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SuccessFactors Reports 4Q Loss On Higher Expenses

Record quarterly revenue and billings weren't enough to bring the software-as-a-service vendor to profitability.
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Despite reporting record quarterly billings and non-GAAP revenue, SuccessFactors' high expenses forced the software developer on Wednesday to report a bigger fourth-quarter loss than previously anticipated.

SuccessFactors lost $4.1 million, or 5 cents per share, during the quarter that ended on Dec. 31. In the same period a year ago, it lost $2.7 million, or 4 cents per share. However, revenue rose to $60.2 million, almost 43% higher than last year's results of $42.2 million.

The company, which develops software-as-a-service (SaaS) applications for small and midsize businesses (SMBs) and enterprises, generated fourth-quarter billings of $88.5 million, a 41% year-over-year increase, it said. The cash generated from operations was approximately $43.4 million, which represented 182% growth from 2009, the report said.

"SuccessFactors had an outstanding quarter and a great year in 2010. Once again the company achieved record quarterly results, highlighted by an all-time high in quarterly billings at $88.5 million, up 41% year-over-year," Lars Dalgaard, founder and CEO of SuccessFactors, said in a statement. "When we were at a $40 million revenue run rate we were growing more than 100%, and now at more than $200 million we are growing more than 40%. I'm proud that we continue to be one of the fastest growing public SaaS companies."

But expenses proved too difficult to overcome: These costs grew 40%, hitting $47.9 million, including a 38% increase in sales and marketing, which alone accounted for $29.5 million in the most recent quarter. Research and development costs surged 89% to $12.2 million, while general and administrative costs hit $11.1 million, up 71% from the same period a year ago.

If special and one-time items were excluded, adjusted net income for the quarter was $260,000 or break-even per share, vs. income of $330,000 million or 1 cent per share in same period 12 months ago.

For 2010, SuccessFactors reported a net loss of $12.5 million, or 17 cents per share, compared with a loss of $12.6 million, or 21 cents per share, in 2009. Last year, the company's revenue increased 34.5% to $205.9 million.

SuccessFactors predicts a stronger start this year, expecting to break even on an adjusted basis this quarter and for the remainder of 2011. The company forecast adjusted revenue of $62.5 million to $63.5 million for the first quarter, ending March 31, and $265 million to $270 million for the year.

Shares of SuccessFactors climbed 6.31% in after-hours trading to $32, Dow Jones reported.

On Thursday, analysts at RBC Capital raised their price target on shares of SuccesFactors' stock to $35 from $30, and added an "outperform" rating on the stock, according to American Banking News. Likewise, Oppenheimer analysts raised their price target on the stock to $41 from $32, and also placed an "outperform" rating on the stock, the industry newspaper said.