10-Q 1 xtly-10q_20160430.htm 10-Q xtly-10q_20160430.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

[X]

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2016

OR

[  ]

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-37451

 

Xactly Corporation

(Exact name of registrant as specified in its charter) 

 

 

Delaware

11-3744289

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

300 Park Avenue, Suite 1700

San Jose, California 95110

(Address of principal executive offices)

Telephone Number (408) 977-3132

(Registrant’s telephone number, including area code) 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  [X]    No  [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [X]    No  [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

[  ]

Accelerated filer

[  ]

 

 

 

 

Non-accelerated filer

[X]  (Do not check if a smaller reporting company)

Smaller reporting company

[  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [  ]   No  [X]

As of May 31, 2016, there were 30,127,146 shares of the registrant’s common stock outstanding.

 

 

 


 

Xactly Corporation

 

 

 

 

 

Page No.

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited):

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A.

 

Risk Factors

 

28

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

47

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

47

 

 

 

 

 

Item 5.

 

Other Information

 

47

 

 

 

 

 

Item 6.

 

Exhibits

 

47

 

 

 

 

 

 

 

Signatures

 

48

 

 

 

 

 

 

 

Exhibit Index

 

49

 

 

 

 

2


 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “expect,” “could,” “target,” “project,” “should,” “predict,” “potential,” “would,” “seek” and similar expressions and the negative of those expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

·

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses, ability to generate cash flow and ability to achieve and maintain positive cash flow from operations or future profitability;

·

our ability to anticipate market needs and timely develop new and enhanced solutions and services to meet those needs, and our ability to successfully monetize them;

·

the evolution of technology affecting our solutions, services and markets;

·

the impact of competition in our industry and innovation by our competitors;

·

the anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

·

the effects of seasonal trends on our operating results;

·

maintaining and expanding our customer base and our relationships with other companies;

·

our liquidity and working capital requirements;

·

our anticipated growth and growth strategies and our ability to effectively manage that growth and effect these strategies;

·

our ability to sell our solutions and expand internationally;

·

our failure to anticipate and adapt to future changes in our industry;

·

our reliance on our third-party service providers;

·

the impact of any failure of our solutions;

·

our ability to hire and retain necessary qualified employees to expand our operations;

·

our ability to adequately protect our intellectual property;

·

the anticipated effect on our business of litigation to which we are or may become a party;

·

our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the U.S. and internationally;

·

the increased expenses and administrative workload associated with being a public company;

·

our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud;

·

the estimates and estimate methodologies used in preparing our consolidated financial statements; and

·

the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are directed to risks and uncertainties identified below under “Risk Factors” and elsewhere in this report for additional detail regarding factors that may cause actual results to be different than those expressed in our forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

 

 

 

3


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

Xactly Corporation

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

(Unaudited)

 

 

 

April 30, 2016

 

 

January 31, 2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

46,047

 

 

$

48,027

 

Restricted cash, short term

 

 

286

 

 

 

286

 

Accounts receivable, net

 

 

19,910

 

 

 

20,278

 

Prepaid expenses and other current assets

 

 

4,118

 

 

 

3,219

 

Total current assets

 

 

70,361

 

 

 

71,810

 

Property and equipment, net

 

 

8,676

 

 

 

8,410

 

Goodwill

 

 

6,384

 

 

 

6,384

 

Other long-term assets

 

 

283

 

 

 

280

 

Total assets

 

$

85,704

 

 

$

86,884

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,863

 

 

$

2,362

 

Accrued expenses

 

 

8,932

 

 

 

9,512

 

Debt, current portion

 

 

8,981

 

 

 

8,981

 

Deferred revenue, current portion

 

 

44,213

 

 

 

41,183

 

Total current liabilities

 

 

63,989

 

 

 

62,038

 

Debt, less current portion

 

 

6,206

 

 

 

6,826

 

Other long-term liabilities

 

 

4,030

 

 

 

4,257

 

Deferred revenue, less current portion

 

 

2,759

 

 

 

3,327

 

Total liabilities

 

 

76,984

 

 

 

76,448

 

Commitments and contingencies (note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value;  20,000,000 shares authorized as of

   April 30, 2016 and January 31, 2016,  no shares issued or outstanding

   as of April 30, 2016 and January 31, 2016

 

 

 

 

 

 

Common stock $0.001 par value; 1,000,000,000 shares authorized as of

   April 30, 2016 and January 31, 2016; 29,837,703 and 29,542,537

   shares issued and outstanding as of April 30, 2016 and

   January 31, 2016, respectively

 

 

30

 

 

 

30

 

Additional paid-in capital

 

 

153,641

 

 

 

151,064

 

Accumulated other comprehensive loss

 

 

(156

)

 

 

(180

)

Accumulated deficit

 

 

(144,795

)

 

 

(140,478

)

Total stockholders’ equity

 

 

8,720

 

 

 

10,436

 

Total liabilities and stockholders’ equity

 

$

85,704

 

 

$

86,884

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

 

4


 

Xactly Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Revenue:

 

 

 

 

 

 

 

 

Subscription services

 

$

17,321

 

 

$

13,477

 

Professional services

 

 

5,933

 

 

 

4,346

 

