Xactly Reports Fourth Quarter and Full Year Fiscal 2017 Financial Results

Fiscal 2017 Revenue Grows 26% Year Over Year

Achieves Positive Cash Flow from Operations of $1.5 million in Q4

SAN JOSE, Calif.--()--Xactly, (NYSE:XTLY), a leading provider of cloud-based incentive solutions, today announced its financial results for the fourth quarter and fiscal year ended January 31, 2017.

“Fiscal 2017 was another strong year for Xactly, and we exited the year with one of the best quarters ever,” said Christopher W. Cabrera, founder and CEO of Xactly Corporation. “Companies turn to Xactly for sales performance management because we have an unmatched combination of data, technology and experience. In Q4 we delivered record total revenue and gross margins and experienced an exceptional win rate. Looking forward, we believe the tremendous opportunity in the incentive compensation market, combined with our differentiated product offering and proven ability to innovate, will continue to fuel Xactly’s long term growth.”

“In the fourth quarter we drove solid topline results while achieving our first quarter of positive cash flow from operations as planned,” said Joseph Consul, CFO of Xactly Corporation. “We further demonstrated leverage in the business model by improving our Adjusted EBITDA margins by over 1500 basis points compared to Q4 of last year. These results were driven by continued revenue growth, record gross margin and focus on operational excellence.”

Fourth Quarter Fiscal 2017 Financial Highlights

  • Total revenue was $24.3 million, an increase of 17% from the fourth quarter of fiscal year 2016 total revenue of $20.7 million. Subscription revenue was $19.1 million, an increase of 17% from the fourth quarter of fiscal 2016 subscription revenue of $16.3 million.
  • GAAP net loss for the fourth quarter of fiscal 2017 was $(4.1) million compared to $(5.9) million in the fourth quarter of fiscal 2016.
  • Non-GAAP net loss for the fourth quarter of fiscal 2017 was $(1.5) million compared to a non-GAAP net loss of $(4.5) million in the fourth quarter of fiscal 2016.
  • Adjusted EBITDA for the fourth quarter of fiscal 2017 was $(0.2) million, or 1% of revenue, compared to a loss of $(3.4) million or 16% of revenue in the fourth quarter of fiscal 2016.
  • Cash flow from operations for the fourth quarter of fiscal 2017 was $1.5 million, compared to cash flow used in operations of $(1.7) million in the fourth quarter of fiscal 2016.

Full Year Fiscal 2017 Financial Highlights

  • Total revenue was $95.5 million, an increase of 26% from fiscal year 2016 total revenue of $76.0 million. Subscription revenue was $73.0 million, an increase of 23% from fiscal 2016 subscription revenue of $59.2 million.
  • GAAP net loss for fiscal 2017 was $(16.9) million compared to $(24.7) million in fiscal 2016.
  • Non-GAAP net loss for fiscal 2017 was $(8.5) million compared to a non-GAAP net loss of $(19.8) million in fiscal 2016.
  • Adjusted EBITDA for fiscal 2017 was a loss of $(4.0) million, or 4% of revenue, compared to a loss of $(12.7) million, or 17% of revenue, in fiscal 2016.

Recent Business Highlights

  • Ended the year with 297,000 subscribers and 980 customers, with key enterprise wins in the Energy and Utility, Financial Services, Food, Insurance, Life Sciences, Media, and Retail vertical markets.
  • Introduced the new Xactly Insights™ Offering for SMBs. This new Strategic Services offering provides guidance and expertise by delivering an incentive compensation assessment leveraging Xactly Insights. For the first time, SMBs can now design and optimize enterprise-level compensation programs to gain a competitive advantage and rapidly grow their business.
  • Introduced Xactly’s Commission Expense Forecasting solution, giving finance leaders increased insight into their organization’s anticipated commission expense. The new offering provides the capability to timely forecast commission expenses, allowing companies to mitigate the risk of material weaknesses, and generate and refine accurate accruals.
  • Recognized as one of the best places to work in technology by Great Place to Work® and Fortune Magazine. The list recognizes companies who value diversity, offer robust benefits and offer an innovative culture that prioritizes employee support and development.
  • Recognized as a winner of the 2017 CRM Watchlist. This award identifies the strength, mindshare, and market share a company has achieved. Xactly is proud to have earned this award for the fifth time.

