Xactly Reports Second Quarter Fiscal 2017 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Xactly (NYSE:XTLY), a leading provider of cloud-based incentive solutions, today announced its financial results for the second quarter of fiscal year 2017 ended July 31, 2016.

“We are very pleased to report another quarter of strong financial results as demand for our cloud-based incentive compensation solutions remained robust,” said Christopher W. Cabrera, founder and CEO of Xactly Corporation. “The future has never been brighter for Xactly. We remain focused on leading the space with innovative products and our unique data set, continued revenue and billings growth and progressing on our path to profitability.”

“Our Q2 results demonstrate our ability to deliver strong revenue growth and continued improvement on the bottom line. This trajectory gives us further confidence in reaching our goal of positive cash flow from operations in the fourth quarter of this fiscal year,” said Joseph Consul, CFO of Xactly Corporation.

Second Quarter Fiscal 2017 Financial Highlights

• Total revenue was $24.0 million, an increase of 31% from the second quarter of fiscal year 2016 total revenue of $18.4 million. Subscription revenue was $18.2 million, an increase of 27% from the second quarter of fiscal 2016 subscription revenue of $14.3 million.
• GAAP net loss for the second quarter of fiscal 2017 was $(4.3) million compared to $(3.5) million in the second quarter of fiscal 2016.
• Non-GAAP net loss for the second quarter of fiscal 2017 was $(2.4) million compared to a non-GAAP net loss of $(5.7) million for the second quarter of fiscal 2016.
• Adjusted EBITDA for the second quarter of fiscal 2017 was a loss of $(1.3) million, or 6% of revenue, compared to a loss of $(3.5) million, or 19% of revenue, for the second quarter of fiscal 2016.

Recent Business Highlights

• Ended the quarter with 281,000 subscribers, a 30% increase over last year. The second quarter marked the 5^th consecutive quarter of 30%+ subscriber growth.
• Added key enterprise wins in the Automotive, Travel and Hospitality, and Technology vertical markets.
• Recognized as the best mid-size workplace by Bay Area News Group’s Top Workplaces. This is the 8^th time Xactly has been recognized for its strong employee centric culture. Voted on by its employees, Xactly was noted for its exceptional workforce satisfaction, enabling employees to feel inspired while doing great work.

Business Outlook

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

• Revenue in the range of $23.3 to $24.1 million
• GAAP net loss in the range of $(7.0) to $(6.2) million, or $(0.23) to $(0.20) per share
• Non-GAAP net loss in the range of $(4.6) to $(3.8) million, or $(0.15) to $(0.12) per share

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

• Revenue in the range of $96.0 to $97.5 million
• GAAP net loss in the range of $(22.6) to $(21.1) million, or $(0.75) to $(0.69) per share
• Non-GAAP net loss in the range of $(14.1) to $(12.6) million, or $(0.47) to $(0.41) 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 1123814) by dialing 888-500-6948 or 719-325-2140 at 4:30 p.m. Eastern Time on September 8, 2016. An audio replay of the call will be available at 7:30 p.m. Eastern Time on September 8, 2016 through 7:30 p.m. Eastern Time on September 22, 2016. 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.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 third 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, 10-Q 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)

  July 31, 2016  

January 31, 2016

Assets

Current assets:

Cash and cash equivalents$45,163$48,027

Restricted cash, short term102286

Accounts receivable, net22,59120,278

Prepaid expenses and other current assets3,6693,219

Total current assets71,52571,810

Property and equipment, net10,2408,410

Goodwill6,3846,384

Other long-term assets283280

Total assets$88,432$86,884

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable$4,986$2,362

Accrued expenses8,9879,512

Debt, current portion8,9818,981

Deferred revenue, current portion44,82541,183

Total current liabilities67,77962,038

Debt, less current portion5,5866,826

Other long-term liabilities3,8064,257

Deferred revenue, less current portion3,5413,327

Total liabilities80,71276,448

Commitments and contingencies

Stockholders’ equity:

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

Common stock, $0.001 par value; 1,000,000,000 shares authorized as of July 31, 2016 and January 31, 2016; 30,669,086 and 29,542,537 shares issued and outstanding as of July 31, 2016 and January 31, 2016, respectively3130

Additional paid-in capital156,988151,064

Accumulated other comprehensive loss(183)(180)

Accumulated deficit(149,116)(140,478)

Total shareholders' equity7,72010,436

Total liabilities and shareholders' equity$88,432$86,884

Xactly Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

Three months ended

  Six months ended  

July 31,July 31,

2016201520162015

Revenue:

Subscription services$18,167$14,271$35,488$27,748

Professional services5,7974,08111,7308,427

Total revenue

23,96418,35247,21836,175

Cost of revenue:

Subscription services4,1404,1308,2757,718

Professional services5,1543,74310,7017,424

Total cost of revenue9,2947,87318,97615,142

Gross profit14,67010,47928,24221,033

Operating expenses:

Research and development4,5343,8528,8837,361

Sales and marketing10,7188,62319,91615,767

General and administrative3,5703,5747,6887,123

Total operating expenses18,82216,04936,48730,251

Operating loss(4,152)(5,570)(8,245)(9,218)

Other income (expense):

Interest expense(120)(1,345)(253)(2,641)

Decrease in fair value of preferred stock warrant liabilities—3,487—3,542

Other income (expense), net20(30)8(33)

