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TMCNet:  E2open Announces Third Quarter of Fiscal Year 2014 results

[January 09, 2014]

E2open Announces Third Quarter of Fiscal Year 2014 results

FOSTER CITY, Calif. --(Business Wire)--

E2open, Inc. (NASDAQ: EOPN), a leading provider of strategic, cloud-based software solutions for collaborative planning and execution across global trading networks, today announced financial results for the quarter ended November 30, 2013.

Mark Woodward, E2open's President and CEO, said, "The strong growth in our non-GAAP subscriptions and support revenue continued in the third quarter. In addition, we have made further progress with both our partner enablement efforts and the integration of ICON-SCM (ICON). Our market leading collaborative planning and execution products are driving significant value for our customers across a variety of industries."

Third Quarter Financial Highlights:

  • GAAP Revenue: Total GAAP revenue was $18.3 million for the third quarter of fiscal 2014; subscriptions and support revenue was $14.4 million and professional services revenue was $3.9 million.
  • Non-GAAP Revenue: Non-GAAP revenue for the third quarter of fiscal 2014 included $0.5 million from the impact of a previous contract amendment that accelerated revenue from future periods to the second quarter of fiscal 2013, and $0.2 million from the impact of a purchase accounting adjustment to deferred revenue in connection with the ICON acquisition in the second quarter of fiscal 2014. Total non-GAAP revenue was $18.9 million, a decrease of 3% compared to $19.5 million for the third quarter of fiscal 2013 and an increase of 2% compared to $18.6 million for the second quarter of fiscal 2014. Subscriptions and support revenue was $14.7 million, an increase of 30% compared to $11.3 million for the third quarter of fiscal 2013 and an increase of 8% compared to $13.6 million for the second quarter of fiscal 2014. Professional services revenue was $4.3 million, a decrease of 48% compared to $8.2 million for the third quarter of fiscal 2013 and a decrease of 14% compared to $5.0 million for the second quarter of fiscal 2014.
  • GAAP Income (Loss) from Operations: GAAP income (loss) from operations was ($7.1) million compared to $0.0 million for the third quarter of fiscal 2013 and ($5.9) million for the second quarter of fiscal 2014.
  • Non-GAAP Income (Loss) from Operations: Non-GAAP income (loss) from operations was ($3.9) million compared to $1.1 million for the third quarter of fiscal 2013 and ($2.8) million for the second quarter of fiscal 2014.
  • GAAP Net Loss: GAAP net loss was ($7.4) million compared to ($0.1) million for the third quarter of fiscal 2013 and ($5.9) million for the second quarter of fiscal 2014. GAAP net loss per share was ($0.28), based on 26.5�million weighted-average shares outstanding, compared to ($0.00) per share, based on 25.0�million weighted-average shares outstanding for the third quarter of fiscal 2013, and ($0.23) per share based on 26.0�million weighted-average shares outstanding, for the second quarter of fiscal 2014.
  • Non-GAAP Net Income (Loss): Non-GAAP net income (loss) was ($4.4) million compared to $1.0 million for the third quarter of fiscal 2013 and ($2.8) million for the second quarter of fiscal 2014. Non-GAAP net loss per share was ($0.16), based on 28.1�million weighted-average shares outstanding, compared to $0.04, based on 26.9�million weighted-average shares outstanding, for the third quarter of fiscal 2013 and ($0.10), based on 27.5�million weighted-average shares outstanding, for the second quarter of fiscal 2014.
  • Adjusted EBITDA: Adjusted EBITDA was ($3.3) million compared to $1.5 million for the third quarter of fiscal 2013 and ($2.3) million for the second quarter of fiscal 2014.
  • Cash Flow: Cash flow from operations was ($8.0) million and free cash flow was ($7.6) million after deducting $0.1 million of capital expenditures and adding back acquisition-related expenses of $0.5 million. This compares to cash flow from operations of $1.3 million and free cash flow of $1.2 million after deducting $0.1 million of capital expenditures for the third quarter of fiscal 2013.
  • Balance sheet: Cash and investments was $12.8 million, a decrease of $8.8 million compared to $21.6 million at the end of the second quarter of fiscal 2014.

