8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 28, 2021

ServiceSource International, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	001-35108	81-0578975
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

707 17^th Street, 25^th Floor

Denver, CO 80202

(Address of principal executive offices, including zip code)

(720) 889-8500

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions: 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common Stock, $0.0001 Par Value	SREV	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On July 28, 2021, ServiceSource International, Inc. issued a press release announcing its results for the quarter ended June 30, 2021. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein.

The information contained in Item 2.02 of this current report on Form 8-K and the Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press release dated July 28, 2021 and entitled "ServiceSource Reports Second Quarter 2021 Financial Results"
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:	July 28, 2021
		SERVICESOURCE INTERNATIONAL, INC.
		By:	/s/ MEGAN FINE
			Name: Megan Fine
			Title: General Counsel

EX-99.1

Exhibit 99.1

ServiceSource Reports Second Quarter 2021 Financial Results

Total Revenue of $46.3 million

GAAP Net Loss of $5.1 million; Non-GAAP Net Loss of $1.4 million

Adjusted EBITDA of negative $0.2 million

DENVER, July 28, 2021 - ServiceSource (NASDAQ: SREV), the customer journey experience company, today announced financial results for the three months ended June 30, 2021.

“In the second quarter, our alignment to areas of industry growth and strengthening client demand contributed to acceleration throughout our business and a return to sequential revenue growth,” said Gary B. Moore, ServiceSource’s chairman and chief executive officer. “Companies are recognizing and embracing the importance of generating organizational value and positive outcomes across the entire customer journey experience. Our expertise supporting the priorities of recurring revenue business models, combined with our ability to become a seamless extension of our clients’ go-to-market teams, positions us at the forefront of an attractive long-term market shift. We are pleased with our results in the quarter and expect our trajectory to continue to improve through the remainder of the year.”

Key Financial Results –Second Quarter 2021

● GAAP revenue was $46.3 million, compared with $47.6 million reported for Q2 2020.

● GAAP net loss was $5.1 million or $0.05 per diluted share, compared with GAAP net loss of $5.4 million or $0.06 per diluted share reported for Q2 2020.

● Non-GAAP net loss was $1.4 million or $0.01 per diluted share, compared with non-GAAP net loss of $1.2 million or $0.01 per diluted share reported for Q2 2020.

● Adjusted EBITDA, a non-GAAP financial measure, was negative $0.2 million, compared with negative $0.4 million reported for Q2 2020.

● Ended the quarter with $34.8 million of cash and cash equivalents and restricted cash and $15.0 million of borrowings under the Company's $40.0 million revolving line of credit.

A reconciliation of GAAP to non-GAAP financial measures is provided following the Condensed Consolidated Financial Statement tables contained within this press release.

Key Business Highlights –Second Quarter 2021

● Successfully renewed or extended approximately 97% of the contract value that was up for renewal during the first six months of the year.

● Delivered another strong quarter of sales activity with an approximately 7% year-over-year increase in new bookings on a trailing twelve-month basis.

● Announced our second new client win of the year to deploy a revenue retention program for a leader in the SaaS-based team collaboration market and tripled the size and scope of an inside digital sales program for a cloud-based business communications platform provider.

● Signed expansions with three of our top ten clients each in excess of $1 million of expected contract value.

● Broadened our virtual-first operating model to scale our U.S. delivery footprint across ten states.

“We are encouraged by the headway we are making in the business and our stronger positioning to capitalize on a large and growing market opportunity for our solutions,” commented Chad Lyne, executive vice president and chief financial officer of ServiceSource. “The strategic changes and investments we have made throughout the company are beginning to enhance our momentum in the marketplace. We continue to see improvement in the trending of our operational KPIs, the health of our client relationships, and the direction of our financial results. We expect to build on this progress and believe we are tracking favorably to report year-over-year revenue growth in the third or fourth quarter.”

Quarterly Conference Call

ServiceSource will discuss its second quarter 2021 results on July 28, 2021, via teleconference at 4:35 p.m. Eastern Time. To access the call within the U.S., please dial (877) 293-5486, or outside the U.S. (914) 495-8592, at least five minutes prior to the start time. Conference ID number: 7343248. In addition, a live webcast of the call will also be available on the Investor Relations section of the ServiceSource website under Events and Presentations. The related slide presentation and a replay of the webcast will also be available on the Company's website at http://ir.servicesource.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our financial management and our expectation to improve our trajectory or return to year-over-year revenue growth in the third or fourth quarter. These forward-looking statements are based on our current assumptions and beliefs and involve risks and uncertainties that could cause our results to differ materially from our forward-looking statements. Those risks and uncertainties include: a decline in client renewals, the loss of one or more of our key clients, the contraction in our revenue from one or more of our key clients - either in the ordinary course of business or as a result of macroeconomic conditions resulting from the COVID-19 pandemic - in each case resulting in churn, or our clients not expanding their relationships with us; economic or other adverse events or conditions affecting the technology industry, including as a result of the COVID-19 pandemic; and other risks and uncertainties described more fully in our periodic reports filed with the Securities and Exchange Commission, which can be obtained online at the Commission's website at http://www.sec.gov. All forward-looking statements in this press release are based on information currently available to us, and except as may be legally required we assume no obligation to update these forward-looking statements.