Total revenue

 

 

23,254

 

 

 

17,823

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription services

 

 

4,135

 

 

 

3,588

 

Professional services

 

 

5,547

 

 

 

3,681

 

Total cost of revenue

 

 

9,682

 

 

 

7,269

 

Gross profit

 

 

13,572

 

 

 

10,554

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

4,349

 

 

 

3,509

 

Sales and marketing

 

 

9,198

 

 

 

7,144

 

General and administrative

 

 

4,118

 

 

 

3,549

 

Total operating expenses

 

 

17,665

 

 

 

14,202

 

Operating loss

 

 

(4,093

)

 

 

(3,648

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(133

)

 

 

(1,296

)

Decrease in fair value of preferred stock warrant liabilities

 

 

 

 

 

55

 

Other income (expense), net

 

 

(12

)

 

 

(3

)

Total other income (expense)

 

 

(145

)

 

 

(1,244

)

Loss before income taxes

 

 

(4,238

)

 

 

(4,892

)

Income tax expense

 

 

79

 

 

 

102

 

Net loss

 

$

(4,317

)

 

$

(4,994

)

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.15

)

 

$

(1.71

)

Weighted-average number of shares used in computing net loss per

   share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

29,677

 

 

 

2,923

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

 

5


 

Xactly Corporation

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Net loss

 

$

(4,317

)

 

$

(4,994

)

Other comprehensive income (loss)—foreign currency translation adjustments

 

 

24

 

 

 

(12

)

Comprehensive loss

 

$

(4,293

)

 

$

(5,006

)

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

 

6


Xactly Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(4,317

)

 

$

(4,994

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

866

 

 

 

599

 

Amortization of debt issuance costs

 

 

5

 

 

 

450

 

Stock-based compensation

 

 

1,636

 

 

 

549

 

(Income) from change in fair value of warrant liabilities

 

 

 

 

 

(55

)

Loss from disposal on fixed assets

 

 

 

 

 

245

 

Facility exit costs

 

 

 

 

 

693

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

368

 

 

 

1,371

 

Prepaid expenses and other current assets

 

 

(900

)

 

 

(1,940

)

Other long-term assets

 

 

 

 

 

3

 

Accounts payable

 

 

(685

)

 

 

(642

)

Accrued expenses

 

 

(601

)

 

 

582

 

Deferred revenue

 

 

2,462

 

 

 

1,750

 

Other long-term liabilities

 

 

(245

)

 

 

220

 

Net cash used in operating activities

 

 

(1,411

)

 

 

(1,169

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(940

)

 

 

(1,974

)

Net cash used in investing activities

 

 

(940

)

 

 

(1,974

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of principal on term debt

 

 

(625

)

 

 

 

Proceeds from exercise of stock options

 

 

91

 

 

 

135

 

Principal payments under capital lease obligations

 

 

(1

)

 

 

 

Payment of deferred initial public offering costs

 

 

 

 

 

(409

)

Proceeds from issuance of common stock for ESPP

 

 

891

 

 

 

 

Net cash provided by (used in) financing activities

 

 

356

 

 

 

(274

)

Effect of exchange rate changes on cash and cash equivalents

 

 

15

 

 

 

(11

)

Net increase (decrease) in cash and cash equivalents

 

 

(1,980

)

 

 

(3,428

)

Cash and cash equivalents at beginning of period

 

 

48,027

 

 

 

19,325

 

Cash and cash equivalents at end of period

 

$

46,047

 

 

$

15,897

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest, net

 

$

131

 

 

$

774

 

Income taxes

 

 

69

 

 

 

40

 

Noncash financing and investing activities:

 

 

 

 

 

 

 

 

Accrued equipment purchases

 

$

453

 

 

$

986

 

Leasehold improvements for deferred rent

 

 

 

 

 

2,275

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

7


Xactly Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 1. Overview and Basis of Presentation

Company and Background

Xactly Corporation (the Company) was incorporated in Delaware in 2005. The Company is a provider of enterprise-class, cloud-based incentive compensation solutions for employee and sales performance management. The Company’s customers leverage these solutions to optimize incentive compensation and drive behavior by automating manual processes, streamlining workflows, providing visibility to users and delivering actionable analyses and insights. The Company’s solutions are delivered through a scalable, secure cloud-based platform that allows for fast innovation benefiting all customers. The Company is headquartered in San Jose, California. The Company’s fiscal year end is January 31 and its fiscal quarters end on April 30, July 31, October 31 and January 31.

Initial Public Offering

On July 1, 2015, the Company completed its initial public offering (IPO) in which it sold 7,909,125 shares of common stock, to the public at $8.00 per share. The total gross proceeds from the offering were approximately $63,273,000. After deducting underwriting discounts and commissions and offering expenses, the aggregate net proceeds received totaled approximately $54,546,000. Upon the closing of the IPO, all shares of the Company’s then-outstanding convertible preferred stock automatically converted into an aggregate of 17,871,971 shares of common stock. In addition, upon the IPO, the Company’s outstanding convertible preferred stock warrants became warrants to purchase common stock and the Company’s outstanding preferred stock warrant liabilities became indexed to the Company's common stock and accordingly have been reclassified to additional paid-in capital. 

