Responsys Announces Second Quarter 2013 Results

  • Achieves 25% growth in revenue to $49.5 million for the second quarter of 2013
  • Delivers non-GAAP diluted EPS of $0.02 in the second quarter of 2013
  • Raises 2013 annual revenue guidance from $190-$193 million to $195-$198 million
  • Establishes third quarter 2013 revenue guidance of $47.0-$48.5 million
  • Gartner recognizes Responsys as a visionary leader

SAN BRUNO, Calif., Aug. 5, 2013 (GLOBE NEWSWIRE) -- Responsys, Inc. (Nasdaq:MKTG), a marketing cloud software and services leader, today announced results for the second quarter ended June 30, 2013.

For the second quarter of 2013, total revenue increased 25% to $49.5 million, up from $39.5 million in the second quarter of 2012.

Subscription revenue for the second quarter of 2013 was $34.3 million, up 25% compared with $27.5 million in the second quarter of 2012. Professional services revenue was $15.2 million, up 25% compared with $12.1 million in the second quarter of 2012.

GAAP net loss for the second quarter of 2013 was $1.6 million compared with break-even in the second quarter of 2012. GAAP net loss per share for the second quarter of 2013 was $0.03 compared with $0.00 in the second quarter of 2012.

For the six months ended June 30, 2013, revenue increased 26.2% to $98.0 million, up from $77.6 million in the six months ended June 30, 2012.

Subscription revenue for the first half of 2013 was $67.9 million up 24.1% as compared to $54.7 million in the first half of 2012. Professional services revenue was $30.1 million, up 31.3% as compared to $22.9 million in the first half of 2012.

GAAP net loss for the first half of 2013 was $0.1 million. This compares to GAAP net income of $2.1 million for the first half of 2012. Net income per share in the first half of 2013 was $0.00 per share, as compared to net income per share of $0.04 in the first half of 2012.

In addition to using GAAP results in evaluating Responsys' business, management believes it is useful to also measure results using non-GAAP net income, which is net income (loss) excluding stock-based compensation expense, amortization of acquired intangible assets, and related income tax effects, as applicable.

Non-GAAP net income for the second quarter of 2013 was $1.1 million, or $0.02 per diluted share as compared with $1.4 million, or $0.03 per diluted share, for the second quarter of 2012.

Non-GAAP net income for the six months ended June 30, 2013 and 2012 was $4.9 million, or $0.09 per diluted share.

"Responsys' strong second quarter performance is further recognition that the Company is a leader in orchestrating individualized experiences across digital channels, and at massive scale," said CEO Dan Springer. "Our continued investment in product innovation has allowed us to stay at the cutting edge of the industry, maintain a clear, competitive advantage for our customers, and increase the rate of return for their individualized digital marketing programs. We appreciate Gartner recognizing Responsys as a visionary leader in its 2013 Magic Quadrant for CRM Multichannel Campaign Management.

"We have a track record of anticipating emerging digital marketing trends, and our increased investment in sales and marketing is introducing Responsys to new customers and expanding relationships with existing ones," continued Mr. Springer. "We believe our investment strategy to expand the customer service organization and build our leading platform, the Responsys Marketing Cloud, will further extend our leadership position, support revenue generation and deliver enhanced value to stockholders."

Business Outlook

Based on information available as of August 5, 2013, Responsys is issuing guidance for the third quarter of 2013 and revising fiscal 2013 guidance as follows:

For the third quarter of 2013, the Company expects revenue to be in the range of $47.0-$48.5 million. Non-GAAP net income is expected to be approximately $0.02 per diluted share. Expected non-GAAP net income for the quarter excludes an estimated $0.2 million in amortization of acquired intangibles and an estimated $3.8 million in stock-based compensation expense. Non-GAAP net income per diluted share is based on estimated weighted average diluted shares outstanding of 55.1 million.

Responsys is increasing its outlook for fiscal 2013 revenue from a range of $190-193 million to a range of $195-$198 million as a result of increased traction with new customers, as well as strong usage from existing customers. The Company is revising its expectation for fiscal 2013 non-GAAP net income from approximately $0.18 per diluted share to approximately $0.15 per diluted share to reflect the increased investment in sales and marketing to continue to support the revenue growth and take advantage of significant market opportunities.

