Kenexa Announces Financial Results for Second Quarter 2011…from Kenexa

 

HRchitect featured Kenexa in our release of The Suite Life of Integrated Talent Management and also includes them in our list of top Talent Acquisition Systems and top Talent Management Systems vendors that businesses should consider. Derek Bluestone, VP Product Marketing appeared on the HRchitect WebMingle on June 17, 2010. HRchitect’s Matt Lafata, one of the industry’s leading talent management systems analysts, attended the Kenexa Analyst Day in May, 2010 and the Kenexa World Conference in 2009 and 2010.

If you are looking for a new Talent Management System, or any HR system, don’t rely solely on “recommendations” or published reports. Do yourself a huge favor and talk to HRchitect first. After 14 years, HRchitect has unparalleled knowledge of the HR and Talent Management vendor community and can save you time and money in selection and implementation. Simply put, do not invest in any kind of HR technology without consulting with the experts first. HRchitect is always available to help!

Kenexa (Nasdaq: KNXA), a global provider of business solutions for human resources, last week announced operating results for the second quarter, ended June 30, 2011.

For the second quarter of 2011, Kenexa reported total GAAP revenue of $69.0 million, with non-GAAP revenue of $71.3 million after eliminating the $2.3 million GAAP adjustment to deferred revenue resulting from the October 2010 acquisition of Salary.com, Inc.  Non-GAAP revenue was $44.9 million for the second quarter of 2010. Within total non-GAAP revenue, subscription revenue was $52.2 million for the second quarter of 2011, an increase of 45% compared with $36.1 million in the second quarter of 2010.  Professional services and other revenue was $19.1 million for the second quarter of 2011, an increase of 119% compared to $8.7 million for the second quarter of 2010. 

“Kenexa’s better than expected second quarter performance was the result of high customer interest levels, solid execution and Kenexa’s differentiated value proposition.  An increasing number of organizations around the world are looking for a strategic HR solutions partner, and Kenexa’s unique combination of software, proprietary content and services is driving continued market share gains,” said Rudy Karsan, Chief Executive Officer of Kenexa.  “We are increasing our outlook for 2011 based on our strong second quarter results and client momentum, though we continue to monitor the economic environment closely as macro data points remain highly variable on a global basis.”

Non-GAAP income from operations, which excludes share-based compensation expense, acquisition-related fees, amortization of acquired intangibles, the purchase accounting impact to Salary.com’s deferred revenue, a benefit related to a legal settlement, and non-recurring litigation charges, was $6.4 million for the three months ended June 30, 2011.  This was above the Company’s guidance of $5.4 million to $5.8 million and represented an increase of 69% compared to non-GAAP income from operations of $3.8 million for the three months ended June 30, 2010. 

Non-GAAP net income available to common shareholders, which excludes the items listed above and accretion associated with a variable interest entity, was $4.7 million for the three months ended June 30, 2011, compared to $3.1 million for the three months ended June 30, 2010.  Non-GAAP net income available to common shareholders was $0.18 per diluted share for the quarter ended June 30, 2011, up 38% compared to $0.13 per diluted share in the second quarter of 2010.  Non-GAAP net income per diluted share for the second quarter of 2011 was $0.01 above the Company’s guidance of $0.16 to $0.17 and included a $0.01 negative impact from higher shares outstanding.  The Company’s follow-on offering of common shares during the quarter was not anticipated at the time guidance was provided.  

Kenexa’s income from operations for the three months ended June 30, 2011, determined in accordance with GAAP, was $0.4 million, compared to income from operations of $1.7 million for the same period of 2010. GAAP net loss available to common shareholders was approximately $1.6 million, or a loss of $0.06 per basic and diluted shares for the three months ended June 30, 2011, compared to net income of $1.0 million, or $0.04 per basic and diluted share, in the same period of 2010.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Kenexa had cash, cash equivalents and investments of $127.5 million at June 30, 2011, compared to $19.7 million at the end of the prior quarter.  The increase in cash was primarily related to the company’s follow-on offering of common shares during the quarter, which provided $91.7 million in net proceeds including the execution of the overallotment option.  The Company also generated $16.8 million in non-GAAP cash from operations for the second quarter. 

Deferred revenue was $84.9 million at June 30, 2011, an increase of 47% from June 30, 2010 and up from $82.2 million at the end of the first quarter of 2011. 

Other Second Quarter and Recent Highlights

 

  • More than 50 “preferred partner” customers were added during the quarter (defined as customers that spend more than $50,000 annually), an increase from the over 30 preferred partner customer additions in the year ago period.
  • The average annualized revenue from the Company’s top 80 customers, or P-cubed metric, was greater than $1.5 million, an increase from the over $1.1 million level in the second quarter of 2010.
  • On May 25, the company completed a public offering of 3,450,000 shares of its common stock at $27.75 per share. Kenexa received net proceeds of approximately $91.7 million after taking into consideration the execution of the overallotment option and deducting underwriting discounts and commissions and offering expenses that are payable by Kenexa.

Business Outlook

Based on information as of today, August 2, 2011, the Company is issuing financial guidance as follows: 

Third Quarter 2011*: The Company expects GAAP revenue to be $70.5 million to $72.5 million.  Excluding the GAAP adjustment to deferred revenue, resulting from the Salary.com acquisition, the Company expects non-GAAP revenue to be $72.0 million to $74.0 million, and non-GAAP operating income to be $7.1 million to $7.5 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 28.0 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.19 to $0.20. 

Full Year 2011*: The Company expects GAAP revenue to be $271.0 million to $275.0 million.  Excluding the GAAP adjustment to deferred revenue, the Company expects non-GAAP revenue to be $279.0 million to $283.0 million, and non-GAAP operating income to be $27.5 million to $28.5 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 26.5 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.77 to $0.80.

* Kenexa’s non-GAAP results  excludes stock based compensation expense, amortization of acquired intangibles, acquisition-related fees, the purchase accounting reduction for Salary.com’s revenue, a benefit related to a legal settlement, non-recurring litigation charges and accretion associated with a variable interest entity.

For more information on Kenexa, please visit www.kenexa.com

 
Matt Lafata, HRchitect

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