Xactly Reports First Quarter Fiscal 2017 Financial Results

Total Revenue Increases 30% Year-Over-Year

Marks Fourth Consecutive Quarter of Accelerated Revenue Growth

Subscribers Increase 32% Year-Over-Year

SAN JOSE, Calif.--()--Xactly (NYSE:XTLY), a leading provider of cloud-based incentive solutions, today announced its financial results for the first quarter of fiscal year 2017 ended April 30, 2016.

“Our better than expected first quarter performance marked a great start to fiscal 2017 with strong revenue growth and solid progress towards our goal of achieving positive cash flow from operations in the fourth quarter of this fiscal year,” said Christopher W. Cabrera, founder and CEO of Xactly Corporation. “As a result of our focus on innovation, we are continuing to elevate our strong market leadership position in incentive compensation management and expand our addressable market. We are thrilled to partner with our customers to drive the right behaviors, inspire performance and improve business results.”

“With our strong Q1 results and pipeline, we are pleased to raise our guidance for the fiscal year 2017,” said Joseph Consul, CFO of Xactly Corporation.

First Quarter Fiscal 2017 Financial Highlights

  • Total revenue was $23.3 million, an increase of 30% from the first quarter of fiscal year 2016 total revenue of $17.8 million. Subscription revenue was $17.3 million, an increase of 29% from the first quarter of fiscal 2016 subscription revenue of $13.5 million.
  • GAAP net loss for the first quarter of fiscal 2017 was $(4.3) million compared to $(5.0) million in the first quarter of fiscal 2016.
  • Non-GAAP net loss for the first quarter of fiscal 2017 was $(2.7) million compared to a non-GAAP net loss of $(4.5) million for the first quarter of fiscal 2016.
  • Adjusted EBITDA for the first quarter of fiscal 2017 was a loss of $(1.6) million, or 7% of revenue, compared to a loss of $(2.3) million, or 13% of revenue, for the first quarter of fiscal 2016.

Recent Business Highlights

  • Ended the quarter with 268,000 subscribers, a 32% increase over last year. The first quarter marked the 4th consecutive quarter of 30%+ subscriber growth.
  • Added key enterprise wins in the Travel and Hospitality, Software and Technology and Business Services vertical markets.
  • Partnered with Wipro Limited, a leading global information technology, consulting, and business process services company, to offer sales performance management (SPM) solutions for customer organizations across industry sectors.
  • Welcomed nearly one thousand registered attendees from around the world to CompCloud, Xactly’s annual incentive compensation event to help companies unlock the transformative power of incentives to better engage and align their workforce.

Business Outlook

For the second quarter of fiscal 2017, Xactly expects to report:

  • Revenue in the range of $23.2 to $23.7 million
  • GAAP net loss in the range of $(6.3) to $(5.8) million, or $(0.21) to $(0.19) per share
  • Non-GAAP net loss in the range of $(4.5) to $(4.0) million, or $(0.15) to $(0.13) per share

For the full year of fiscal 2017, Xactly expects to report:

  • Revenue in the range of $95.5 to $97.0 million
  • GAAP net loss in the range of $(24.2) to $(22.7) million, or $(0.80) to $(0.75) per share
  • Non-GAAP net loss in the range of $(16.7) to $(15.2) million, or $(0.55) to $(0.50) per share

Conference Call Details:

Xactly will discuss its quarterly results today via teleconference at 1:30 p.m. PT (4:30 p.m. ET). Investors may listen to the live conference call (ID 4974763) by dialing 877-852-6575 or 719-325-4785 at 4:30 p.m. Eastern Time on June 6, 2016. An audio replay of the call will be available at 7:30 p.m. Eastern Time on June 6, 2016 through 7:30 p.m. Eastern Time on June 20, 2016. The replay dial information will be provided when registered at https://jsp.premiereglobal.com/webrsvp using passcode (4974763).

A webcast of the presentation will be available on the company’s investor relations website at http://investors.xactlycorp.com/investors/overview/default.aspx.k.

Non-GAAP Financial Measures

To supplement its financial statements, Xactly also provides investors with certain non-GAAP financial measures. We believe that these non-GAAP measures are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. The non-GAAP financial measures included in this press release should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP, and the non-GAAP financial measures that we use may differ from those of other companies in our industry. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent and related explanations are included below. We believe that supplementing GAAP disclosure with non-GAAP disclosure that excludes items that are not directly related to performance in any particular period provides management and investors with a more complete view of Xactly’s operational performance. Various items are excluded from such non-GAAP financial measures in part because the decisions which gave rise to the excluded items were not made to increase revenue in a particular period, but were made for Xactly’s long-term benefit over multiple periods.

Non-GAAP net loss and non-GAAP net loss per share We believe non-GAAP net loss and non-GAAP net loss per share may prove useful to investors who wish to consider the impact of certain non-cash or non-recurring items, such as certain one-time charges, on Xactly’s operating performance. We compensate for the inherent limitations associated with using non-GAAP net loss and non-GAAP net loss per share through disclosure of these limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures, net loss and net loss per share. We calculate non-GAAP net loss (and non-GAAP net loss per share) as net loss (and net loss per share) before (i) stock-based compensation, (ii) increase or decrease in expenses related to the change in fair value of convertible preferred stock warrant liabilities, (iii) amortization of intangible assets, and (iv) any applicable, non-recurring or unusual charges as we may determine from time to time.