Third Quarter & Recent Business Highlights:

  • Signed a Collaboration and License Agreement with PricewaterhouseCoopers LLP (PWC), the world's largest professional services firm. The agreement includes supply chain services delivery and joint marketing efforts in the United States.
  • Achieved Drummond AS2 Certification in a Fall 2013 interoperability test event.
  • Won, in conjunction with Vodafone, a 2013 European Supply Chain Excellence Award in the Supply Chain Operations category.
  • Announced that the company is the first, dedicated, cloud-based supply chain Software-as-a-Service (SaaS) vendor to achieve the International Organization for Standardization/International Electrotechnical Commission (ISO/IEC) 27001:2005 Security Certification (ISO 27001).
  • Added four new customers during the quarter and expanded our relationship with several other customers.
  • Ended the quarter with 104 customers, 37,931 unique registered trading partners, and 122,739 unique registered users on the E2open network.

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

Guidance:

As of January 9, 2014, E2open is providing guidance for its fourth quarter of fiscal 2014 as well as the full fiscal year 2014.

  • Fourth Quarter Fiscal 2014 Guidance: Total GAAP revenue is expected to be in the range of $19.0 million to $19.8 million. Non-GAAP revenue is expected to be in the range of $19.6 million to $20.4 million, which includes a $0.6 million impact to revenue, due to the aforementioned acceleration of revenue in the second quarter of fiscal 2013 in connection with a contract amendment and the impact of a purchase accounting adjustment to deferred revenue acquired in the second quarter of fiscal 2014. Within total non-GAAP revenue, we expect subscriptions and support revenue of $16.1 million to $16.4 million and professional services revenue of $3.5 million to $4.0 million. Non-GAAP loss from operations is expected to be in the range of ($4.0) million to ($3.5) million. Non-GAAP loss per share is expected to be in the range of ($0.15) to ($0.13) based on approximately 28.3 million weighted-average shares outstanding. Adjusted EBITDA is expected to be in the range of ($3.5) million to ($3.0) million.
  • Full Year Fiscal 2014 Guidance: Total GAAP revenue is expected to be in the range of $70.9 million to $71.7 million, including a $2.4 million impact to revenue, due to the aforementioned acceleration of revenue in the second quarter of fiscal 2013 in connection with a contract amendment and the impact of a purchase accounting adjustment to deferred revenue acquired in the second quarter of fiscal 2014. Excluding the aforementioned contract amendment and the purchase accounting adjustment to deferred revenue, total non-GAAP revenue is expected to be in the range of $73.2 million to $74.0 million. Within total non-GAAP revenue, we expect subscriptions and support revenue of $56.7 million to $57.0 million and professional services revenue of $16.5 million to $17.0 million. Non-GAAP loss from operations is expected to be in the range of ($14.7) million to ($14.2) million. Non-GAAP loss per share is expected to be in the range of ($0.55) to ($0.53) based on approximately 27.8 million weighted-average shares outstanding. Adjusted EBITDA is expected to be in the range of ($12.7) million to ($12.2) million. Free cash flow is expected to be in the range of ($12.6) million to ($11.6) million. New and upsell bookings are expected to be roughly $91.5 million, representing growth of approximately 30% compared to fiscal 2013.

With respect to the Company's expectations under "Guidance" above, the Company has not reconciled non-GAAP income (loss) from operations or non-GAAP income (loss) per share to GAAP income (loss) from operations and GAAP income (loss) per share because these items cannot be reasonably predicted.