Business Outlook

For the first quarter of fiscal 2018, Xactly expects to report:

  • Revenue in the range of $23.8 to $24.8 million. Subscription revenue is expected to account for at least 80% of total revenue in the quarter
  • GAAP net loss in the range of $(5.9) to $(4.9) million, or $(0.19) to $(0.16) per share
  • Non-GAAP net loss in the range of $(3.3) to $(2.3) million, or $(0.10) to $(0.07) per share

For the full year of fiscal 2018, Xactly expects to report:

  • Revenue in the range of $111.0 to $115.0 million
  • GAAP net loss in the range of $(21.5) to $(18.9) million, or $(0.67) to $(0.59) per share
  • Non-GAAP net loss in the range of $(10.2) to $(7.6) million, or $(0.32) to $(0.24) 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 5098557) by dialing 877-627-6581 or 719-325-4762 at 1:30 p.m. Pacific Time on March 8, 2017. An audio replay of the call will be available at 4:30 p.m. Pacific Time on March 8, 2017 through 4:30 p.m. Pacific Time on March 22, 2017. The replay dial information will be provided when registered here.

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

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) and 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 debt issuance costs, (v) stock-based compensation and (vi) 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 first quarter and full year of fiscal 2018, 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 long term growth and profitability 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-Q, 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

Headquartered in San Jose, California, Xactly (NYSE: XTLY), is a leading provider of enterprise-class, cloud-based, incentive compensation solutions for employee and sales performance management. Named a leader in Gartner’s Magic Quadrant for Sales Performance Management software, Xactly addresses 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. To learn more about Xactly and the latest issues and trends in SPM software, follow us on Twitter, Facebook, and subscribe to the Xactly blog.

©2017 Xactly Corporation. All rights reserved. Xactly, the Xactly logo, Xactly Insights 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)
 
January 31, 2017 January 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 15,010 $ 48,027
Short-term marketable securities 26,534
Restricted cash, short term 102 286
Accounts receivable, net 26,447 20,278
Prepaid expenses and other current assets   4,105     3,219  
Total current assets 72,198 71,810
Property and equipment, net 9,134 8,410
Goodwill 6,384 6,384
Other long-term assets   280     280  
Total assets $ 87,996   $ 86,884  
 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 946 $ 2,362
Accrued expenses 8,355 9,512
Debt, current portion 8,981 8,981
Deferred revenue, current portion   53,375     41,183  
Total current liabilities 71,657 62,038
Debt, less current portion 4,346 6,826
Other long-term liabilities 3,329 4,257
Deferred revenue, less current portion   3,486     3,327  
Total liabilities 82,818 76,448
Commitments and contingencies
Stockholders’ equity:

Preferred stock, $0.001 par value; 20,000,000 shares authorized as of January 31, 2017 and 2016, no shares issued or outstanding as of January 31, 2017 and 2016

Common stock, $0.001 par value; 1,000,000,000 shares authorized as of January 31, 2017 and 2016; 31,519,134 and 29,542,537 shares issued and outstanding as of January 31, 2017 and 2016, respectively

32 30
Additional paid-in capital 162,781 151,064
Accumulated other comprehensive loss (243 ) (180 )
Accumulated deficit   (157,392 )   (140,478 )
Total shareholders' equity   5,178     10,436  
Total liabilities and shareholders' equity $ 87,996   $ 86,884  
 