Non-GAAP net income for the full year excludes an estimated $1.8 million in amortization of acquired intangibles and an estimated $14.3 million in stock-based compensation expense. Non-GAAP net income per diluted share is based on weighted average diluted shares outstanding of 54.8 million.

Non-GAAP net income outlook for the fiscal year 2013 assumes an effective non-GAAP tax rate of 34%.

Conference Call Information for Today, Monday, August 5, 2013

Responsys will host a conference call to discuss the results today at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. The conference call will be hosted by Dan Springer, Chief Executive Officer, and Chris Paul, Chief Financial Officer. To access the call from the U.S., please dial (877) 548-9590 or (720) 545-0037 from outside the U.S. A live webcast of the call will also be available at http://investors.responsys.com/events.cfm under the Events and Presentations menu. An audio replay will be available until August 8, 2013 by calling (855) 859-2056 or (404) 537-3406 from outside the U.S., using conference ID 21366925. The replay will also be available on our website at http://investors.responsys.com.

About Responsys

Responsys (Nasdaq:MKTG) is a leading marketing cloud software and services company. Our mission is to enable the smartest marketing in the digital world. The most respected brands across the globe use the Responsys Interact Marketing Cloud to manage their digital relationships and deliver the right marketing to their customers across email, mobile, social, display and the web. Our customers gain competitive advantage through the automation, individualization, and coordination of cross-channel marketing interactions at massive scale. Founded in 1998, Responsys is headquartered in San Bruno, California and has offices throughout the world. For more information visit: responsys.com.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures including non-GAAP net income, and non-GAAP net income per share on a diluted basis 1. Non-GAAP net income and non-GAAP net income per share on a diluted basis 1, exclude the amortization of acquired intangible assets, stock-based compensation expense, gain on the acquisitions, and related tax effects. The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company's financial condition and results of operations. The Company's management uses these non-GAAP measures to compare the Company's performance to that of prior periods and uses these measures in financial reports prepared for management and 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 the Company's financial measures with other cloud based companies, many of which present similar non-GAAP financial measures to investors.

The Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant elements that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management in determining these 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. The Company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which is included in this press release, and not to rely on any single financial measure to evaluate the Company's business.

Forward Looking Statements

The financial projections under Business Outlook, and other forward-looking statements included in this release, including those regarding the Company's future prospects, reflect management's best judgment based on factors currently known and involve risks and uncertainties; our actual results may differ materially from those discussed here. These risks and uncertainties include: our ability to acquire and retain customers; whether customers purchase additional functionality and increase their usage; pricing pressures and competitive factors; the uncertain impact of overall global economic conditions, including on customers, prospective customers and partners, renewal rates and length of sales cycles; the fact that the market for cross-channel, cloud based marketing solutions, particularly in emerging channels, is at an early stage of development and may not develop as rapidly as we anticipate; outages, which can affect customer satisfaction or result in reduced revenues; security breaches; our ability to develop, and market acceptance of, new products and services; the impact of any discovered product defects; our ability to manage our growth, both domestically and internationally; our ability to successfully expand our sales force; our ability to utilize personnel and resources efficiently; our ability to maintain profitability; the level of hiring and equity award activity, which will affect the level of stock-based compensation expense; and other risks detailed from time to time in our SEC reports including, but not limited to, our most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q. The Company disclaims any intention or obligation to publicly update or revise any forward-looking statements including any guidance, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

1 Non-GAAP net income per share was derived by dividing by the corresponding non-GAAP basic and non-GAAP diluted weighted-average shares outstanding.
     