About ServiceSource

ServiceSource International, Inc. (NASDAQ: SREV) is a global outsourced go-to-market services provider that accelerates B2B digital sales and customer success transformation. Our expert sales professionals, data-powered insights and proven methodologies scale and reimagine customer journey experiences (CJX™) into profitable business outcomes. Backed by more than 20 years of experience, ServiceSource drives billions of dollars in client value annually, conducting commerce in 45 languages and 175 countries. To learn more about how we design, develop and manage CJX solutions that transform the agility, speed, efficiency and value of our clients’ growth initiatives, visit www.servicesource.com.

Trademarks

ServiceSource®, and any ServiceSource product or service names or logos above are trademarks of ServiceSource International, Inc. All other trademarks used herein belong to their respective owners.

Connect with ServiceSource:

http://www.facebook.com/ServiceSource

http://twitter.com/servicesource

http://www.linkedin.com/company/servicesource

http://www.youtube.com/user/ServiceSourceMKTG

ServiceSource International, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Net revenue	$	46,307	$	47,638	$	91,330	$	97,752
Cost of revenue(1)		35,395		34,645		69,462		70,205
Gross profit		10,912		12,993		21,868		27,547
Operating expenses:
Sales and marketing(1)		4,059		6,142		8,089		13,410
Research and development(1)		1,181		1,516		2,341		2,697
General and administrative(1)		10,624		10,619		22,814		21,307
Restructuring and other related costs		54		236		974		703
Total operating expenses		15,918		18,513		34,218		38,117
Loss from operations		(5,006)		(5,520)		(12,350)		(10,570)
Interest and other (expense) income, net		(364)		324		(1,524)		(550)
Loss before provision for income taxes		(5,370)		(5,196)		(13,874)		(11,120)
Provision for income tax benefit (expense)		279		(161)		(52)		(179)
Net loss	$	(5,091)	$	(5,357)	$	(13,926)	$	(11,299)
Net loss per share, basic and diluted	$	(0.05)	$	(0.06)	$	(0.14)	$	(0.12)
Weighted-average common shares outstanding, basic and diluted		97,601		95,369		97,424		95,169

⁽¹⁾ Reported amounts include stock-based compensation expense as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	288	$	90	$	418	$	135
Sales and marketing		168		444		359		821
Research and development		17		1		32		19
General and administrative		601		740		2,740		1,345
Total stock-based compensation	$	1,074	$	1,275	$	3,549	$	2,320

ServiceSource International, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	32,464	$	34,006
Accounts receivable, net		34,596		38,890
Prepaid expenses and other		7,403		9,275
Total current assets		74,463		82,171
Property and equipment, net		24,583		29,948
ROU assets		25,290		29,798
Contract acquisition costs		675		872
Goodwill		6,334		6,334
Other assets		4,184		3,490
Total assets	$	135,529	$	152,613
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,246	$	1,204
Accrued expenses		2,568		3,217
Accrued compensation and benefits		16,129		18,342
Revolver		15,000		15,000
Operating lease liabilities		10,008		10,797
Other current liabilities		1,015		1,209
Total current liabilities		46,966		49,769
Operating lease liabilities, net of current portion		21,408		25,975
Other long-term liabilities		1,742		1,593
Total liabilities		70,116		77,337
Stockholders' equity:
Preferred stock		-		-
Common stock		10		10
Treasury stock		(441)		(441)
Additional paid-in capital		383,403		379,696
Accumulated deficit		(318,533)		(304,607)
Accumulated other comprehensive income		974		618
Total stockholders' equity		65,413		75,276
Total liabilities and stockholders' equity	$	135,529	$	152,613