On June 11, 2015, a four-to-one reverse stock split of the Company's then-outstanding common stock and convertible preferred stock was effected in connection with the IPO.

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016, which was filed with the SEC on April 20, 2016.

The consolidated balance sheet as of January 31, 2016, included herein was derived from the audited financial statements as of that date. These unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, the Company’s comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending January 31, 2017.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, revenue and sales allowances, allowance for doubtful accounts, determination of the fair value of common and preferred stock and preferred stock warrant liabilities (prior to IPO), stock-based compensation, determination of the fair value of acquired intangible assets, contingent liabilities and accounting for income taxes. These estimates and assumptions are based on management’s best judgment. Management evaluates its estimates and assumptions using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

 

 

 

8


Note 2. Balance Sheet Components

Accounts receivable, net consisted of the following (in thousands):

 

 

 

April 30,

 

 

January 31,

 

 

 

2016

 

 

2016

 

Accounts receivable

 

$

19,036

 

 

$

19,378

 

Unbilled accounts receivable

 

 

914

 

 

 

940

 

Allowance for doubtful accounts

 

 

(40

)

 

 

(40

)

Accounts receivable, net

 

$

19,910

 

 

$

20,278

 

 

Accrued expenses consisted of (in thousands):

 

 

 

April 30,

 

 

January 31,

 

 

 

2016

 

 

2016

 

Accrued compensation and benefits

 

$

3,624

 

 

$

5,148

 

Accrued expenses

 

 

2,611

 

 

 

1,909

 

Deferred rent

 

 

954

 

 

 

948

 

Accrued legal settlement

 

 

500

 

 

 

500

 

Sales tax payable

 

 

325

 

 

 

460

 

Other

 

 

918

 

 

 

547

 

Total accrued expenses

 

$

8,932

 

 

$

9,512

 

 

Other long-term liabilities consisted of:

 

 

 

April 30,

 

 

January 31,

 

 

 

2016

 

 

2016

 

Deferred rent

 

$

3,843

 

 

$

4,088

 

Deferred tax liabilities

 

 

187

 

 

 

169

 

Total other long-term liabilities

 

$

4,030

 

 

$

4,257

 

 

Property and equipment, net consisted of the following (in thousands):

 

 

 

April 30,

 

 

January 31,

 

 

 

2016

 

 

2016

 

Computer software and equipment

 

$

12,974

 

 

$

12,830

 

Furniture and fixtures

 

 

755

 

 

 

752

 

Leasehold improvements

 

 

4,367

 

 

 

4,366

 

Construction in progress

 

 

1,337

 

 

 

348

 

Gross property and equipment

 

 

19,433

 

 

 

18,296

 

Less accumulated depreciation and amortization

 

 

(10,757

)

 

 

(9,886

)

Property and equipment, net

 

$

8,676

 

 

$

8,410

 

 

Depreciation and amortization expense for the three months ended April 30, 2016 and 2015 was $866,000 and $599,000, respectively.

 

 

Note 3. Fair Value Measurements of Assets and Liabilities

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are:

Level 1

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2

Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 

9


Level 3

Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Observable inputs are based on market data obtained from independent sources.

The following summarizes assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy (in thousands):

 

 

 

April 30, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents—money market funds

 

$

42,517

 

 

$

 

 

$

 

 

$

42,517

 

Restricted cash—money market funds

 

 

313

 

 

 

 

 

 

 

 

 

313

 

Restricted cash—bank certificates of deposit

 

 

102

 

 

 

 

 

 

 

 

 

102

 

Total

 

$

42,932

 

 

$

 

 

$

 

 

$

42,933

 

 

 

 

January 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents—money market funds

 

$

46,387

 

 

$

 

 

$

 

 

$

46,387

 

Restricted cash—money market funds

 

 

129

 

 

 

 

 

 

 

 

 

129

 

Restricted cash—bank certificates of deposit

 

 

102

 

 

 

 

 

 

 

 

 

102

 

Total

 

$

46,618

 

 

$

 

 

$

 

 

$

46,618

 

 

In connection with the Company's IPO, all outstanding convertible preferred stock converted to common stock. As a result, as of June 26, 2015, liabilities associated with the convertible preferred stock warrants were remeasured at fair value on the IPO date and have been reclassified to additional paid-in capital because all of these warrants to purchase convertible preferred stock have become warrants to purchase common stock and will no longer be remeasured at fair value each reporting period.

 

                                  

Note 4. Debt

The Company has an Amended and Restated Loan and Security Agreement (Amended SVB Agreement) with Silicon Valley Bank (SVB), effective October 30, 2015. The Amended SVB Agreement amended the Company’s existing revolving line of credit (LOC) with SVB and provided the Company with a with a term loan (SVB Term Loan) to repay the Company’s existing Mezzanine Loan and Security Agreement, dated as of October 24, 2014, by and among the Company and SVB (Mezzanine Loan).

