Rainmaker Systems, Inc. News
Rainmaker Reports Record Fourth Quarter and Fiscal 2007 Revenue
CAMPBELL, Calif.,
Financial Highlights: — Q4 record revenue of $20.1 million, up 40% year-over-year and 5% sequentially — Contract sales revenue excluding Dell up 33% sequentially in Q4 — Organic revenue growth excluding Dell up 22% in FY07 year-over-year — Q4 Non-GAAP net income of $1.3 million, or $0.06 per diluted share — FY07 Non-GAAP net income of $5.2 million, up from $5.1 million for FY06 — Cash flow from operations of $2.2 million in Q4 and $4.9 million in FY07
Rainmaker achieved record fourth quarter net revenue of
Excluding Dell, revenue for the 2007 full year was
Gross margin was 48% in the fourth quarter of 2007, compared to 51% in the fourth quarter of 2006, and 48% in the third quarter of 2007. Gross margin for 2007 was 48%, compared to 50% in 2006.
GAAP net income for the fourth quarter of 2007 was
Non-GAAP net income for the fourth quarter of 2007 was
Tax expense in the fourth quarter was
Fourth quarter 2007 diluted EPS results are based on 20.7 million weighted average shares outstanding, calculated using the treasury stock method.
Total shares outstanding at
Total cash and cash equivalents at
Recent Business Highlights — In January 2008, added leading software solutions company as new client for hosted channel contract sales solution on a global scale — Added Fortune 500 global desktop and notebook computer manufacturer as new client for contract sales — Fortune 500 global network computing client significantly expanded agreement for lead development — Fortune 50 hardware client expanded agreement for lead development — Selected by second business unit of Fortune 50 hardware client for lead development — Added leading networking solutions provider QLogic as new client for training sales — Added semiconductor design software leader Magma Design Automation as new client for training sales
Rainmaker CEO
Financial Guidance
Rainmaker is providing fiscal year 2008 revenue guidance of
Conference Call
Rainmaker Systems will host a conference call and webcast today at
Discussion of Non-GAAP Financial Measures
Rainmaker Systems' management evaluates and makes operating decisions using various performance measures. In addition to GAAP results, Rainmaker also considers adjusted net income and adjusted net income per share, which are referred to as non-GAAP net income and non-GAAP net income per share, and EBITDA. These non-GAAP measures are derived from the revenue generated by Rainmaker's business and the costs directly related to the generation of that revenue, such as costs of services, sales and marketing expenses, technology expenses and general and administrative expenses, that management considers in evaluating the Company's operating performance. Non-GAAP net income, non-GAAP net income per share and EBITDA exclude certain expenses that management does not consider to be related to the Company's core operating performance.
Non-GAAP net income consists of net income including an adjustment intended to reflect the full amount of revenue on assumed contracts in connection with acquisitions and excluding equity plan-related compensation expenses and amortization of purchased intangible assets. For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income is adjusted by the amount of additional taxes that Rainmaker would accrue using a annualized effective tax rate applied to the non-GAAP results. The net revenue adjustment was
Fourth quarter EBITDA was
Non-GAAP net income, non-GAAP net income per share and EBITDA are supplemental measures of Rainmaker's performance that are not required by, or presented in accordance with, GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of liquidity. Rainmaker presents non-GAAP net income, non-GAAP net income per share and EBITDA because management considers them to be important supplemental measures of Rainmaker's operating performance and profitability trends, and because management believes they give investors useful information on period-to-period performance as evaluated by management. Rainmaker believes that the use of these non-GAAP measures provides consistency and comparability with Rainmaker's past financial reports and also facilitates comparisons with other companies in Rainmaker's industry, a number of which use similar non-GAAP financial measures to supplement their GAAP results. Management has historically used non-GAAP net income, non-GAAP net income per share and EBITDA when evaluating operating performance because management believes that the inclusion or exclusion of the items described above provides an additional measure of the company's core operating results and facilitates comparisons of the Company's core operating performance against prior periods and the Company's business model objectives. Rainmaker has chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluation of the Company's ongoing core operations.
About Rainmaker
Rainmaker Systems, Inc. delivers sales and marketing solutions, combining hosted application software and execution services designed to drive more revenue for our clients. Our Revenue Delivery Platform(SM) combines proprietary, on-demand application software and advanced analytics with specialized sales and marketing execution services. Rainmaker clients include large enterprises in a range of industries, including computer hardware and software, telecommunications, and financial services industries. For more information, visit http://www.rmkr.com or call 800-631-1545.
NOTE: Rainmaker Systems, the Rainmaker logo, Sunset Direct and Contract Renewals Plus are registered with the U.S. Patent and Trademark Office. All other service marks or trademarks are the property of their respective owners.