Conference Call Details:

  • What: E2open financial results for the third quarter of fiscal 2014 and outlook for the fourth quarter of fiscal 2014 and the full year of fiscal 2014
  • When: Thursday, January 9, 2014 at 2PM PT (5PM ET)
  • Dial in: To access the call in the U.S., please dial (877) 407-3982, and for international callers, please dial (201) 493-6780. Callers may provide confirmation number 13573142 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
  • Webcast: http://investor.e2open.com/ (live and replay)
  • Replay: A replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the telephone replay in the U.S., please dial (877) 870-5176, and for international callers, please dial (858) 384-5517 and enter access code 13573142.

About E2open

E2open is a leading provider of cloud-based, on-demand software solutions enabling enterprises to procure, manufacture, sell, and distribute products more efficiently through collaborative planning and execution across global trading networks. Enterprises use E2open solutions to gain visibility into and control over their trading networks through the real-time information, integrated business processes, and advanced analytics that E2open provides. E2open customers include Celestica, Cisco, HGST, HP, IBM, Lenovo, L'Or�al, LSI, Motorola Solutions, Seagate, and Vodafone. E2open is headquartered in Foster City, California with operations worldwide.

"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements about expected GAAP revenue, non-GAAP revenue, non-GAAP income (loss) from operations, non-GAAP income (loss) per share, and adjusted EBITDA for the fourth quarter of fiscal 2014 and the full fiscal year, and free cash flow and new and upsell bookings for the full fiscal year. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company's results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include, but are not limited to, risks associated with the Company's growth strategy; the Company's plans for future products; the Company's operating results; the Company's ability to anticipate future market demands and future needs of its customers; the Company's customer concentration; the Company's ability to effectively manage its growth; the Company's expectations regarding expenses, sales and operations; anticipated trends and challenges in the markets in which the Company operates; the Company's competition; the Company's ability to successfully enter new markets and manage its international expansion; the Company's ability to integrate the ICON acquisition; and the Company's intellectual property.

Further information on these and other factors that could affect the Company's financial results is included in the filings made with the Securities and Exchange Commission, including the Company's annual report on Form 10-K and the Company's quarterly report on Form 10-Q. These documents are available on the SEC Filings section of the Investor Relations section of the Company's website at: investor.e2open.com.

E2open, Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Non-GAAP Financial Measures

Our reported results include certain non-GAAP financial measures, including non-GAAP revenue, non-GAAP income (loss) from operations, non-GAAP net income (loss), weighted-average shares outstanding, non-GAAP net income (loss) per share, adjusted EBITDA, and free cash flow. Non-GAAP income (loss) from operations and non-GAAP net income (loss) exclude expenses related to stock-based compensation expense, amortization of acquired intangibles, acquisition-related expenses, and noncash income taxes, as they are often excluded by other companies to help investors understand the operational performance of their business and, in the case of stock-based compensation, can be difficult to predict. In addition, stock-based compensation expense varies from period to period and company to company due to such things as differing valuation methodologies and changes in stock price. Non-GAAP revenue, non-GAAP income (loss) from operations and non-GAAP net income (loss) also exclude the impact of certain accelerated revenue recognized in connection with a contract amendment in the second quarter of fiscal 2013 and the impact of a purchase accounting adjustment to deferred revenue acquired in the second quarter of fiscal 2014. Adjusted EBITDA is defined as net income (loss), adjusted for accelerated revenue from a contract amendment, the impact of a purchase accounting adjustment to deferred revenue, depreciation and amortization, stock-based compensation expense, interest and other expense, net, benefit from (provision for) income taxes, amortization of acquired intangibles, and acquisition-related expenses. Free cash flow is defined as net cash provided by (used in) operating activities less capital expenditures, which consist of purchases of property, equipment and software, and excluding acquisition-related expenses. Reconciliation tables are provided in this press release. Management believes that the use of non-GAAP financial measures provides consistency and comparability with our past financial performance, facilitates period to period comparisons of results of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.



