Salary.com Inc. (SLRY)
F4Q10 Earnings Call
May 25, 2010 5:00 pm ET
Paul Daoust - Interim President and Chief Executive Officer
Bryce Chicoyne - Senior Vice President, Chief Financial Officer and Treasurer
Jeff Houston – William Blair & Company
Analyst for Tom Roderick – Thomas Weisel Partners
Matt [Hoss] – Pacific Crest Securities
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Welcome to the Salary.com fourth quarter 2010 earnings conference call. Today’s call is being recorded. At this time I would like to turn the conference over to Mr. Bryce Chicoyne, CFO. Please go ahead sir.
Thank you. Good afternoon. This is Bryce Chicoyne, Chief Financial Officer of Salary.com. Thank you for joining us today to discuss Salary.com’s results for the fourth quarter of fiscal 2010. With me on the call today is Paul Daoust, interim CEO.
During the course of this conference call we will discuss our business outlook and make other forward-looking statements regarding our current expectations of future events and the future financial performance of the company. Our actual results may differ from those projected due to risks and uncertainties. Any forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates on any subsequent day. We assume no duty or obligation to update these forward-looking statements even though our situation may change in the future.
For additional information on risk factors we encourage you to review our annual report on form 10-K for the year-ended March 31, 2009, our form 10-Q for the quarter ended December 31, 2009 and other public filings. These filings are available on the SEC website at
Also during the course of this call we intend to discuss non-GAAP financial information. Reconciliations of GAAP and non-GAAP results are available in the press release we issued earlier today. In addition, our press release was included as part of our form 8-K which was filed just prior to this call.
I will now turn the call over to Paul Daoust, interim CEO. Paul?
Thank you Bryce and thank all of you for joining us to discuss Salary.com’s fiscal 2010 fourth quarter and full-year results. While our fourth quarter net loss was within our expected ranges, revenue was slightly below target in Q4 and we missed our target of positive operating cash flow for the year. We are disappointed in this performance and as a result we have begun a major restructuring process and realignment of our business which I will explain in detail momentarily.
On today’s call I would like to clearly define and illustrate our go-forward plan for profitable growth that will enable us to return to positive operating cash flow and importantly to generate non-GAAP net income on a full-year basis in fiscal 2011.
While distractions from our CEO transition no doubt played a part in the company missing our objectives for the fourth quarter it does not account for the whole story. As a new member of the leadership team I along with the senior management team have taken the opportunity to conduct a full and complete review of our businesses strengths and weaknesses. The result of this analysis formed the framework of our go-forward strategy which I will describe to you. I might add that I inherited an excellent team of senior executives from our Founder and Chairman, Kent Plunkett, who have been working diligently with me and now plan to execute this broad restructuring process.
The foundation for this framework is a shift in strategic priorities for Salary.com. In the past few years we have pursued top line growth but this growth has come at the expense of cash flow. We went away from our fundamental business premise of profitable growth and we have determined the key to this fundamental goal are focus and execution. I believe we now have the focus and we are well into the execution phase. Looking back at the company’s history it is clear we have demonstrated an ability to generate positive cash flow while driving top line growth.
During a period of healthy growth our core compensation business which is not only now highly differentiated in the marketplace but is also our largest contributor of revenue, remained relatively stable to the current recession. We also believe our core strengths; compensation, talent management and our consumer businesses are best positioned to generate profits when we execute effectively.
The second component of our analysis was the determination our current product offerings are too broad for a company with our resources and that by focusing our energy and resources on our three highly differentiated businesses we can accelerate our return to positive cash flow. We have a lot of very good people at Salary.com who simply were trying to execute on too many fronts all at once.
This go-forward strategy not only leverages our past successes but magnifies them by concentrating our resources in the areas where we believe we have the greatest potential for profitable growth. There are two components to our strategy. First is to renew our focus on key strengths where we hold leadership positions that have a demonstrated track record of generating positive cash flow for us in the past.
Second is to significantly reduce our cost structure by removing the components of our business that we don’t believe have the ability to contribute to cash flow in the very near future even though that may come at the expense of top line growth. Importantly to reallocate certain resources as an investment in our continuing core businesses. This is why we chose to make most of these decisions at one time, so that we can have the best Salary.com team on the field to deliver in the businesses and product lines we are pursuing.