The LOC had provided the Company with a revolving line of credit for $11,000,000 and allowed for an increase up to $13,000,000 if the Company met certain milestones. The Amended SVB Agreement increased the LOC from $11,000,000 to $15,000,000, and extended the maturity date from August 2016 to October 2018. The LOC carries a variable interest rate equal to Prime plus 1.25% or LIBOR plus 2.5%. As of April 30, 2016 and January 31, 2016, $6,500,000 had been borrowed under the LOC, leaving $8,500,000 available for borrowing. As of April 30, 2016 and January 31, 2016, the interest rate on the LOC was 2.94% and 2.93%, respectively. The SVB Term Loan provides for a $10,000,000 term loan with a maturity date of September 2019. The SVB Term Loan carries a variable interest rate of Prime plus 1.25% or LIBOR plus 2.5% and requires quarterly principal payments and monthly interest payments through the maturity date in September 2019. The terms of the SVB Term Loan were substantially different than the Mezzanine Loan and therefore the amendment was accounted for as an extinguishment of the Mezzanine Loan. As such, the SVB Term Loan was recorded at fair value and the existing unamortized debt issuance costs were included in the calculation of any gain or loss on extinguishment. Therefore, the Company recorded a loss on extinguishment of debt of $1,524,000 in its condensed consolidated statements of operations in the third quarter of the fiscal year ended January 31, 2016. As of April 30, 2016 and January 31, 2016, $8,750,000 and $9,375,000, respectively, was outstanding under the SVB Term Loan. As of April 30, 2016 and January 31, 2016, the interest rate on the SVB Term Loan was 2.94% and 2.93%, respectively.    

The Company also had an Amended and Restated Loan and Security Agreement (Wellington Agreement) with Wellington Financial LP (Wellington). In August 2015, all amounts outstanding under the Wellington Agreement were fully repaid in accordance with its terms. The remaining unamortized debt issuance costs of $2,564,000 were recorded as interest expense in the third quarter of the fiscal year ended January 31, 2016.

All of the Company’s agreements with SVB and the Wellington Agreement include, or included, various financial and non-financial covenants with which the Company was in compliance as of April 30, 2016 and January 31, 2016.

 

10


 

 

Note 5. Commitments and Contingencies

Minimum Service Commitments and Leases

The Company has certain contractual service contracts that contain non-cancellable minimum service commitments that expire on various dates through fiscal 2018 and leases office space and equipment under non-cancellable operating and capital leases that expire on various dates through fiscal 2022. These commitments as of January 31, 2016 are disclosed in the Company’s Annual Report on Form 10-K, and did not change materially during the three months ended April 30, 2016. Leases for certain office facilities include scheduled periods of abatement and escalation of rental payments. The Company recognizes minimum rental expenses and lease incentives for operating leases on a straight-line basis over the term of the leases.    

Indemnifications

In the normal course of business, the Company provides indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of the Company’s services and the Company may be subject to claims by customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and the Company is unable to estimate the maximum potential impact of these indemnification provisions on future results of operations.

To the extent permitted under Delaware law, the Company has agreements to indemnify directors and officers for certain events or occurrences while the director or officer is or was serving at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that limits the Company’s exposure and enables the Company to recover a portion of any future amounts paid. The Company believes that the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

Other Taxes

The Company conducts operations in many tax jurisdictions throughout the United States. In many of these jurisdictions, non-income based taxes, such as property taxes, sales and use taxes, and value-added taxes are assessed on the Company’s operations in that particular location. While the Company strives to ensure compliance with these various non-income based tax filing requirements, there have been instances where potential non-compliance exposures have been identified. In accordance with U.S. GAAP, the Company makes a provision for these exposures when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated.

 

 

Note 6. Stockholders’ Equity

Capital Structure

In June 2015, the Company’s board of directors and stockholders adopted an amendment to the Company’s certificate of incorporation to effect a reverse stock split of the Company’s outstanding common stock and convertible preferred stock at a ratio of four-to-one. Accordingly, on June 11, 2015, (i) each four shares of outstanding common stock and convertible preferred stock (collectively referred to as “Capital Stock”) were exchanged and combined into one share of Capital Stock of the same class and series, as applicable; (ii) the number of shares of Capital Stock into which each outstanding warrant or option to purchase Capital Stock is exercisable was proportionately reduced on a four-to-one basis; and (iii) the exercise price of each outstanding warrant or option to purchase Capital Stock was proportionately increased on a four-to-one basis.

Upon the closing of the IPO on July 1, 2015, all then-outstanding convertible preferred stock converted into 17,871,971 shares of common stock.

In connection with the Company’s IPO, the Company amended and restated its certificate of incorporation (Amended and Restated Certificate of Incorporation), pursuant to which the Company is authorized to issue 1,000,000,000 shares of common stock and 20,000,000 shares of preferred stock, both with a par value of $0.001 per share. The Amended and Restated Certificate of Incorporation was filed with the Delaware Secretary of State, and became effective on July 1, 2015.

As of April 30, 2016, there were 29,837,703 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

 

11


Series E Preferred Stock Options

In connection with the Company’s acquisition of Centive, Inc. (Centive) in January 2009, the Company reserved for issuance 399,960 shares of Series E convertible preferred stock related to Series E convertible preferred stock options with an exercise price of $0.9580 per share, granted to former members of Centive management as designated by the former Centive shareholders. The shares may be issued to the former members of Centive management upon exercise of the options only upon the completion of a sale event of the Company or if the shares become freely tradable in a public securities market. In either case, the proceeds from the exercise of the options, once received by the Company or, in the case of a cashless exercise, any shares tendered back to the Company to satisfy the exercise price, will be distributed to the former Centive shareholders. If the shares underlying the options are not issued to the former members of Centive management, either because they are never exercised or they terminate by their expiration date of January 22, 2019, then the shares will be distributed to the former Centive shareholders.

