revenue 58,708 49,964 Capital lease obligations 229 211 Total current liabilities 83,770 67,785 Capital lease obligations, less current portion 107 259 Revolving credit loan 25,000 - Deferred income taxes 530 850 Other non-current liabilities 1,892 1,981 Total liabilities 111,299 70,875 Commitments and Contingencies Temporary equity Noncontrolling interest 2,546 1,330 Shareholders' equityPreferred stock, par value $0.01; 10,000,000 shares authorized; noshares issued or outstanding
- -Class A common stock, $0.01 par value; 100,000,000 shares authorized;22,708,829 and 22,561,883 shares issued, respectively
227 226 Additional paid-in capital 279,465 275,127 Accumulated deficit (140,604 ) (141,712 ) Accumulated other comprehensive loss (4,109 ) (3,503 ) Total shareholders' equity 134,979 130,138 Total liabilities and shareholders' equity $ 248,824 $ 202,343 Kenexa Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share data) Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2010 2009 2010 2009 (unaudited) (unaudited) (unaudited) (unaudited) Revenue: Subscription $ 39,764 $ 33,221 $ 109,136 $ 100,527 Other 11,020 7,093 26,177 18,083 Total revenues 50,784 40,314 135,313 118,610 Cost of revenues 17,957 13,129 46,828 40,462 Gross profit 32,827 27,185 88,485 78,148 Operating expenses: Sales and marketing 11,642 9,083 32,540 26,029 General and administrative 12,084 10,182 32,542 30,972 Research and development 3,277 2,453 7,693 7,557 Depreciation and amortization 4,341 3,582 12,457 10,084 Goodwill impairment charge - - - 33,329 Total operating expenses 31,344 25,300 85,232 107,971 Income (loss) from operations 1,483 1,885 3,253 (29,823 ) Interest income (expense) 72 (28 ) 355 (186 )(Loss) income on change in fair market value ofinvestments including ARS andput option, net and municipal bonds
(382 ) 102 (379 ) 54 Income (loss) before income tax 1,173 1,959 3,229 (29,955 ) Income tax expense 26 361 906 1,418 Net income (loss) $ 1,147 $ 1,598 $ 2,323 $ (31,373 ) Income allocated to noncontrolling interests (188 ) 0 (406 ) 0 Accretion of variable interest entity (809 ) 0 (809 ) 0 Net income (loss) allocable to common shareholders' $ 150 $ 1,598 $ 1,108 $ (31,373 ) Basic income (loss) per share $ 0.01 $ 0.07 $ 0.05 $ (1.39 )Weighted average shares used to compute netincome (loss) allocable to common shareholdersper share - basic
22,629,050 22,539,717 22,603,323 22,525,144 Diluted income (loss) per share $ 0.01 $ 0.07 $ 0.05 $ (1.39 )Weighted average shares used to compute netincome (loss) allocable to common shareholdersper share - diluted
23,168,553 22,920,935 23,098,070 22,525,144 Non-GAAP income from operations and non-GAAP net income reconciliation: Three Months Ended September 30, 2010 2009 (unaudited) (unaudited) Non-GAAP income from operations reconciliation: Income from operations $ 1,483 $ 1,885 Add back: Share-based compensation expense 1,010 1,384 Amortization of acquired intangibles 777 1,041 Acquisition-related fees 945 - Non-GAAP income from operations $ 4,215 $ 4,310Weighted average shares used to compute net income allocable tocommon shareholders per share - basic
22,629,050 22,539,717 Dilutive effect of options and restricted stock units 539,503 381,218Weighted average shares used to compute net income allocable tocommon shareholders per share - diluted
23,168,553 22,920,935 Non-GAAP income from operations as a percentage of total revenue 8 % 11 % Non-GAAP net income reconciliation: Net income allocable to common shareholders $ 150 $ 1,598 Add back: Share-based compensation expense 1,010 1,384 Amortization of acquired intangibles 777 1,041 Acquisition-related fees 945 - Accretion associated with variable interest entity 809 - Non-GAAP net income available to common shareholders' $ 3,691 $ 4,023 Non-GAAP basic net income per share $ 0.16 $ 0.18 Non-GAAP diluted net income per share $ 0.16 $ 0.18 Other non-GAAP measures referenced on earnings call: Gross profit $ 32,827 $ 27,185 Add: share-based compensation expense 40 59 Non-GAAP gross profit $ 32,867 $ 27,244 Sales and marketing $ 11,642 $ 9,083 Less: share-based compensation expense (226 ) (286 ) Less: acquisition-related fees (200 ) - Non-GAAP sales and marketing $ 11,216 $ 8,797 General and administrative $ 12,084 10,182 Less: share-based compensation expense (631 ) (902 ) Less: acquisition-related fees (745 ) - Non-GAAP general and administrative $ 10,708 $ 9,280 Research and development $ 3,277 $ 2,453 Less: share-based compensation expense (113 ) (137 ) Non-GAAP research and development $ 3,164 $ 2,316 Kenexa Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the nine months ended September 30, 2010 2009 (unaudited) (unaudited) Cash flows from operating activities Net income (loss) from operations $ 2,323 $ (31,373 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 12,457 10,084 Loss on disposal of property and equipment 48 - (Gain) loss on change in fair market value of ARS and put option, net (3 ) 9 Realized Loss on available-for-sale securities 483 - Goodwill Impairment charge - 33,329 Share-based compensation expense 3,578 4,080 Amortization of deferred financing costs 2 364 Bad debt net of recoveries (23 ) (471 ) Deferred income tax benefit (387 ) (1,118 ) Changes in assets and liabilities Accounts and unbilled receivables (6,896 ) 4,272 Prepaid expenses and other current assets (3,522 ) (1,907 ) Income taxes receivable 1,432 83 Other long-term assets (778 ) (903 ) Accounts payable 1,994 336 Accrued compensation and other accrued liabilities 2,259 180 Commissions payable 1,380 149 Deferred revenue 8,501 5,433 Other liabilities (279 ) (34 ) Net cash provided by operating activities 22,569 22,513 Cash flows from investing activities Capitalized software and purchases of property, plant and equipment (12,121 ) (10,923 ) Purchases of available-for-sale securities (7,653 ) (4,765 ) Sales of available-for-sale securities 23,054 2,572 Sales of trading securities 15,291 1,650 Acquisitions and variable interest entity, net of cash acquired (5,326 ) (4,795 ) Net cash deposited in escrow for acquisitions (160 ) - Net cash provided by (used in) investing activities 13,085 (16,261 ) Cash flows from financing activities Borrowings from revolving credit loan 25,000 - Net repayments of notes payable (9 ) (73 ) Repayments of capital lease obligations (160 ) (237 ) Deferred financing costs (83 ) - Proceeds from common stock issued through Employee Stock Purchase Plan 303 244 Net proceeds from option exercises 458 70 Net cash provided by financing activities 25,509 4 Effect of exchange rate changes on cash and cash equivalents 46 226 Net increase in cash and cash equivalents 61,209 6,482 Cash and cash equivalents at beginning of period 29,221 21,742 Cash and cash equivalents at end of period: $ 90,430 $ 28,224 Supplemental disclosures of cash flow information Cash paid during the period for: Interest expense 6 190 Income taxes (received) paid (823 ) 4,634 Non-cash investing and financing activities: Capital Leases - 513 Common stock issuance for earn out - 1,050
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