Responsys, Inc.
Consolidated Balance Sheets
(in thousands)
  As of June 30, As of December 31,
  2013 2012
Assets    
Current assets:    
Cash and cash equivalents  $ 106,555  $ 106,656
Accounts receivable, net  29,743  28,065
Deferred taxes – current  5,997  5,997
Prepaid expenses and other current assets  4,667  2,803
Total current assets  146,962  143,521
Property and equipment – net  24,366  18,426
Goodwill  15,737  17,335
Intangible assets – net  1,968  2,925
Deferred taxes – noncurrent  5,531  4,100
Other assets  4,251  2,458
Total assets  $ 198,815  $ 188,765
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 4,244  $ 3,363
Accrued compensation  9,756  8,014
Other accrued liabilities  4,108  4,432
Capital lease obligations – current  677  896
Deferred revenue – current  8,246  8,072
Total current liabilities  27,031  24,777
Capital lease obligations – noncurrent  –  228
Deferred revenue – noncurrent  410  407
Contingent liability  1,537  1,561
Deferred rent  3,189  2,145
Deferred taxes – noncurrent  361  482
Other long-term liabilities  895  755
Total liabilities  33,423  30,355
Commitments and contingencies    
Stockholders' equity:    
Common stock  5  5
Additional paid-in capital  174,627  165,423
Accumulated deficit  (7,310)  (7,212)
Accumulated other comprehensive income (loss)  (1,930)  194
Total stockholders' equity  165,392  158,410
Total liabilities and stockholders' equity  $ 198,815  $ 188,765
     
     
Responsys, Inc.
Consolidated Statements of Income (Loss)
(in thousands, except per share data)
  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012 2013 2012
         
Revenue:        
Subscription  $ 34,303  $ 27,458  $ 67,855  $ 54,663
Professional services  15,165  12,091  30,114  22,940
Total revenue  49,468  39,549  97,969  77,603
         
Cost of revenue:        
Subscription  9,514  8,031  18,602  15,476
Professional services  13,618  10,623  26,110  20,543
Total cost of revenue  23,132  18,654  44,712  36,019
Gross profit  26,336  20,895  53,257  41,584
         
Operating expenses:        
Research and development  4,837  3,937  8,977  7,739
Sales and marketing  18,662  12,571  32,495  21,632
General and administrative  6,192  4,428  11,917  8,599
Total operating expenses  29,691  20,936  53,389  37,970
Operating income (loss)  (3,355)  (41)  (132)  3,614
         
Other income (expense), net:        
Interest income  23  22  51  49
Interest expense  (32)  (89)  (57)  (181)
Other income (expense), net  (84)  (150)  (420)  (133)
Total other expense, net  $ (93)  $ (217)  $ (426)  $ (265)
Income (loss) before income taxes  (3,448)  (258)  (558)  3,349
Benefit (provision) for income taxes  1,834  262  460  (1,273)
Equity in net income of unconsolidated affiliates  $ –  $ 11 $  –  $ 36
Net income (loss)  $ (1,614)  $ 15  $ (98)  $ 2,112
         
Net income (loss) per share:        
Basic  $ (0.03)  $ 0.00  $ (0.00)  $ 0.04
Diluted  $ (0.03)  $ 0.00  $ (0.00)  $ 0.04
         
Shares used in computation of net income (loss) per share:        
Basic  49,473  48,193  49,264  48,001
Diluted  49,473  53,359  49,264  53,437
         
         
Responsys, Inc.
Non-GAAP Financial Measures
(in thousands, except per share data)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012 2013 2012
Gross profit:        
GAAP gross profit        
Subscription  $ 24,789   $ 19,427   $ 49,253   $ 39,177
Professional services  1,547  1,468  4,004  2,397
Total GAAP gross profit  26,336  20,895  53,257  41,574
Add back:        
Stock-based compensation:        
Subscription  368  153  652  301
Professional services  471  224  864  430
Total non-GAAP gross profit   $ 27,175   $ 21,272   $ 54,773   $ 42,305
         
Operating income:        
GAAP operating income (loss)  $ (3,355)   $ (41)   $ (132)   $ 3,614
Add back:        
Amortization of intangible assets  682  569  1,371  1,160
Stock-based compensation  3,406  1,431  5,999  2,829
Total non-GAAP operating income   $ 733   $ 1,959   $ 7,238   $ 7,603
         
Income before income taxes:        
GAAP income (loss) before income taxes   $ (3,448)   $ (258)   $ (558)   $ 3,349
Add back:        
Amortization of intangible assets  682  569  1,371  1,160
Stock-based compensation  3,406  1,431  5,999  2,829
Total non-GAAP income before taxes   $ 640   $ 1,742   $ 6,812   $ 7,338
         