Upon the IPO, the Company’s outstanding convertible preferred stock options became options to purchase common stock. In December 2015 and January 2016, the former members of Centive management each exercised their options on a cashless exercise basis.  As a result, 188,744 shares of common stock were issued and 211,216 shares were tendered back to the Company to satisfy the exercise price and required tax withholdings.

Warrants

Prior to the IPO, the Company had determined that the warrants to purchase Series C, D and D-1 convertible preferred stock should be liability classified and the warrants to purchase Series F convertible preferred stock should be equity classified. Upon the IPO, the Company’s outstanding convertible preferred stock warrants became warrants to purchase common stock and the Company’s outstanding preferred stock warrant liabilities became indexed to the Company’s common stock and accordingly have been reclassified to additional paid-in capital. 

 

 

 

Note 7. Stock-based Awards and Stock-based Compensation

2005 Stock Option Plan

In 2005, the Company adopted a stock plan (2005 Plan), which was amended in September 2011 and again in March 2015. The 2005 Plan was terminated in connection with the IPO, and accordingly, no shares are available for future issuance under this plan. All shares that were available for the Company to grant under the 2005 Plan immediately prior to its termination were canceled. Awards under the 2005 Plan that expire or terminate without having been exercised subsequent to the IPO or are forfeited to or repurchased by the Company subsequent to the IPO will become available for issuance under the 2015 Equity Incentive Plan (2015 Plan), subject to the limits set forth in the 2015 Plan.

2015 Equity Incentive Plan

In June 2015, the Board adopted and the Company’s stockholders approved the 2015 Plan, which became effective upon the effectiveness of the IPO Prospectus. The 2015 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to the Company’s employees, directors and consultants and the Company’s subsidiary corporations’ employees and consultants.

As of April 30, 2016, an aggregate of 2,835,101 common shares were reserved and available for issuance under the 2015 Plan.

 

12


2015 Employee Stock Purchase Plan

In June 2015, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2015 Employee Stock Purchase Plan (ESPP) with the first offering period under the ESPP beginning on the effectiveness of the IPO Prospectus. As of such date, an aggregate of 600,000 shares of common stock were reserved and are available for issuance under the ESPP. During the three months ended April 30, 2016, the Company increased the shares reserved available for issuance under the ESPP by 590,851.  The Company issued 168,125 shares under the ESPP during the three months ended April 30, 2016.  As of April 30, 2016, there were 1,022,726 shares reserved and were available for issuance under the ESPP. The ESPP allows eligible employees to purchase shares of common stock at a discount through payroll deductions of up to 15% of their eligible compensation, at 85% of the fair market value, as defined in the ESPP, on the first day of the offering period or the last day of the purchase period, whichever is lower, and subject to any plan limitations. The ESPP provides for consecutive six-month purchase periods, starting on the first trading day on or after March 20 and September 20 of each year. The first purchase period began on the first trading day after the effective date of the registration statement and ended on March 20, 2016.

As of April 30, 2016, the Company had $929,669 in unrecognized stock-based compensation expense, net of estimated forfeitures, related to purchase rights that will be recognized over the weighted average period of approximately 1.2 years.

Stock option activity

Stock option activity is as follows:

 

 

 

Number

of shares

 

 

Weighted

average

exercise

price

 

 

Weighted

average

remaining

contractual

term

 

Aggregate

intrinsic value

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at January 31, 2016

 

 

4,844,592

 

 

$

4.49

 

 

6.6 years

 

$

14,268

 

Granted

 

 

57,500

 

 

 

7.36

 

 

 

 

 

 

 

Exercised

 

 

(91,524

)

 

 

1.01

 

 

 

 

 

 

 

Forfeited

 

 

(92,912

)

 

 

8.09

 

 

 

 

 

 

 

Expired

 

 

(5,369

)

 

 

7.57

 

 

 

 

 

 

 

Balance at April 30, 2016

 

 

4,712,287

 

 

$

4.52

 

 

6.5 years

 

$

17,411

 

Vested and expected to vest as of April 30, 2016

 

 

4,594,440

 

 

$

4.43

 

 

6.4 years

 

$

17,351

 

Exercisable as of April 30, 2016

 

 

2,931,827

 

 

$

2.66

 

 

5.1 years

 

$

15,902

 

 

The intrinsic value for options exercised represents the difference between the fair market value based on the valuation of the common stock as determined by the Company’s Board of Directors prior to the IPO, or the closing market price of the Company’s common stock, following the IPO, on the date of exercise and the exercise price of the in-the-money stock options.

Valuation and expense of stock-based compensation

The fair value of stock options and ESPP awards is estimated at the grant date for options and issuance date for ESPP using the Black-Scholes option valuation model. The determination of fair value of stock options on the date of grant and ESPP awards on the date of issuance using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards based on average historical volatility of comparable entities with publicly traded shares and actual employee stock option exercise behavior.

