Kenexa Announces Financial Results for Fourth Quarter and Full Year 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 15 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 (NYSE: KNXA), a global provider of business solutions for human resources, this week announced operating results for the fourth quarter and for the year, ended December 31, 2011.

For the fourth quarter of 2011, Kenexa reported total GAAP revenue of $78.2 million. Non-GAAP revenue, which eliminates the GAAP adjustment to deferred revenue resulting from the October 2010 acquisition of Salary.com, Inc., was $79.6 million for the fourth quarter of 2011, an increase of 24% compared to $64.1 million for the fourth quarter of 2010. Within total non-GAAP revenue, subscription revenue was $56.0 million for the fourth quarter of 2011, an increase of 15% compared with $48.6 million in the fourth quarter of 2010. Professional services and other revenue was $23.5 million for the fourth quarter of 2011, an increase of 52% compared to $15.5 million for the fourth quarter of 2010.

“Our fourth quarter results were above our expectations and represented a strong finish to a record year for Kenexa. The company’s market share gains are being driven by our end-to-end business model, which enables HR organizations to serve as a strategic function that drives business value,” said Rudy Karsan, Chief Executive Officer of Kenexa. “Uncertainty regarding the global economy remains at a very high level, however, we have continued to experience solid global demand for our solutions. As we look ahead, we are cautiously optimistic regarding Kenexa’s outlook for 2012. We expect our differentiated offering to drive continued market share gains, and we are targeting modest non-GAAP operating margin expansion as we continue to invest in proven growth strategies.”

Karsan added, “Our acquisition of OutStart, announced separately today, provides Kenexa with a next generation e-learning solution. We believe that Kenexa is the only vendor capable of meeting growing demand for an end-to-end, integrated talent management solution that includes e-learning along with recruiting, performance management, compensation management, proprietary content and services expertise to help implement best practices.”

Non-GAAP income from operations, which excludes share-based compensation expense, amortization of acquired intangibles, the purchase accounting impact to Salary.com’s deferred revenue, acquisition related fees, and a gain related to an asset sale, was $9.9 million for the three months ended December 31, 2011. This represented a 12.4% non-GAAP operating margin and an increase of 35% compared to non-GAAP income from operations of $7.4 million for the three months ended December 31, 2010.

Non-GAAP net income available to common shareholders, which excludes the items listed above and accretion associated with a variable interest entity and a non-GAAP tax adjustment was $7.5 million for the three months ended December 31, 2011, compared to $5.4 million for the three months ended December 30, 2010. Non-GAAP net income available to common shareholders was $0.27 per diluted share for the fourth quarter of 2011, above the Company’s guidance of $0.25 to $0.26 and based on 27.9 million weighted average shares outstanding. Non-GAAP net income available to common shareholders was $0.23 per diluted share for the fourth quarter of 2010, based on 23.7 million weighted average shares outstanding.

Kenexa’s income from operations for the three months ended December 31, 2011, determined in accordance with GAAP, was $2.9 million, compared to a loss from operations of $3.6 million for the same period of 2010. GAAP net income available to common shareholders was approximately $0.6 million, or $0.02 per diluted shares for the three months ended December 31, 2011, compared to net loss of $6.9 million, or ($0.30) 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 $129.0 million at December 31, 2011, an increase from $124.9 million at the end of the prior quarter. The Company generated $23.9 million in cash from operations for the fourth quarter, which was partially offset primarily by $11.0 million used for acquisitions and $5.5 million associated with capital expenditures and capitalized investments.

Deferred revenue was $88.8 million at December 31, 2011, an increase of 17% from December 31, 2010.