Adjusted EBITDA We believe that Adjusted EBITDA helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that we exclude from Adjusted EBITDA. Furthermore, we use this measure to establish budgets and operational goals for managing our business and evaluating our performance. We also believe that Adjusted EBITDA provides an additional tool for investors to use in comparing our recurring core business operating results over multiple periods with other companies in our industry. We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of Adjusted EBITDA to the most directly comparable U.S. GAAP measure, net loss. We calculate Adjusted EBITDA as net loss before (i) other income (expense), net, which includes interest expense, the change in fair value of convertible preferred stock warrant liabilities and other income and expense, (ii) income tax expense, (iii) depreciation and amortization of property and equipment, (iv) amortization of intangible assets, (v) amortization of debt issuance costs, (vi) stock-based compensation and (vii) any applicable, non-recurring or unusual charges as we may determine from time to time.

Forward-Looking Statements

All statements in this press release that are not historical are forward-looking statements, including, among other things, projected GAAP and non-GAAP financial operating results for the second quarter and full year of fiscal 2017, such as revenue, net loss, net loss per share, non-GAAP net loss and non-GAAP net loss per share, and our expectation regarding our ability to achieve positive cash flow from operations in the future, and other information about future events and trends that we believe may affect our business, financial condition, operating results and growth prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, changes in circumstances and other factors that are, in some cases, beyond Xactly’s control and could cause actual results to differ materially from the information expressed or implied by forward-looking statements made in this press release. Factors that could materially affect actual results can be found in Xactly’s most recent filings with the Securities and Exchange Commission, including Xactly’s most recent reports on Forms 8-K and 10-K, and include those listed under the caption “Risk Factors.” Xactly undertakes no obligation to revise or update information in this press release to reflect events or circumstances in the future, even if new information becomes available.

About Xactly

Xactly is a leading provider of enterprise-class, cloud-based, incentive compensation solutions for employee and sales performance management. We address a critical business need: To incentivize employees and align their behaviors with company goals. Our products allow organizations to make more strategic decisions, increase employee performance, improve margins, and mitigate risk. Our core values are key to our success, and each day we’re committed to upholding them by delivering the best we can to our customers.

©2016 Xactly Corporation. All rights reserved. Xactly, the Xactly logo, and “Inspire Performance” are registered trademarks or trademarks of Xactly Corporation in the United States and/or other countries. All other trademarks are the property of their respective owners.

 
Xactly Corporation
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
(Unaudited)
 
  April 30, 2016   January 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 46,047 $ 48,027
Restricted cash, short term 286 286
Accounts receivable, net 19,910 20,278
Prepaid expenses and other current assets   4,118     3,219  
Total current assets 70,361 71,810
Property and equipment, net 8,676 8,410
Goodwill 6,384 6,384
Other long-term assets   283     280  
Total assets $ 85,704   $ 86,884  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,863 $ 2,362
Accrued expenses 8,932 9,512
Debt, current portion 8,981 8,981
Deferred revenue, current portion   44,213     41,183  
Total current liabilities 63,989 62,038
Debt, less current portion 6,206 6,826
Other long-term liabilities 4,030 4,257
Deferred revenue, less current portion   2,759     3,327  
Total liabilities 76,984 76,448
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized as of April 30, 2016 and January 31, 2016, no shares issued or outstanding as of April 30, 2016 and January 31, 2016
Common stock $0.001 par value; 1,000,000,000 shares authorized as of April 30, 2016 and January 31, 2016; 29,837,703 and 29,542,537 shares issued and outstanding as of April 30, 2016 and January 31, 2016, respectively 30 30
Additional paid-in capital 153,641 151,064
Accumulated other comprehensive loss (156 ) (180 )
Accumulated deficit   (144,795 )   (140,478 )

Total stockholders' equity

  8,720     10,436  

Total liabilities and stockholders' equity

$ 85,704   $ 86,884  
 
Xactly Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
  Three months ended
April 30,
  2016       2015  
Revenue:
Subscription services $ 17,321 $ 13,477
Professional services   5,933     4,346  
Total revenue 23,254 17,823
Cost of revenue:
Subscription services 4,135 3,588
Professional services   5,547     3,681  
Total cost of revenue   9,682     7,269  
Gross profit 13,572 10,554
Operating expenses:
Research and development 4,349 3,509
Sales and marketing 9,198 7,144
General and administrative   4,118     3,549  
Total operating expenses   17,665     14,202  
Operating loss (4,093 ) (3,648 )
Other income (expense):
Interest expense (133 ) (1,296 )
Decrease in fair value of preferred stock warrant liabilities 55
Other income (expense), net   (12 )   (3 )
Total other income (expense)   (145 )   (1,244 )

Loss before income taxes

(4,238 ) (4,892 )
Income tax expense   (79 )   (102 )
Net loss $ (4,317 ) $ (4,994 )
 