 

13


Stock-based compensation included in the Company’s condensed consolidated statements of operations is as follows (in thousands):

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Cost of subscription services

 

$

133

 

 

$

72

 

Cost of professional services

 

 

191

 

 

 

41

 

Research and development

 

 

410

 

 

 

94

 

Sales and marketing

 

 

371

 

 

 

112

 

General and administrative

 

 

531

 

 

 

230

 

Total

 

$

1,636

 

 

$

549

 

 

As of April 30, 2016, there was $6,460,947 of unamortized stock-based compensation expense related to unvested stock options which will be recognized over a weighted average period of approximately 2.8 years.

Restricted stock units

A summary of RSU activity during the three months ended April 30, 2016 was as follows:

 

 

 

Number

of shares

 

 

Weighted

average

grant-date

fair value

 

Balance at January 31, 2016

 

 

860,472

 

 

$

8.48

 

Granted

 

 

215,586

 

 

 

6.84

 

Released

 

 

(22,159

)

 

 

6.68

 

Forfeited

 

 

(32,351

)

 

 

8.35

 

Balance at April 30, 2016

 

 

1,021,548

 

 

$

8.17

 

 

As of April 30, 2016, there was a total of $7,066,705 in unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of approximately 3.1 years.

 

 

Note 8. Income Taxes

For the three months ended April 30, 2016 and 2015, the provision for income taxes differed from the statutory amount primarily due to state and foreign taxes currently payable, and the Company realized no benefit for current year losses due to maintaining a full valuation allowance against its domestic and foreign net deferred tax assets.

 

 

Note 9. Basic and Diluted Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share of common stock under the two-class method attributable to common stockholders (in thousands, except per share data):

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(4,317

)

 

$

(4,994

)

Denominator:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

29,677

 

 

 

2,923

 

Basic and diluted net loss per share

 

$

(0.15

)

 

$

(1.71

)

 

 

 

14


The following is a table summarizing the potentially dilutive common shares that were excluded from diluted weighted-average common shares outstanding because they were anti-dilutive (in thousands):

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Shares of common stock issuable upon conversion of preferred stock

 

 

 

 

 

17,872

 

Shares of common stock issuable upon exercise of warrants

 

 

472

 

 

 

739

 

Shares of common stock issuable under stock option plans outstanding

 

 

5,747

 

 

 

4,697

 

Potential common shares excluded from diluted net loss per share

 

 

6,219

 

 

 

23,308

 

 

 

Note 10. Segment Information and Information About Geographic Concentrations

The Company has determined that the chief executive officer is the chief operating decision maker. The Company’s chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reporting segment.

Revenue by location is determined by the billing address of the customer. Approximately 90% and 93% of the Company’s revenue was from the United States for the three months ended April 30, 2016 and 2015, respectively. Revenue from no other individual country exceeded 10% of total revenue for the three months ended April 30, 2016 or 2015. Property and equipment by geographic location is based on the location of the legal entity that owns the asset. As of April 30, 2016 and January 31, 2016, more than 95% of the Company’s property and equipment was located in the United States.

 

    

 

 

15


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward-Looking Statements” above.

Overview

We are a leading provider of enterprise-class, cloud-based incentive compensation solutions for employee and sales performance management. We address a critical business need: to incentivize employees and align their behaviors with company goals. Our solutions allow organizations to make better strategic decisions, optimize behaviors, increase sales and employee performance, improve margins, increase operational efficiencies, mitigate risk, design better incentive compensation plans and reduce error rates in incentive compensation calculations. We were the first 100% cloud-based, multi-tenant provider focusing solely on the incentive compensation and employee and sales performance management market and we achieved our leadership position through domain expertise and innovative technology. We deliver our solutions through a Software-as-a-Service (SaaS) business model.

We were founded in March 2005 and initially we focused on providing incentive compensation solutions for sales personnel. As we have grown, we have expanded our solutions to serve all types of employees across a variety of industries and companies, ranging from FORTUNE 50 enterprises to small, emerging companies. Our initial commercially available solution was Xactly Incent Enterprise, our flagship solution, which helps large enterprise and mid-market companies manage the critical elements of incentive compensation. In 2010, we introduced Xactly Incent Express, our incentive compensation solution that provides streamlined functionality targeted to companies with fewer than 350 employees. In 2013, we introduced Xactly Objectives, a solution for both sales and non-sales personnel, allowing managers and employees to collaboratively track and achieve individual and shared goals. In August 2014, we introduced Xactly Insights, a solution which helps our customers make fact-based decisions to motivate employees and drive business performance using our empirical set of aggregated and anonymized data. In addition, over the years, we have also introduced modules that augment Xactly Incent Enterprise, such as analytics, modeling, automated workflows, quotas and approvals and credit assignment. In December 2015, we announced Xactly Inspire, a solution for onboarding and coaching for sales personnel and managers. We expect Xactly Inspire to be available in the first half of calendar 2016. In March 2016, we announced Xactly Connect, an API solution for customers to leverage their own internal IT resources for managing data sources for incentive compensation. We expect Xactly Connect to be available in the first half of calendar 2016.

