Kenexa Announces Financial Results for Third 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 2010 & 2011 and the Kenexa World Conference from 2009-2011.

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, today announced operating results for the third quarter, ended September 30, 2011.

For the third quarter of 2011, Kenexa reported total GAAP revenue of $75.7 million, with non-GAAP revenue of $77.2 million after eliminating the $1.5 million GAAP adjustment to deferred revenue resulting from the October 2010 acquisition of Salary.com, Inc.  Non-GAAP revenue was $50.8 million for the third quarter of 2010.  Within total non-GAAP revenue, subscription revenue was $55.0 million for the third quarter of 2011, an increase of 38% compared with $39.8 million in the third quarter of 2010.  Professional services and other revenue was $22.2 million for the third quarter of 2011, an increase of 102% compared to $11.0 million for the third quarter of 2010.

“Our third quarter financial results were above our expectations and reflect the building momentum of Kenexa’s unique value proposition in the market place.  The combination of our software and content continue to drive the majority of our revenue, while our RPO business experienced a record quarterly performance and included the two largest customer wins in the history of our company,” said Rudy Karsan, Chief Executive Officer of Kenexa.  “While we continue to watch the global economy carefully, our confidence regarding Kenexa’s long-term market position has never been greater and we are increasing our 2011 outlook based on our strong third quarter performance and continued market share gains.”

Non-GAAP income from operations, which excludes share-based compensation expense, amortization of acquired intangibles and the purchase accounting impact to Salary.com’s deferred revenue, was $8.3 million for the three months ended September 30, 2011.  This was above the Company’s guidance of $7.1 million to $7.5 million and represented an increase of 98% compared to non-GAAP income from operations of $4.2 million for the three months ended September 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 $6.3 million for the three months ended September 30, 2011, compared to $3.7 million for the three months ended September 30, 2010.  Non-GAAP net income available to common shareholders was $0.23 per diluted share for the quarter ended September 30, 2011, up 44% compared to $0.16 per diluted share in the third quarter of 2010.  Non-GAAP net income per diluted share for the third quarter of 2011 was $0.03 above the high-end of the Company’s guidance of $0.19 to $0.20.

Kenexa’s income from operations for the three months ended September 30, 2011, determined in accordance with GAAP, was $1.3 million, compared to income from operations of $1.5 million for the same period of 2010. GAAP net loss available to common shareholders was approximately $3.1 million, or a loss of $0.12 per basic and diluted shares for the three months ended September 30, 2011, compared to net income of $0.2 million, or $0.01 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 $124.9 million at September 30, 2011, compared to $127.5 million at the end of the prior quarter.  The decrease in cash was primarily related to $4.2 million used to pay down long-term debt and $1.8 million used to settle legacy shareholder lawsuits for Salary.com.  The Company also generated $10.9 million in cash from operations for the third quarter.

Deferred revenue was $87.3 million at September 30, 2011, an increase of 49% from September 30, 2010 and up from $84.9 million at the end of the second quarter of 2011.

Other Third Quarter and Recent Highlights

• More than 60 “preferred partner” customers were added during the quarter (defined as customers that spend more than $50,000 annually), an increase from the over 40 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 $1.6 million, an increase from the over $1.2 million level in the third quarter of 2010.
• Announced the launch of Kenexa 2x Perform™, which offers integrated, enterprise-class performance management, succession and compensation planning tools to drive organizational alignment and ensure top performers are retained and engaged.
• Announced an alliance with SkillSoft, a leading SaaS provider of e-learning content, technology and services, to integrate and market Kenexa’s Global Talent Management solutions with SkillSoft’s learning content and platform technology.

Business Outlook

Based on information as of today, November 1, 2011, the Company is issuing financial guidance as follows:

Fourth Quarter 2011*: The Company expects GAAP revenue to be $74.7 million to $76.7 million.  Excluding the GAAP adjustment to deferred revenue, resulting from the Salary.com acquisition, the Company expects non-GAAP revenue to be $76.0 million to $78.0 million, and non-GAAP operating income to be $9.2 million to $9.6 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 $0.25 to $0.26.

Full Year 2011*: The Company expects GAAP revenue to be $279.4 million to $281.4 million.  Excluding the GAAP adjustment to deferred revenue, the Company expects non-GAAP revenue to be $287.4 million to $289.4 million, and non-GAAP operating income to be $28.9 million to $29.3 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 $0.81 to $0.82.

* Kenexa’s non-GAAP results  exclude 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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