Net loss per share attributable to common stockholders:
Basic and diluted $ (0.15 ) $ (1.71 )
 
Weighted-average number of shares used in computing

net loss per share attributable to common stockholders:

Basic and diluted   29,677     2,923  
 
Xactly Corporation
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
 
 

Three months ended

April 30,

  2016       2015  
Cash flows from operating activities:
Net loss $ (4,317 ) $ (4,994 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 866 599
Amortization of debt issuance costs 5 450
Stock-based compensation 1,636 549
(Income) from change in fair value of warrant liabilities (55 )
Loss from disposal on fixed assets 245
Facility exit costs 693
Changes in operating assets and liabilities:
Accounts receivable 368 1,371
Prepaid expenses and other current assets (900 ) (1,940 )
Other long-term assets 3
Accounts payable (685 ) (642 )
Accrued expenses (601 ) 582
Deferred revenue 2,462 1,750
Other long-term liabilities   (245 )   220  
Net cash used in operating activities (1,411 ) (1,169 )
Cash flows from investing activities:
Purchases of property and equipment   (940 )   (1,974 )
Net cash used in investing activities (940 ) (1,974 )
Cash flows from financing activities:
Payments of principal on term debt (625 )
Proceeds from exercise of stock options 91 135
Principal payments under capital lease obligations (1 )
Payment of deferred initial public offering costs (409 )
Proceeds from issuance of common stock for ESPP   891      
Net cash provided by (used in) financing activities 356 (274 )
Effect of exchange rate changes on cash and cash equivalents   15     (11 )
Net increase (decrease) in cash and cash equivalents (1,980 ) (3,428 )
Cash and cash equivalents at beginning of period   48,027     19,325  
Cash and cash equivalents at end of period $ 46,047   $ 15,897  
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(in thousands, except per share data)
(Unaudited)
 
  Three months ended
April 30,
  2016       2015  
 
GAAP net loss $ (4,317 ) $ (4,994 )
Non-GAAP adjustments:
Stock-based compensation 1,636 549
Decrease in fair value of preferred stock warrant liabilities       (55 )
Non-GAAP net loss $ (2,681 ) $ (4,500 )
 
Non-GAAP net loss per share:
Basic and diluted $ (0.09 ) $ (1.54 )
 
Shares used in computing non-GAAP net loss per share:
Basic and diluted   29,677     2,923  
 
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(in thousands)
(Unaudited)
 
  Three months ended
April 30,
  2016       2015  
 
Net loss $ (4,317 ) $ (4,994 )
Non-GAAP adjustments:
Interest expense 133 1,296
Income tax expense 79 102
Depreciation and amortization 866 599
Stock-based compensation 1,636 549
Decrease in fair value of preferred stock warrant liabilities (55 )
Other income (expense), net 12 3
Loss on disposal of fixed assets       245  
Adjusted EBITDA $ (1,591 ) $ (2,255 )
 
Stock-based compensation
(in thousands)
(Unaudited)
 
  Three months ended
April 30,
2016   2015
Stock-based compensation:
Cost of subscription services 133 72
Cost of professional services 191 41
Research and development 410 94
Sales and marketing 371 112
General and administrative   531   230
Total stock-based compensation $ 1,636 $ 549
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE
(in thousands, except per share data)
(Unaudited)
 
  Three months ending
July 31, 2016
Low   High
 
GAAP net loss $ (6,300 ) $ (5,800 )
Non-GAAP adjustments:
Stock-based compensation   1,800     1,800  
Non-GAAP net loss $ (4,500 ) $ (4,000 )
 
GAAP net loss per share, basic and diluted $ (0.21 ) $ (0.19 )
Non-GAAP net loss per share, basic and diluted $ (0.15 ) $ (0.13 )
 
Shares used in computing GAAP and non-GAAP net loss per share:
Basic and diluted   29,900     29,900  
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE
(in thousands, except per share data)
(Unaudited)
 
  Fiscal Year Ending
January 31, 2017
Low   High
 
GAAP net loss $ (24,200 ) $ (22,700 )
Non-GAAP adjustments:
Stock-based compensation   7,500     7,500  
Non-GAAP net loss $ (16,700 ) $ (15,200 )
 
GAAP net loss per share, basic and diluted $ (0.80 ) $ (0.75 )
Non-GAAP net loss per share, basic and diluted $ (0.55 ) $ (0.50 )
 
Shares used in computing GAAP and non-GAAP net loss per share:
Basic and diluted   30,200     30,200  

Contacts

Xactly Corporation
Joseph Consul, 408-477-3338
Chief Financial Officer
ir@xactlycorp.com
or
The Blueshirt Group
Investor Relations
Lisa Laukkanen, 415-217-4967
lisa@blueshirtgroup.com
Nicole Gunderson, 415-489-2196
nicole@blueshirtgroup.com

Contacts

Xactly Corporation
Joseph Consul, 408-477-3338
Chief Financial Officer
ir@xactlycorp.com
or
The Blueshirt Group
Investor Relations
Lisa Laukkanen, 415-217-4967
lisa@blueshirtgroup.com
Nicole Gunderson, 415-489-2196
nicole@blueshirtgroup.com