Our customer base has been predominantly located in the U.S., and we plan to grow our customer base internationally. However, a number of our customers are U.S. companies with employees abroad. We estimate that approximately 31% of our subscribers are located outside of the U.S., based on a representative sample of our user logins during the last two months of the fiscal year ended January 31, 2016. For the three months ended April 30, 2016, approximately 90% of our revenue was from U.S. customers. We market our solutions and services through our direct sales force and sales support staff, and we also rely on partners to refer opportunities to our sales force.

Because we offer our solutions on a subscription basis, we have visibility into a substantial portion of our near-term subscription revenue. Subscriptions are typically sold through non-cancellable contracts with one to three year terms. Subscription fees are primarily based on the number of subscribers per customer per month. We generally invoice customers annually in advance. The prices we charge a customer per subscriber are driven, in part, by subscriber attributes and the number of subscribers for which that customer has contracted, with generally lower prices per subscriber for larger contracts consistent with industry practice. Customer attributes that impact pricing include, in no particular order, frequency of payment by the customer to its employees, complexity of the compensation plans, value of the employee’s compensation, value of the product or service that the employee is selling and the number of payees. Changes in competitive or market conditions may also cause us to reduce the prices we charge for our solutions or revise the pricing model upon which they are based. The average pricing per subscriber of our subscription services for the three months ended April 30, 2016 remained relatively consistent when compared to the three months ended April 30, 2015.  We recognize subscription services revenue ratably over the term of the contract, and amounts billed in excess of revenue recognized for the period are reported as deferred revenue on our consolidated balance sheet. Our deferred revenue does not include the unbilled portion of subscription agreements.

We also derive revenue from professional services. Professional services include revenue from assisting customers in implementing our solutions and optimizing their uses, such as application configuration, system integration, data transformation and automation

 

16


services, education and training services and strategic services. This revenue is largely driven by the number and mix of implementations performed by us in a quarter. Professional services are billed predominantly on a time-and-materials basis, with some fixed-fee arrangements. Professional services yield lower margins than subscriptions due to the labor-intensive nature of such services. We also have partners who implement our solutions for which we do not receive professional services revenue.

As of April 30, 2016, we had approximately 268,000 subscribers, compared to approximately 203,000 subscribers at April 30, 2015, an increase of approximately 32%. No single customer accounted for more than 5% of our revenue for the three months ended April 30, 2016 or 2015. Within our customer base, deployments range from implementations within a single division or geography to enterprise-wide or global deployments. Our growth to date has been a function of growth in new customers, new subscribers at current customers and sales of additional modules to current customers. While approximately 55% of our customers were enterprise and mid-market companies as of April 30, 2016, we derived approximately 92% of our revenue from enterprise and mid-market customers for the three months ended April 30, 2016. We define our enterprise customers as those customers with a minimum of 4,000 employees and our mid-market customers as those customers with at least 350 and less than 4,000 employees. We have sold our solutions to customers in a number of industry verticals, including business & financial services, communications, high-tech manufacturing, life sciences, travel & hospitality, media & internet and SaaS & traditional software.

We had total revenue of $23.3 million and $17.8 million for the three months ended April 30, 2016 and 2015, respectively, resulting in an increase of 30%. Our subscription revenue for the three months ended April 30, 2016 and 2015 was $17.3 million and $13.5 million, respectively, resulting in an increase of 29%. We have made and expect to continue to make significant investments to support our growth, and accordingly have incurred net losses of $4.3 million and $5.0 million for the three months ended April 30, 2016 and 2015, respectively. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.

Our growth strategy includes acquiring new customers, selling more subscriptions and modules to existing customers, enhancing our existing solutions, introducing new solutions and modules, expanding internationally, developing our partner ecosystem and pursuing selective acquisitions. Our continued growth is dependent on selling more solutions and on a stable or robust economy. A general economic downturn that leads to less hiring or to a reduction in hiring or spending by our customers or potential customers would negatively impact our growth and would adversely affect our operating results. Given our limited experience in operating our business internationally, there is a risk that efforts that we may undertake to expand abroad will not be successful, which would adversely affect our operating results.

Key business metrics

We use the following key business metrics in addition to our U.S. GAAP financial results to evaluate growth trends, measure our performance and make strategic decisions.

Subscribers

The number of subscribers at each of our customers ranges from tens to thousands. As of April 30, 2016, we had approximately 268,000 subscribers. This represents an increase of approximately 32% over the approximately 203,000 subscribers we had as of April 30, 2015. A subscriber is a unique user account purchased by a customer for use by an employee or other customer-authorized user.

 

 

 

As of April 30,

 

 

As of April 30,

 

 

 

2016

 

 

2015

 

Subscribers*

 

 

268,000

 

 

 

203,000

 

 

*

Rounded to the nearest thousand.

Revenue Retention Rate

On an annual fiscal year basis, we also use the revenue retention rate as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2016, filed with the SEC on April 20, 2016.

 

17


Components of Results of Operations

Revenue

Subscription services

Subscription services include revenue from our incentive compensation solutions. We generate revenue from subscription services and related support of our solutions, generally pursuant to non-cancellable contracts that range in duration from one to three years. We typically invoice customers in advance in annual installments for our subscription services. We recognize subscription services revenue ratably over the term of the subscription. Amounts billed in excess of revenue recognized for the period are reported as deferred revenue on our consolidated balance sheet.