E2open, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended

November 30,

2013

August 31,

2013

November 30,

2012

November 30,

2013

November 30,

2012

Revenue
Subscriptions and support $ 14,400 $ 13,433 $ 11,215 $ 40,125 $ 32,160
Professional services and other 3,860 4,579 7,748 11,746 25,167
Total revenue 18,260 18,012 18,963 51,871 57,327
Cost of revenue
Subscriptions and support (1) 2,769 2,645 2,175 7,942 6,212
Professional services and other (1) 4,309 4,486 3,691 12,852 11,008
Amortization of acquired intangibles 408 58 - 466 -
Total cost of revenue 7,486 7,189 5,866 21,260 17,220
Gross profit
Subscriptions and support 11,631 10,788 9,040 32,183 25,948
Professional services and other (449 ) 93 4,057 (1,106 ) 14,159
Amortization of acquired intangibles (408 ) (58 ) - (466 ) -
Total gross profit 10,774 10,823 13,097 30,611 40,107
Gross margin
Subscriptions and support 78 % 80 % 81 % 79 % 81 %
Professional services and other (12 %) 2 % 52 % (9 %) 56 %
Total gross margin 59 % 60 % 69 % 59 % 70 %
Operating expenses
Research and development (1) 5,099 4,533 3,621 13,705 11,270
Sales and marketing (1) 9,683 8,752 7,393 26,334 20,168
General and administrative (1) 2,413 2,641 2,050 7,502 6,109
Acquisition-related expenses 340 791 - 1,131 -
Amortization of acquired intangibles 369 25 - 394 -
Total operating expenses 17,904 16,742 13,064 49,066 37,547
Income (loss) from operations (7,130 ) (5,919 ) 33 (18,455 ) 2,560
Interest and other expense, net (461 ) 31 (53 ) (379 ) (317 )
Income (loss) before income taxes (7,591 ) (5,888 ) (20 ) (18,834 ) 2,243
Benefit from (provision for) income taxes 209 (35 ) (62 ) 135 (137 )
Net income (loss)

$

(7,382

)

$ (5,923 ) $ (82 ) $ (18,699 ) $ 2,106
Net income (loss) per share:
Basic $ (0.28 ) $ (0.23 ) $ (0.00 ) $ (0.72 ) $ 0.13
Diluted $ (0.28 ) $ (0.23 ) $ (0.00 ) $ (0.72 ) $ 0.08
Weighted average shares used to compute net income (loss) per share:
Basic 26,545 26,018 25,021 26,061 16,243
Diluted 26,545 26,018 25,021 26,061 25,882

(1) Includes stock-based compensation as follows:

Cost of revenue
Subscriptions and support $ 77 $ 82 $ 53 $ 222 $ 127
Professional services and other 326 415 128 910 317
Total cost of revenue 403 497 181 1,132 444
Operating expenses
Research and development 133 148 52 349 130
Sales and marketing 559 617 206 1,466 488
General and administrative 351 456 171 1,062 509
Total operating expenses 1,043 1,221 429 2,877 1,127
Total stock-based compensation $ 1,446 $ 1,718 $ 610 $ 4,009 $ 1,571
E2open, Inc. Condensed Consolidated Balance Sheets (in thousands) � � � November 30, 2013 February 28, 2013 (Unaudited) Assets Current assets: Cash and cash equivalents $ 12,381 $ 20,262 Short-term investments - 15,289 Accounts receivable, net 21,490 20,670 Prepaid expenses and other current assets � 3,189 � � 2,212 � Total current assets 37,060 58,433 Long -term investments 384 11,692 Property and equipment, net 3,469 2,438 Intangible assets, net 12,040 - Goodwill 24,769 - Other assets � 1,006 � � 905 � Total assets $ 78,728 � $ 73,468 � � Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 12,324 $ 10,769 Deferred revenue 34,249 39,789 Acquisition payable to seller 5,442 - Current portion of notes payable and capital lease obligations 2,927 � � 849 � Total current liabilities 54,942 51,407 Deferred revenue 2,222 1,898