Total other income (expense)(100)2,112(245)868

Loss before income taxes(4,252)(3,458)(8,490)(8,350)

Income tax expense6917148119

Net loss$(4,321)$(3,475)$(8,638)$(8,469)

Net loss per share attributable to common stockholders:

Basic and diluted$(0.14)$(0.28)$(0.29)$(1.10)

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

Basic and diluted30,32612,28030,0057,679

Xactly Corporation

Condensed Consolidated Statement of Cash Flows

(in thousands)

(Unaudited)

Six months ended July 31,

20162015

Cash flows from operating activities:

Net loss$(8,638)$(8,469)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization1,7631,447

Amortization of debt issuance costs12925

Stock-based compensation3,5641,282

Donation of common stock to XactlyOne Foundation—498

(Income) from change in fair value of warrant liabilities—(3,542)

Loss from disposal on fixed assets1245

Facility exit costs—693

Changes in operating assets and liabilities:

Accounts receivable(2,313)2,896

Prepaid expenses and other current assets(451)(3,697)

Other long-term assets—5

Accounts payable463153

Accrued expenses(493)901

Deferred revenue3,8563,254

Other long-term liabilities(483)469

Net cash used in operating activities(2,719)(2,940)

Cash flows from investing activities:

Purchases of property and equipment(1,437)(3,660)

Restricted cash184—

Net cash used in investing activities(1,253)(3,660)

Cash flows from financing activities:

Payments of principal on term debt(1,250)—

Principal payments under capital lease obligations(1)(1)

Proceeds from exercise of warrants to acquire convertible preferred stock, net of issuance costs—37

Proceeds from exercise of warrants to acquire common stock581—

Proceeds from exercise of stock options1,377554

Proceeds from issuance of common stock for ESPP891—

Taxes paid on exercise of options(488)—

Payment of deferred initial public offering costs—(1,042)

Proceeds from initial public offering, net of offering costs—58,844

Net cash provided by financing activities1,11058,392

Effect of exchange rate changes on cash and cash equivalents(2)(15)

Net increase (decrease) in cash and cash equivalents(2,864)51,777

Cash and cash equivalents at beginning of period48,02719,325

Cash and cash equivalents at end of period$45,163$71,102

Reconciliation of GAAP Net Loss to Adjusted EBITDA

(in thousands)

(Unaudited)

Three months ended

  Six months ended  

July 31,July 31,

2016201520162015

Net loss$(4,321)$(3,475)$(8,638)$(8,469)

Non-GAAP adjustments:

Interest expense1201,3452532,641

Income tax expense6917148119

Depreciation and amortization8978481,7631,447

Stock-based compensation1,9287333,5641,282

Decrease in fair value of preferred stock warrant liabilities—(3,487)—(3,542)

Other income (expense), net(20)30(8)33

Loss on disposal of fixed assets1—1245

Donation of common stock to XactlyOne Foundation—498—498

Adjusted EBITDA$(1,326)$(3,491)$(2,917)$(5,746)

Stock-based compensation

(in thousands)

(Unaudited)

Three months ended

  Six months ended  

July 31,July 31,

2016201520162015

Stock-based compensation:

Cost of subscription services

$

133

$

93

$

266

$

165

Cost of professional services22468415109

Research and development434146844240

Sales and marketing508173879285

General and administrative6292531,160483

Total stock-based compensation

$

1,928$733$3,564$1,282

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss

(in thousands, except per share data)

(Unaudited)

Three months ended

  Six months ended  

July 31,July 31,

2016201520162015

GAAP net loss$(4,321)$(3,475)$(8,638)$(8,469)

Non-GAAP adjustments:

Stock-based compensation1,9287333,5641,282

Decrease in fair value of preferred stock warrant liabilities—(3,487)—(3,542)

Donation of common stock to XactlyOne Foundation—498—498

Non-GAAP net loss$(2,393)$(5,731)$(5,074)$(10,231)

Non-GAAP net loss per share:

Basic and diluted$(0.08)$(0.47)$(0.17)$(1.33)

Shares used in computing non-GAAP net loss per share:

Basic and diluted30,32612,28030,0057,679

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE

(in thousands, except per share data)

(Unaudited)

Three months ending

October 31, 2016

LowHigh

GAAP net loss$(7,000)$(6,200)

Non-GAAP adjustments:

Stock-based compensation2,4002,400

Non-GAAP net loss$(4,600)$(3,800)

GAAP net loss per share, basic and diluted$(0.23)$(0.20)

Non-GAAP net loss per share, basic and diluted$(0.15)$(0.12)

Shares used in computing GAAP and non-GAAP net loss per share:

Basic and diluted30,90030,900

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss - GUIDANCE

(in thousands, except per share data)

(Unaudited)

Fiscal Year Ending

January 31, 2017

LowHigh

GAAP net loss$(22,600)$(21,100)

Non-GAAP adjustments:

Stock-based compensation8,5008,500

Non-GAAP net loss$(14,100)$(12,600)

GAAP net loss per share, basic and diluted$(0.75)$(0.69)

Non-GAAP net loss per share, basic and diluted$(0.47)$(0.41)

Shares used in computing GAAP and non-GAAP net loss per share:

Basic and diluted30,30030,300

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 Nicole Gunderson, 415-489-2196 nicole@blueshirtgroup.com

 

Source: Xactly Corporation