Professional services

Professional services include revenue from assisting customers in implementing and optimizing use of our incentive compensation solutions. These services include application configuration, system integration, data transformation and automation services, education and training services and strategic services.

Our professional services are billed predominantly on a time-and-materials basis, with some services billed on a fixed-fee basis. We generally invoice customers monthly as the work is performed for time-and-materials arrangements or on a milestone basis for fixed-fee arrangements. We recognize professional services revenue as the services are performed using the proportional-performance method, with performance based on hours of work performed or upon project completion for certain fixed-fee contracts.

Cost of revenue

Subscription services

Our cost of subscription services consists primarily of data center capacity costs, personnel costs for our data center and customer support departments, software and maintenance costs, third-party royalties and other outside services associated with delivery of our subscription services. In addition, our cost of subscription services includes allocated depreciation and amortization, facilities, insurance and rent expenses.

Professional services

Cost of professional services consists primarily of personnel costs for our professional services delivery team as well as other outside services associated with supplementing our internal staff. In addition, our cost of professional services includes allocated depreciation, facilities, insurance and rent expenses.

Operating expenses

We classify our operating expenses as research and development, sales and marketing and general and administrative expenses.

Research and development expenses consist primarily of personnel costs and outside services. In addition, research and development expenses include allocated depreciation, facilities, insurance and rent expenses. We believe that continued investment in our solutions is important for our growth. We expect our research and development expenses to continue to increase in dollar amount for the foreseeable future.

Sales and marketing expenses consist primarily of personnel costs, sales commissions, lead generation, promotions, customer-focused events and travel-related expenses. In addition, sales and marketing expenses include allocated depreciation, facilities, insurance and rent expenses. We expect our sales and marketing expenses to continue to increase in dollar amount for the foreseeable future as we expand our sales and marketing efforts domestically and internationally.

General and administrative expenses consist primarily of personnel costs for finance, accounting, legal, human resources and management information systems personnel. In addition, general and administrative expenses include outside legal costs, professional fees and all other supporting corporate expenses not allocated to other departments. We expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services. We expect our general and administrative expenses to continue to increase in dollar amount for the foreseeable future, and these expenses also may increase as a percentage of our total revenue, at least in the near term.

 

18


Results of operations

The following tables show our results of operations in dollars and as a percentage of our total revenue. The historical results presented below are not necessarily indicative of the results that may be expected for any future period:

 

 

 

Three months ended

April 30,

 

(in thousands)

 

2016

 

 

2015

 

Revenue:

 

 

 

 

 

 

 

 

Subscription services

 

$

17,321

 

 

$

13,477

 

Professional services

 

 

5,933

 

 

 

4,346

 

Total revenue

 

 

23,254

 

 

 

17,823

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription services

 

 

4,135

 

 

 

3,588

 

Professional services

 

 

5,547

 

 

 

3,681

 

Total cost of revenue

 

 

9,682

 

 

 

7,269

 

Gross profit

 

 

13,572

 

 

 

10,554

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

4,349

 

 

 

3,509

 

Sales and marketing

 

 

9,198

 

 

 

7,144

 

General and administrative

 

 

4,118

 

 

 

3,549

 

Total operating expenses

 

 

17,665

 

 

 

14,202

 

Operating loss

 

 

(4,093

)

 

 

(3,648

)

Total other income (expense)

 

 

(145

)

 

 

(1,244

)

Loss before income taxes

 

 

(4,238

)

 

 

(4,892

)

Income tax expense

 

 

79

 

 

 

102

 

Net loss

 

$

(4,317

)

 

$

(4,994

)

 

Percentage of total revenue 

 

 

 

Three months ended

April 30,

 

 

 

2016

 

 

2015

 

Revenue:

 

 

 

 

 

 

 

 

Subscription services

 

 

74

%

 

 

76

%

Professional services

 

 

26

 

 

 

24

 

Total revenue

 

 

100

 

 

 

100

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription services

 

 

18

 

 

 

20

 

Professional services

 

 

24

 

 

 

21

 

Total cost of revenue

 

 

42

 

 

 

41

 

Gross profit

 

 

58

 

 

 

59

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

19

 

 

 

20

 

Sales and marketing

 

 

40

 

 

 

40

 

General and administrative

 

 

18

 

 

 

20

 

Total operating expenses

 

 

76

 

 

 

80

 

Operating loss

 

 

(18

)

 

 

(20

)

Total other income (expense)

 

 

(1

)

 

 

(7

)

Loss before income taxes

 

 

(18

)

 

 

(27

)

Income tax expense

 

 

 

 

 

(1

)

Net loss

 

 

(19

)%

 

 

(28

)%

 

*

Certain figures may not sum due to rounding.

 

19


Comparison of the three months ended April 30, 2016 and 2015

Revenue

 

 

 

Three months ended

April 30,

 

(dollars in thousands)

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

Subscription services

 

$

17,321

 

 

$

13,477

 

 

$

3,844

 

 

 

29