Notes payable and capital lease obligations, net of current portion

2,142 562 Deferred tax liabilities 3,440 - Other noncurrent liabilities � 1,022 � � 508 � Total liabilities 63,768 54,375 � Stockholders' equity: Common stock 27 25 Additional paid-in capital 374,780 360,280 Accumulated other comprehensive income (loss) 47 (17 ) Accumulated deficit � (359,894 ) � (341,195 ) Total stockholders' equity � 14,960 � � 19,093 � Total liabilities and stockholders' equity $ 78,728 � $ 73,468 � �
E2open, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) � � � � � � � � � � � � � Three Months Ended Nine Months Ended November 30,

2013

August 31,

2013

November 30,

2012

November 30,

2013

November 30,

2012

Cash flows from operating activities: Net income (loss) $ (7,382 ) $ (5,923 ) $ (82 ) $ (18,699 ) $ 2,106 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Stock-based compensation 1,446 1,718 610 4,009 1,571 Depreciation and amortization 1,329 579 401 2,312 1,196 Other (256 ) 199 177 (80 ) 245 Changes in operating assets and liabilities: Accounts receivable, net (10,145 ) 3,802 (3,784 ) 454 (3,472 ) Prepaid expenses and other current assets 131 (665 ) 1,177 (608 ) 628 Accounts payable and accrued liabilities 2,222 2,401 2,068 3,100 1,521 Deferred revenue 4,662 (6,443 ) 786 (6,370 ) (8,828 ) Other � (30 ) � 245 � � (41 ) � 476 � � (62 ) Net cash provided by (used in) operating activities � (8,023 ) � (4,087 ) � 1,312 � � (15,406 ) � (5,095 ) Cash flows from investing activities: Capital expenditures (68 ) (58 ) (70 ) (165 ) (1,117 ) Sale (purchase) of marketable securities, net 8,226 19,963 (10,807 ) 26,777 (25,143 ) Payment for acquisition - (11,489 ) - (11,489 ) - Other assets � (6 ) � 97 � � (2 ) � 67 � � 26 � Net cash provided by (used in) investing activities � 8,152 � � 8,513 � � (10,879 ) � 15,190 � � (26,234 ) Cash flows from financing activities: Proceeds from bank credit facilities 1,982 536 - 2,518 30,300 Repayments of bank credit facilities (2,693 ) (653 ) - (3,346 ) (39,950 ) Repayment of notes payable and capital lease obligations (639 ) (436 ) (150 ) (1,533 ) (1,895 ) Proceeds from exercise of common stock options 643 505 10 1,821 170 Proceeds from exercise of warrants - - - - 700 Repayment of debt assumed from acquired company - (7,126 ) - (7,126 ) - Payment of fractional shares from reverse stock split - - - - (3 ) Proceeds from initial public offering, net - - - - 52,313 Payment of deferred initial public offering costs - - (1,681 ) - (2,410 ) Other � (17 ) � - � � - � � (17 ) � - � Net cash provided by (used in) financing activities (724 ) (7,174 ) (1,821 ) (7,683 ) 39,225 Effect of exchange rate changes � 27 � � (12 ) � (7 ) � 18 � � (31 ) Net increase (decrease) in cash and cash equivalents (568 ) (2,760 ) (11,395 ) (7,881 ) 7,865 � Cash and cash equivalents at beginning of period 12,949 15,709 29,479 20,262 10,219 � � � � � Cash and cash equivalents at end of period $ 12,381 � $ 12,949 � $ 18,084 � $ 12,381 � $ 18,084 � �

Supplemental cash flow information:

Cash paid during the period for: Interest $ 67 $ 60 $ 29

$

143 $ 208 Income taxes $ 44 $ 32 $ 57 $ 121 $ 119 Noncash financing and investing activities:

Property, software and equipment acquired under
notes payable and capital leases

$ 395 $ 1,322 $ 32 $ 2,072 $ 73

Prepaid software, maintenance and services acquired
under notes payable and capital leases