This press release contains forward-looking statements regarding future events. These forward-looking statements are based on information available to Rainmaker as of this date and they assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance, and actual results could differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are general market conditions, unfavorable economic conditions, our ability to execute our business strategy, our ability to integrate acquisitions without disruption to our business, the effectiveness of our sales team and approach, our ability to target, analyze and forecast the revenue to be derived from a client and the costs associated with providing services to that client, the date during the course of a calendar year that a new client is acquired, the length of the integration cycle for new clients and the timing of revenues and costs associated therewith, our client concentration given that we are currently dependent on a few significant client relationships, our ability to expand our channel hosted contract solution and drive adoption of this solution by resellers, potential competition in the marketplace, the ability to retain and attract employees, market acceptance of our service programs and pricing options, our ability to maintain our existing technology platform and to deploy new technology, our ability to sign new clients and control expenses, the possibility of the discontinuation and/or realignment of some client relationships, and the financial condition of our clients' businesses, and other factors detailed in the Company's filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q.
- Financial tables to follow - RAINMAKER SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) December 31, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $37,407 $21,996 Restricted cash 157 315 Accounts receivable, less allowance for doubtful accounts of $285 at December 31, 2007 and $233 at December 31, 2006 20,625 13,547 Prepaid expenses and other current assets 3,622 1,172 Total current assets 61,811 37,030 Property and equipment, net 9,447 4,293 Intangible assets, net 7,049 5,604 Goodwill 14,539 7,006 Other noncurrent assets 2,706 325 Total assets $95,552 $54,258 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $25,466 $22,522 Accrued compensation and benefits 2,062 1,979 Other accrued liabilities 3,447 2,368 Deferred revenue 3,541 3,457 Current portion of capital lease obligations - 2 Current portion of notes payable 1,083 1,500 Total current liabilities 35,599 31,828 Deferred tax liability 167 43 Long term deferred revenue 401 268 Notes payable, less current portion 1,333 417 Total liabilities 37,500 32,556 Commitments and contingencies - - Stockholders' equity: Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding - - Common stock, $0.001 par value; 50,000,000 shares authorized; 20,359,564 shares issued and 20,325,964 shares outstanding at December 31, 2007, and 15,088,294 shares issued and outstanding at December 31, 2006 19 15 Additional paid-in capital 116,391 81,265 Accumulated deficit (58,074) (59,578) Accumulated other comprehensive loss (51) - Treasury stock, at cost, 33,600 shares at December 31, 2007 and 0 shares at December 31, 2006 (233) - Total stockholders' equity 58,052 21,702 Total liabilities and stockholders' equity $95,552 $54,258 RAINMAKER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 Net revenue $20,127 $14,365 $73,515 $48,921 Cost of services 10,448 7,070 38,114 24,385 Gross margin 9,679 7,295 35,401 24,536 Operating expenses: Sales and marketing 1,848 1,592 6,854 4,250 Technology and development 2,734 1,874 10,738 5,990 General and administrative 3,417 1,889 11,443 7,483 Depreciation and amortization 1,760 1,016 5,711 3,299 Total operating expense 9,759 6,371 34,746 21,022 Operating income (80) 924 655 3,514 Interest and other income, net 439 133 1,407 187 Income before income tax expense 359 1,057 2,062 3,701 Income tax expense 138 114 558 298 Net income $221 $943 $1,504 $3,403 Basic income per share $0.01 $0.06 $0.09 $0.25 Diluted income per share $0.01 $0.06 $0.08 $0.23 Weighted average common shares Basic 19,225 14,671 17,569 13,662 Diluted 20,740 15,990 18,882 14,568 RAINMAKER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Year Ended December 31, 2007 2006 Operating activities: Net income $1,504 $3,403 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 2,646 1,831 Amortization of intangible assets 3,065 1,468 Stock-based compensation expense 1,814 207 Provision for allowances for doubtful accounts 408 267 Amortization of discount on notes receivable (44) - Loss on disposal of fixed assets 41 10 Changes in operating assets and liabilities, net of assets acquired and liabilities assumed: Accounts receivable (5,634) (3,184) Prepaid expenses and other assets (1,440) 18 Accounts payable 2,185 4,781 Accrued compensation and benefits (310) 552 Other accrued liabilities 223 637 Deferred tax liability 363 43 Deferred revenue 47 503 Net cash provided by operating activities 4,868 10,536 Investing activities: Purchases of property and equipment (4,671) (1,660) Restricted cash, net 157 271 Acquisition of business, net of cash acquired (9,027) 365 Purchase of notes receivable and warrants (2,500) - Net cash used in investing activities (16,041) (1,024) Financing activities: Proceeds from issuance of common stock from option exercises 1,111 1,016 Proceeds from issuance of common stock from ESPP 76 53 Proceeds from issuance of common stock from warrant exercises 55 190 Net proceeds from issuance of