 
Xactly Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
                 
Three months ended Twelve months ended
January 31, January 31,
2017 2016 2017 2016
Revenue:
Subscription services $ 19,051 $ 16,306 $ 72,994 $ 59,211
Professional services   5,247     4,396     22,467     16,763  
Total revenue 24,298 20,702 95,461 75,974
Cost of revenue:
Subscription services 4,476 4,031 16,993 15,722
Professional services   4,727     4,379     20,386     15,680  
Total cost of revenue   9,203     8,410     37,379     31,402  
Gross profit 15,095 12,292 58,082 44,572
Operating expenses:
Research and development 4,705 4,159 18,210 15,650
Sales and marketing 9,831 9,750 40,187 34,836
General and administrative   4,487     4,049     15,900     14,502  
Total operating expenses   19,023     17,958     74,297     64,988  
Operating loss (3,928 ) (5,666 ) (16,215 ) (20,416 )
Other income (expense):
Interest expense (124 ) (153 ) (501 ) (6,021 )
Loss on extinguishment of debt (1,524 )
Decrease in fair value of preferred stock warrant liabilities 3,542
Other income (expense), net   15     44     43     (1 )
Total other income (expense)   (109 )   (109 )   (458 )   (4,004 )
Loss before income taxes (4,037 ) (5,775 ) (16,673 ) (24,420 )
Income tax expense   19     118     241     299  
Net loss $ (4,056 ) $ (5,893 ) $ (16,914 ) $ (24,719 )
 
Net loss per share attributable to common stockholders:
Basic and diluted $ (0.13 ) $ (0.20 ) $ (0.55 ) $ (1.33 )
 

Weighted-average number of shares used in computing net loss per share attributable to common stockholders:

Basic and diluted   31,404     29,312     30,593     18,545  
 
         
Xactly Corporation
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
 
Twelve months ended January 31,
2017 2016
Cash flows from operating activities:
Net loss $ (16,914 ) $ (24,719 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 3,825 3,133

Loss on extinguishment of debt

1,524
Amortization of debt issuance costs 22 3,512
Allowance for doubtful accounts 200
Stock-based compensation 8,411 3,857
Donation of common stock to XactlyOne Foundation 498
(Income) from change in fair value of warrant liabilities (3,542 )
Loss from disposal on fixed assets 52 245
Amortization of premium on marketable securities 15
Facility exit costs 693
Changes in operating assets and liabilities:
Accounts receivable (6,369 ) (3,106 )
Prepaid expenses and other current assets (816 ) (926 )
Accounts payable (1,699 ) 310
Accrued expenses (1,120 ) 1,964
Deferred revenue 12,351 10,367
Other long-term liabilities   (964 )   (174 )
Net cash used in operating activities (3,006 ) (6,364 )
Cash flows from investing activities:
Purchases of property and equipment (4,325 ) (4,298 )
Purchases of marketable securities (27,951 )
Proceeds from maturities of marketable securities 1,300
Restricted cash   184      
Net cash used in investing activities (30,792 ) (4,298 )
Cash flows from financing activities:
Proceeds from principal on term debt, net of issuance costs 9,937
Payments of principal on term debt (2,500 ) (26,033 )
Principal payments under capital lease obligations (2 ) (3 )

Proceeds from exercise of warrants to acquire convertible preferred stock, net of issuance costs

37
Proceeds from exercise of warrants to acquire common stock 581
Proceeds from exercise of stock options 2,530 938
Proceeds from issuance of common stock for ESPP 1,768
Taxes paid on exercise of options and restricted stock units (1,571 ) (1,570 )
Payment of deferred initial public offering costs (2,732 )
Proceeds from initial public offering, net of offering costs       58,844  
Net cash provided by financing activities 806 39,418
Effect of exchange rate changes on cash and cash equivalents   (25 )   (54 )

Net increase (decrease) in cash and cash equivalents

(33,017 ) 28,702
Cash and cash equivalents at beginning of period   48,027     19,325  
Cash and cash equivalents at end of period $ 15,010   $ 48,027  
 
                 
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(dollars in thousands)
(Unaudited)
 
Three months ended Twelve months ended
January 31, January 31,
2017 2016 2017 2016
 
Net loss $ (4,056 ) $ (5,893 ) $ (16,914 ) $ (24,719 )
Non-GAAP adjustments:
Interest expense 124 153 501 6,021
Income tax expense 19 118 241 299
Depreciation and amortization 1,086 855 3,825 3,133
Stock-based compensation 2,596 1,410 8,411 3,857
Loss on extingiushment of debt 1,524
Decrease in fair value of preferred stock warrant liabilities (3,542 )
Other income (expense), net (36 ) (44 ) (95 ) 1
Loss on disposal of fixed assets 21 52 245
Donation of common stock to XactlyOne Foundation               498  
Adjusted EBITDA $ (246 ) $ (3,401 ) $ (3,979 ) $ (12,683 )
Percent of revenue (1 )% (16 )% (4 )% (17 )%
 