$ 847 $ 1,099 $ 62 $ 2,919 $ 982 Issurance of common stock for acquisition $ - $ 8,849 $ - $ 8,849 $ -

Automatic conversion of preferred stock to
common stock in connection with the IPO

$ - $ - $ - $ - $ 84,191 �
E2open, Inc. GAAP to Non-GAAP Reconciliation Tables (in thousands) (Unaudited) � � � � � � � � `

Three Months Ended

Nine Months Ended

November 30,

2013

August 31,

2013

November 30,

2012

November 30,

2013

November 30,

2012

Non-GAAP Revenue GAAP Revenue Subscriptions and support $ 14,400 $ 13,433

$

11,215 $ 40,125 $ 32,160 Professional services and other � 3,860 � � 4,579 � � 7,748 � � 11,746 � � 25,167 � Total 18,260 18,012 18,963 51,871 57,327 Add (Less): accelerated revenue from contract amendment Subscriptions and support 78 79 63 236 (645 )

Professional services and other

� 424 � � 429 � � 424 � � 1,282 � � (3,399 ) Total 502 508 487 1,518 (4,044 ) Add: deferred revenue purchase accounting adjustment Subscriptions and support 178 64 - 242 - Professional services and other � - � � - � � - � � - � � - � Total 178 64 - 242 - Non-GAAP Revenue Subscriptions and support 14,656 13,576 11,278 40,603 31,515 Professional services and other � 4,284 � � 5,008 � � 8,172 � � 13,028 � � 21,768 � Total $ 18,940 � $ 18,584 � $ 19,450 � $ 53,631 � $ 53,283 � �

Non-GAAP Gross Profit

GAAP Gross Profit Subscriptions and support $ 11,631 $ 10,788 $ 9,040 $ 32,183 $ 25,948 Professional services and other (449 ) 93 4,057 (1,106 ) 14,159 Amortization of acquired intangibles � (408 ) � (58 ) � - � � (466 ) � - � Total 10,774 10,823 13,097 30,611 40,107 Add (Less): accelerated revenue from contract amendment Subscriptions and support 78 79 63 236 (645 ) Professional services and other � 424 � � 429 � � 424 � � 1,282 � � (3,399 ) Total 502 508 487 1,518 (4,044 ) Add: deferred revenue purchase accounting adjustment Subscriptions and support 178 64 - 242 - Professional services and other � - � � - � � - � � - � � - � Total 178 64 - 242 - Add: stock-based compensation expense Subscriptions and support 77 82 53 222 127 Professional services and other � 326 � � 415 � � 128 � � 910 � � 317 � Total 403 497 181 1,132 444 Add: amortization of acquired intangibles Subscriptions and support - - - - - Professional services and other - - - - - Amortization of acquired intangibles � 408 � � � 58 � � � - � � 466 � � - � Total 408 58 - 466 - Non-GAAP Gross Profit Subscriptions and support 11,964 11,013 9,156 32,883 25,430 Professional services and other 301 937 4,609 1,086 11,077 Amortization of acquired intangibles � - � � - � � - � � - � � - � Total

$

12,265

$

11,950

� $ 13,765 � $ 33,969 � $ 36,507 � �

Non-GAAP Gross Margin

Subscriptions and support 82 % 81 % 81 % 81 % 81 % Professional services and other � 7 % � 19 % � 56 % � 8 % � 51 % Total � 65 % � 64 % � 71 % � 63 % � 69 % �
E2open, Inc. GAAP to Non-GAAP Reconciliation Tables (in thousands, except per share amounts) (Unaudited) � � � � � � � Three Months Ended Nine Months Ended November 30,