Other Fourth Quarter and Recent Highlights

  • This week announced and closed the acquisition OutStart, a leading innovator in the learning management industry. The company delivers a portfolio of inter-related mobile, social and learning knowledge solutions and has been recognized as a visionary in Gartner’s Magic Quadrant for the last 7 years, in addition to winning a wide range of awards for having the top learning portal in the industry. Using cash on hand, Kenexa paid $38.9 million, subject to working capital and other adjustments described in the Merger Agreement.
  • More than 70 “preferred partner” customers were added during the fourth quarter (defined as customers that spend more than $50,000 annually), an increase from the over 50 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 in the fourth quarter of 2011, an increase from the over $1.2 million level in the fourth quarter of 2010.
  • During the fourth quarter, announced the acquisition of Batrus Hollweg (BHI). BHI’s wealth of research and content regarding talent best practice, as well as their assessment solutions, are recognized as some of the top notch content and solutions in our industry today. The combination of Kenexa and BHI provides the most researched and proven talent solutions content, particularly in the hospitality industry.
  • Announced details of its alliance with LinkedIn, including integrations with LinkedIn to support candidates throughout the job application process and enable recruiters to work faster, smarter and more effectively in managing these candidates. Kenexa is committed to accelerating the benefits of social recruiting for our global clients, and the new tools for LinkedIn are being incorporated into future product releases from Kenexa.
  • Transferred the listing of its common stock to the New York Stock Exchange (“NYSE”) effective November 9, 2011. Kenexa continues to trade under the “KNXA” ticker symbol.

Full Year 2011 Financial Results

For the full year 2011, Kenexa reported total GAAP revenue of $282.9 million, with non-GAAP revenue of $291.1 million, an increase of 46% compared to non-GAAP revenue of $199.4 million for the full year 2010. Non-GAAP subscription revenue was $212.4 million and professional services revenue was $78.7 million for the full year 2011, compared to $157.8 million and $41.7 million, respectively, in the year ago period.

Non-GAAP income from operations, which excludes share-based compensation expense, amortization of acquired intangibles, expenses related to our acquisitions, a benefit related to a legal settlement, the deferred revenue write-down related to the Salary.com acquisition, a gain related to an asset sale and non-recurring litigation charges was $29.6 million for the year ended December 31, 2011, representing a 10.2% non-GAAP operating margin and an increase of 68% compared to $17.6 million in the year ended December 31, 2010. Non-GAAP net income available to common shareholders, which excludes the items listed above and accretion associated with a variable interest entity and a non-GAAP tax adjustment, was $22.2 million, or $0.84 per diluted share, for the year ended December 31, 2011, an increase of 35% compared to $0.62 in the year ago period.

Kenexa’s income from operations for the full year 2011, determined in accordance with GAAP, was $1.9 million, compared with a loss from operations of $0.3 million for 2010. GAAP net loss allocable to common shareholders’ was $7.3 million or loss of ($0.28) per diluted and basic share for the full year 2011, compared to a net loss allocable to common shareholders’ of $5.8 million or a loss of ($0.25) per diluted and basic share for the full year 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.”

Business Outlook

Based on information as of today, February 6, 2012, the Company is issuing financial guidance as follows:

First Quarter 2012*: The Company expects GAAP revenue to be $75.8 million to $76.8 million. Excluding the GAAP adjustment to deferred revenue, resulting from the Salary.com and OutStart acquisitions, the Company expects non-GAAP revenue to be $78 million to $79 million, and non-GAAP operating income to be $6.1 million to $6.5 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 28 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.15 to $0.17.

First quarter guidance assumes that the OutStart acquisition contributes approximately $1 million to GAAP revenue, $2 million to non-GAAP revenue and has no material impact on non-GAAP operating income.

Full Year 2012*: The Company expects GAAP revenue to be $344 million to $354 million. Excluding the GAAP adjustment to deferred revenue, the Company expects non-GAAP revenue to be $352 million to $362 million, and non-GAAP operating income to be $36 million to $40 million. Assuming an effective tax rate for reporting purposes of approximately 20% and approximately 28.6 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.95 to $1.07.

Full year 2012 guidance assumes that the OutStart acquisition contributes approximately $13.5 million to GAAP revenue, $17 million to non-GAAP revenue and $1.5 million to $2.0 million to non-GAAP operating income.

* Kenexa’s non-GAAP guidance excludes stock-based compensation expense, amortization of acquired intangibles, acquisition-related fees, the purchase accounting reduction for Salary.com’s and OutStart’s revenue, and accretion associated with a variable interest entity.

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

To learn more about HRchitect’s expertise in HR technology strategy, selection and implementation services, and how HRchitect can help your organization, please visit www.HRchitect.com

 
Matt Lafata, HRchitect

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