                 
Stock-based compensation
(in thousands)
(Unaudited)
 
Three months ended Twelve months ended
January 31, January 31,
2017 2016 2017 2016
Stock-based compensation:
Cost of subscription services $ 184 $ 157 $ 595 $ 456
Cost of professional services 318 191 1,009 454
Research and development 599 350 2,013 898
Sales and marketing 730 342 2,176 893
General and administrative   765   370   2,618   1,156
Total stock-based compensation $ 2,596 $ 1,410 $ 8,411 $ 3,857
 
 
Reconciliation of Cash Flow From Operations for the Fiscal Fourth Quarter
(in thousands)
(Unaudited)
         
2017 2016
Cash flows from operations:

Net cash used in operating activities for the fiscal year ended January 31,

$ (3,006 ) $ (6,364 )
Less:

Net cash used in operating activities for the nine months ended October 31,

  (4,541 )   (4,635 )
Cash flows from (used in) operations for the fiscal fourth quarter $ 1,535   $ (1,729 )
 
         
Reconciliation of Free Cash Flow for the Fiscal Fourth Quarter
(in thousands)
(Unaudited)
 
2017 2016
 
Cash flows from (used in) operations for the fiscal fourth quarter $ 1,535 $ (1,729 )
 

Fiscal fourth quarter purchases of property and equipment:

Purchases of property and equipment for the fiscal year ended January 31,

(4,325 ) (4,298 )

Less:

Purchases of property and equipment for the nine months ended October 31,

  (3,901 )   (3,888 )

Fiscal fourth quarter purchases of property and equipment

(424 ) (410 )
           

Free cash flow for the fiscal fourth quarter

$ 1,111   $ (2,139 )
 
                 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(in thousands, except per share data)
(Unaudited)
 
Three months ended Twelve months ended
January 31, January 31,
2017 2016 2017 2016
 
GAAP net loss $ (4,056 ) $ (5,893 ) $ (16,914 ) $ (24,719 )
Non-GAAP adjustments:
Stock-based compensation 2,596 1,410 8,411 3,857
Decrease in fair value of preferred stock warrant liabilities (3,542 )
Donation of common stock to XactlyOne Foundation 498
Non-cash debt issuance costs               4,088  
Non-GAAP net loss $ (1,460 ) $ (4,483 ) $ (8,503 ) $ (19,818 )
 
Non-GAAP net loss per share:
Basic and diluted $ (0.05 ) $ (0.15 ) $ (0.28 ) $ (1.07 )
 
Shares used in computing non-GAAP net loss per share:
Basic and diluted   31,404     29,312     30,593     18,545  
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE
(in thousands, except per share data)
(Unaudited)
         
Three months ending
April 30, 2017
Low High
 
GAAP net loss $ (5,900 ) $ (4,900 )
Non-GAAP adjustments:
Stock-based compensation   2,600     2,600  
Non-GAAP net loss $ (3,300 ) $ (2,300 )
 
GAAP net loss per share, basic and diluted $ (0.19 ) $ (0.16 )
Non-GAAP net loss per share, basic and diluted $ (0.10 ) $ (0.07 )
 
Shares used in computing GAAP and non-GAAP net loss per share:
Basic and diluted   31,700     31,700  
 
         
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE
(in thousands, except per share data)
(Unaudited)
 
Fiscal Year Ending
January 31, 2018
Low High
 
GAAP net loss $ (21,500 ) $ (18,900 )
Non-GAAP adjustments:
Stock-based compensation   11,300     11,300  
Non-GAAP net loss $ (10,200 ) $ (7,600 )
 
GAAP net loss per share, basic and diluted $ (0.67 ) $ (0.59 )
Non-GAAP net loss per share, basic and diluted $ (0.32 ) $ (0.24 )
 
Shares used in computing GAAP and non-GAAP net loss per share:
Basic and diluted   32,100     32,100  
 

Contacts

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

Contacts

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