2013

August 31,

2013

November 30,

2012

November 30,

2013

November 30,

2012

Non-GAAP Income (Loss) from Operations

GAAP income (loss) from operations $ (7,130 ) $ (5,919 ) $ 33 $ (18,455 ) $ 2,560 Add (Less): accelerated revenue from contract amendment 502 508 487 1,518 (4,044 ) Add: deferred revenue purchase accounting adjustment 178 64 - 242 - Add: stock-based compensation expense 1,446 1,718 610 4,009 1,571 Add: amortization of acquired intangibles 777 83 - 860 - Add: acquisition-related expenses � 340 � � 791 � � - � � 1,131 � � - � Non-GAAP income (loss) from operations $ (3,887 ) $ (2,755 ) $ 1,130 � $ (10,695 ) $ 87 � � Non-GAAP Net Income (Loss) Per ShareNumerator: GAAP net income (loss) $ (7,382 ) $ (5,923 ) $ (82 ) $ (18,699 ) $ 2,106 Add (Less): accelerated revenue from contract amendment 502 508 487 1,518 (4,044 ) Add: deferred revenue purchase accounting adjustment 178 64 - 242 - Add: stock-based compensation 1,446 1,718 610 4,009 1,571 Add: provision for (benefit from) income taxes (209 ) 35 62 (135 ) 137 Add: amortization of acquired intangibles 777 83 - 860 - Add: acquisition-related expenses � 340 � � 791 � � - � � 1,131 � � - � Non-GAAP income (loss) before income taxes (4,348 ) (2,724 ) 1,077 (11,074 ) (230 ) Cash paid for income taxes � (44 ) � (32 ) � (57 ) � (121 ) � (119 ) Non-GAAP net income (loss) $ (4,392 ) $ (2,756 ) $ 1,020 � $ (11,195 ) $ (349 ) � Denominator: Reconciliation between GAAP and non-GAAP weighted average shares used to compute diluted net loss per share: � Weighted average number of shares used to compute GAAP net loss per share (diluted) 26,545 26,018 25,021 26,061 25,882 Effect of potentially dilutive common stock equivalents (1) � 1,509 � � 1,510 � � 1,855 � � 1,542 � � - � Non-GAAP weighted average shares used to compute non-GAAP net loss per share � 28,054 � � 27,528 � � 26,876 � � 27,603 � � 25,882 � � GAAP net income (loss) per share (diluted) $ (0.28 ) $ (0.23 ) $ (0.00 ) $ (0.72 ) $ 0.08 � Non-GAAP net income (loss) per share $ (0.16 ) $ (0.10 ) $ 0.04 � $ (0.41 ) $ (0.01 ) � Adjusted EBITDA GAAP net income (loss) $ (7,382 ) $ (5,923 ) $ (82 ) $ (18,699 ) $ 2,106 Add (Less): accelerated revenue from contract amendment 502 508 487 1,518 (4,044 ) Add: deferred revenue purchase accounting adjustment 178 64 - 242 - Add: depreciation and amortization 552 496 401 1,452 1,196 Add: amortization of acquired intangibles 777 83 - 860 - Add (Less): interest and other expense, net 461 (31 ) 53 379 317 Add: provision for (benefit from) income taxes (209 ) 35 62 (135 ) 137 Add: acquisition-related expenses � 340 � � 791 � � - � � 1,131 � � - � EBITDA (4,781 ) (3,977 ) 921 (13,252 ) (288 ) Add: stock-based compensation expense � 1,446 � � 1,718 � � 610 � � 4,009 � � 1,571 � Adjusted EBITDA $ (3,335 ) $ (2,259 ) $ 1,531 � $ (9,243 ) $ 1,283 � � Free Cash Flow Net cash provided by (used in) operating activities $ (8,023 ) $ (4,087 ) $ 1,312 $ (15,406 ) $ (5,095 ) Capital expenditures (68 ) (58 ) (70 ) (165 ) (1,117 ) Acquisition-related expenses � 503 � � 206 � � - � � 709 � � - � Free cash flow $ (7,588 ) $ (3,939 ) $ 1,242 � $ (14,862 ) $ (6,212 )

(1) These securities are anti-dilutive on a GAAP basis as a result of our net loss, but are included for non-GAAP net loss per share.


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