common stock and warrants from private placement - 5,312 Tax benefit from stock option exercises 54 65 Net proceeds from follow-on offering of common stock 27,203 - Principal payment of notes payable (1,501) (3,500) Principal payment of financing arrangements - (301) Principal payment of capital lease obligations (2) (97) Tax payments in connection with treasury stock surrendered (233) - Net cash provided by financing activities 26,763 2,738 Effect of exchange rate changes on cash (179) - Net increase in cash and cash equivalents 15,411 12,250 Cash and cash equivalents at beginning of year 21,996 9,746 Cash and cash equivalents at end of year $37,407 $21,996 Supplemental disclosures of cash flow information: Cash paid for interest $208 $254 Cash paid for taxes $223 $108 Supplemental disclosures of non-cash investing and financing activities: Issuance of notes payable for acquisition of assets $2,000 $- Issuance of common stock in business acquisitions $4,817 $5,337 RAINMAKER SYSTEMS, INC. EXHIBIT A RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (1) (In thousands, except per share) (Unaudited) Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 Net income - US GAAP basis $221 $943 $1,504 $3,403 Net revenue adjustment (2) - 116 149 139 Stock compensation adjustments (3): Cost of services 132 37 395 45 Sales and marketing 92 42 331 61 Technology and development 69 19 214 23 General and administrative 321 58 874 78 Amortization of intangible assets (4) 913 567 3,065 1,468 Tax effect of adjustment (5) (414) (91) (1,322) (147) Net income - Non-GAAP basis $1,334 $1,691 $5,210 $5,070 Diluted weighted average shares outstanding 20,740 15,990 18,882 14,568 Non-GAAP diluted net income per share $0.06 $0.11 $0.28 $0.35 (1) To supplement our financial results presented on a GAAP basis, we use non-GAAP net income, which excludes certain business combination accounting entries and expenses related to acquisitions as well as other expenses including stock-based compensation. As we have completed six acquisitions since January 1, 2005, we believe non-GAAP net income provides useful information to investors regarding the underlying business trends and performance of the Company's ongoing operations and is useful for period over period comparisons of such operations. Non-GAAP net income is not meant to be considered in isolation or as a substitute for GAAP net income, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. (2) Business combination accounting rules require us to record the fair value of contracts assumed in connection with acquisitions. The non-GAAP adjustment is intended to reflect the full amount of revenue on assumed contracts that would have otherwise been recorded during the three and twelve months ended December 31, 2007 which are related to our acquisitions of ViewCentral on September 15, 2006 and CAS Systems, Inc on January 25, 2007. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on these types of contracts, although we cannot be sure that customers will renew these contracts. (3) Stock-based compensation: We adopted FASB Statement No. 123R, Share Based Payments, on January 1, 2006 under the modified prospective method. Statement 123R requires us to record non-cash operating expenses associated with stock option awards at their estimated fair values. Prior to our Statement 123R adoption, we recorded stock-based compensation expenses at intrinsic values. In accordance with the modified prospective method, our financial statements for periods prior to January 1, 2006 have not been restated to reflect, and do not include, the changes in methodology to expense options at fair values in accordance with Statement 123R. Stock-based compensation expenses will recur in future periods. (4) We have excluded the effect of amortization of intangibles from our non-GAAP net income. We believe this helps investors understand a significant reason why our GAAP operating expenses increase following acquisitions. Investors should note that the use of intangible assets contributed to revenue earned during the period and will contribute to future revenue generation and should also note that these amortization expenses are recurring. (5) The income tax provision was calculated reflecting an effective tax rate of 27.1% and 10.8% for the three months ended December 31, 2007 and 2006, respectively, and 27.1% and 8.1% in the twelve months ended December 31, 2007 and 2006, respectively. RAINMAKER SYSTEMS, INC. EXHIBIT B RECONCILIATION OF NET INCOME (U.S. GAAP) TO EBITDA (1) (In thousands) (Unaudited) Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 Net income - US GAAP basis $221 $943 $1,504 $3,403 Add: Provision for income taxes 138 114 558 298 Depreciation of property and equipment 847 449 2,646 1,831 Amortization of acquisition related intangibles 913 567 3,065 1,468 Interest and other income (439) (133) (1,407) (187) 1,459 997 4,862 3,410 EBITDA - Non GAAP basis $1,680 $1,940 $6,366 $6,813 (1) To supplement our financial results presented on a GAAP basis, we use EBITDA, which excludes certain cash and non-cash expenses. We believe EBITDA provides useful information to investors regarding the underlying business trends and performance of the Company's ongoing operations and are useful for period over period comparisons of such operations. EBITDA is not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. We regularly use EBITDA internally to manage our business and make operating decisions.
SOURCE Rainmaker Systems, Inc.
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