Benefit (provision) for income taxes:        
GAAP benefit (provision) for income taxes   $ 1,834   $ 262   $ 460   $ (1,273)
Tax effect from:        
Amortization of intangible assets  (197)  (177)  (395)  (362)
Stock-based compensation  (1,131)  (435)  (1,992)  (857)
Total non-GAAP benefit (provision) for income (loss) taxes   $ 506   $ (350)   $ (1,927)   $ (2,492)
         
Net income:        
GAAP net income (loss)   $ (1,614)   $ 15   $ (98)   $ 2,112
Add back:        
Amortization of intangible assets  682  569  1,371  1,160
Stock-based compensation  3,406  1,431  5,999  2,829
Income tax effect of non-GAAP items  (1,328)  (612)  (2,387)  (1,219)
Total non-GAAP net income   $ 1,146   $ 1,403   $ 4,885   $ 4,882
         
Non-GAAP net income per share 1:        
Basic   $ 0.02   $ 0.03   $ 0.10   $ 0.10
Diluted   $ 0.02   $ 0.03   $ 0.09   $ 0.09
         
Shares used in computing non-GAAP net income per share:        
Basic shares:        
Weighted-average shares outstanding used in computing non-GAAP basic net income per share  49,473  48,193  49,264  48,001
         
Diluted shares:        
Weighted-average shares outstanding used in calculating non-GAAP diluted net income per share  54,329  53,359  54,003  53,437
         
         
Responsys, Inc.
Stock-Based Compensation Expense
(in thousands)
  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012 2013 2012
Cost of revenue  $ 839  $ 377  $ 1,516  $ 731
Research and development  412  196  626  434
Sales and marketing  1,155  388  2,003  750
General and administrative  1,000  470  1,854  914
Total  $ 3,406  $ 1,431  $ 5,999  $ 2,829
         
       
Responsys, Inc.
Consolidated Cash Flow
(in thousands)
       
    Six Months Ended June 30,
    2013 2012
       
Cash flows from operating activities:      
Net income (loss)    $ (98)  $ 2,112
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Provision for bad debts    231  65
Depreciation and amortization    6,370  4,986
Stock-based compensation    5,999  2,829
Deferred taxes    (1,563)  (329)
Tax benefit from stock-based compensation    1,062  -- 
Excess tax benefits from stock-based compensation    17  (1,326)
Equity in net income of unconsolidated affiliates    --   (36)
Other    5  163
Changes in operating assets and liabilities - net of business acquired:      
Accounts receivable    (2,291)  (3,000)
Prepaid expenses and other current assets    (1,906)  (2,599)
Other assets    (314)  100
Accounts payable    338  2,494
Accrued compensation    1,891  (753)
Other accrued liabilities    31  3,080
Deferred revenue    250  (116)
Other long-term liabilities    1,178  2,331
Net cash provided by operating activities    11,200  10,001
       
Cash flows from investing activities:      
Purchases of property and equipment    (8,515)  (4,543)
Addition of capitalized software development costs    (2,083)  -- 
Patent-related rights    (600)  -- 
Purchase of short-term investments    --   (4,007)
Redemption of short-term investments    --   22,477
Purchase of equity interest    (1,500)  (1,772)
Net cash (used in) provided by investing activities    (12,698)  12,155
       
Cash flows from financing activities:      
Proceeds from issuance of common stock    2,108  891
Proceeds from early-exercised stock options    --   2
Principal payments on capital lease obligations    (447)  (439)
Excess tax benefits from stock-based compensation    (17)  1,326
Net cash provided by financing activities    1,644  1,780
Effect of foreign exchange rate changes on cash and cash equivalents  (247)  45
Net increase (decrease) in cash and cash equivalents    (101)  23,981
Cash and cash equivalents at beginning of period    106,656  73,456
Cash and cash equivalents at end of period    $ 106,555  $ 97,437
       
CONTACT: Carla Cooper (Investor Relations)         Responsys, Inc.         (650) 452-1484         ccooper@responsys.com

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