ServiceSource International, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(13,926)	$	(11,299)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		7,299		6,819
Amortization of contract acquisition costs		314		515
Amortization of ROU assets		4,745		4,690
Stock-based compensation		3,549		2,320
Restructuring and other related costs		935		645
Other		353		35
Net changes in operating assets and liabilities:
Accounts receivable, net		4,160		1,704
Prepaid expenses and other assets		551		1,299
Contract acquisition costs		(117)		(129)
Accounts payable		1,061		(2,452)
Accrued compensation and benefits		(2,948)		(1,431)
Operating lease liabilities		(5,532)		(4,385)
Accrued expenses		(653)		(823)
Other liabilities		286		(578)
Net cash provided by (used in) operating activities		77		(3,070)
Cash flows from investing activities:
Purchases of property and equipment		(2,092)		(2,596)
Net cash used in investing activities		(2,092)		(2,596)
Cash flows from financing activities:
Repayment on finance lease obligations		(315)		(481)
Proceeds from Revolver		-		27,000
Repayment of Revolver		-		(7,000)
Proceeds from issuance of common stock		136		76
Net cash (used in) provided by financing activities		(179)		19,595
Effect of exchange rate changes on cash and cash equivalents and restricted cash		626		(68)
Net change in cash and cash equivalents and restricted cash		(1,568)		13,861
Cash and cash equivalents and restricted cash, beginning of period		36,326		29,383
Cash and cash equivalents and restricted cash, end of period	$	34,758	$	43,244

Use of Non-GAAP Financial Measures

To supplement its Condensed Consolidated Financial Statements presented in accordance with generally accepted accounting principles, or GAAP, ServiceSource provides investors with non-GAAP gross profit, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the closest GAAP financial measure is presented in the following financial tables.

ServiceSource believes non-GAAP financial information provided in this release can assist investors in understanding and assessing its on-going core operations and prospects for the future and provides an additional tool for investors to use in comparing ServiceSource's financial results with other companies in the industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP gross profit consists of gross profit plus adjustments to stock-based compensation and amortization of internally developed software.

Non-GAAP net income (loss) consists of net income (loss) plus stock-based compensation, amortization of internally developed software, restructuring and other related costs, amortization of contract acquisition costs related to the initial adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), non-cash interest expense and applying an income tax rate of 26.5% on non-GAAP adjustments. Stock-based compensation expense is expected to vary depending on the number of new grants issued, changes in the Company's stock price, stock market volatility, expected option lives and risk-free interest rates, all of which are difficult to estimate.

EBITDA consists of net income (loss) plus provision for income tax expense (benefit), interest and other expense (income), net and depreciation and amortization. Adjusted EBITDA consists of EBITDA plus stock-based compensation, restructuring and other related costs, and amortization of contract acquisition costs related to the initial adoption of ASC 606.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.

ServiceSource International, Inc.

GAAP To Non-GAAP Reconciliation

(in thousands, except per share amounts)

(unaudited)

		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2021			2020			2021			2020
Net revenue		$	46,307		$	47,638		$	91,330		$	97,752
Gross profit
GAAP gross profit		$	10,912		$	12,993		$	21,868		$	27,547
Non-GAAP adjustments:
Stock-based compensation	(A)		288			90			418			135
Amortization of internally developed software	(B)		1,947			1,313			3,779			2,566
Non-GAAP gross profit		$	13,147		$	14,396		$	26,065		$	30,248
Gross profit %
GAAP gross profit			23.6	%		27.3	%		23.9	%		28.2	%
Non-GAAP adjustments:
Stock-based compensation	(A)		0.6	%		0.2	%		0.5	%		0.1	%
Amortization of internally developed software	(B)		4.2	%		2.8	%		4.1	%		2.6	%
Non-GAAP gross profit			28.4	%		30.2	%		28.5	%		30.9	%
Certain totals do not add due to rounding
Operating expenses
GAAP operating expenses		$	15,918		$	18,513		$	34,218		$	38,117
Non-GAAP adjustments:
Stock-based compensation	(A)		(786)			(1,185)			(3,131)			(2,185)
Amortization of internally developed software	(B)		(349)			(536)			(709)			(1,048)
Restructuring and other related costs	(C)		(54)			(236)			(974)			(703)
Amortization of contract acquisition costs - ASC 606 initial adoption	(D)		(68)			(162)			(152)			(380)
Non-GAAP operating expenses		$	14,661		$	16,394		$	29,252		$	33,801
Net loss
GAAP net loss		$	(5,091)		$	(5,357)		$	(13,926)		$	(11,299)
Non-GAAP adjustments:
Stock-based compensation	(A)		1,074			1,275			3,549			2,320
Amortization of internally developed software	(B)		2,296			1,849			4,488			3,614
Restructuring and other related costs	(C)		54			236			974			703
Amortization of contract acquisition costs - ASC 606 initial adoption	(D)		68			162			152			380
Non-cash interest expense	(E)		17			17			35			35
Income tax effect on non-GAAP adjustments	(F)		214			600			1,291			1,256
Non-GAAP net loss		$	(1,368)		$	(1,218)		$	(3,437)		$	(2,991)
Diluted net loss per share
GAAP diluted net loss per share		$	(0.05)		$	(0.06)		$	(0.14)		$	(0.12)
Non-GAAP adjustments:
Stock-based compensation	(A)		0.01			0.01			0.04			0.02
Amortization of internally developed software	(B)		0.02			0.02			0.05			0.04
Restructuring and other related costs	(C)		0.00			0.00			0.01			0.01
Amortization of contract acquisition costs - ASC 606 initial adoption	(D)		0.00			0.00			0.00			0.00
Non-cash interest expense	(E)		0.00			0.00			0.00			0.00
Income tax effect on non-GAAP adjustments	(F)		0.00			0.01			0.01			0.01
Non-GAAP diluted net loss per share		$	(0.01)		$	(0.01)		$	(0.04)		$	(0.03)
Certain totals do not add due to rounding
Shares used in calculating diluted net loss per share on a non-GAAP basis	(G)		97,601			95,369			97,424			95,169

Footnotes to GAAP to Non-GAAP Reconciliation

(A) Stock-based compensation. Included in our GAAP presentation of cost of revenue and operating expenses, stock-based compensation consists of expenses for stock options, stock unit awards and purchase rights under our stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.

(B) Amortization of internally developed software. Included in our GAAP presentation of cost of revenue and operating expenses, amortization of internally developed software reflects non-cash expense for software developed or obtained for internal use. We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance.

(C) Restructuring and other related costs. Included in our GAAP presentation, we incurred expenses related to our restructuring effort to better align our cost structure with current revenue levels. Restructuring and other related costs consist primarily of employees' severance payments, related employee benefits, related legal fees and charges related to leases and other contract termination costs. These are one-time in nature costs that are not indicative of our core operating performance.

(D) Amortization of contract acquisition costs - ASC 606 initial adoption. Upon adoption of ASC 606 using the modified retrospective approach, we capitalized approximately $3.3 million of previously expensed sales commissions from 2015, 2016 and 2017. Amortization of these amounts are included in our GAAP presentation as sales and marketing expense. We believe the non-cash amortization expense is not related to or indicative of our ongoing operating performance.

(E) Non-cash interest expense. Under GAAP, we recognize interest expense at the effective interest rate which includes interest costs related to the amortization of debt issuance costs. The difference between the effective interest rate and the contractual interest rate is excluded from our assessment of our operating performance because we believe this non-cash expense is not indicative of ongoing operating performance. We believe that the exclusion of the non-cash interest expense provides investors a view of our core operating performance.

(F) Income tax effect on non-GAAP adjustments. This adjusts the provision for income taxes to reflect the effect of the non-GAAP items A, B, C, D and E noted above on our non-GAAP net income (loss).

(G) Shares used in calculating diluted net income (loss) per share on a non-GAAP basis. The share count for basic and diluted earnings per share is the same due to GAAP net losses for the three and six months ended June 30, 2021 and 2020.

ServiceSource International, Inc.

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(unaudited)

		For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020
Net loss		$	(5,091)	$	(5,357)	$	(13,926)	$	(11,299)
Provision for income tax (benefit) expense			(279)		161		52		179
Interest and other expense (income), net			364		(324)		1,524		550
Depreciation and amortization(1)			3,642		3,423		7,299		6,819
EBITDA			(1,364)		(2,097)		(5,051)		(3,751)
Stock-based compensation	(A)		1,074		1,275		3,549		2,320
Restructuring and other related costs	(C)		54		236		974		703
Amortization of contract acquisition asset costs - ASC 606 initial adoption	(D)		68		162		152		380
Adjusted EBITDA		$	(168)	$	(424)	$	(376)	$	(348)

⁽¹⁾ Depreciation and amortization expense are comprised of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Internally developed software amortization	$	2,296	$	1,849	$	4,488	$	3,614
Property and equipment depreciation		1,346		1,574		2,811		3,205
Depreciation and amortization	$	3,642	$	3,423	$	7,299	$	6,819

Investor Relations Contact for ServiceSource:

Chad Lyne

ServiceSource International, Inc.

investorrelations@servicesource.com

XML

Document and Entity Information	Jul. 28, 2021
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Jul. 28, 2021
Entity File Number	001-35108
Entity Registrant Name	ServiceSource International, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-0578975
Entity Address, Address Line One	707 17th Street
Entity Address, Adress Line Two	25th Floor
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80202
City Area Code	720
Local Phone Number	889-8500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.0001 Par Value
Trading Symbol	SREV
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0001310114
Amendment Flag	false