SuccessFactors Inc. (SFSF) filed Quarterly Report for the period ended 2010-09-30.
Successfactors Inc. has a market cap of $2.13 billion; its shares were traded at around $28.87 with and P/S ratio of 13.9. SFSF is in the portfolios of Ron Baron of Baron Funds.
Highlight of Business Operations:Beginning in the third quarter of 2010, we adopted a new accounting standard (Accounting Standards Update No. 2009-13 or ASU 2009-13) for arrangements with multiple deliverables, which had the effect of increasing revenue by $2.2 million and $5.7 million in the three and nine months ended September 30, 2010, respectively, including the effects of retrospective application of new standard to our revenues for the first and second quarters of 2010 to conform all arrangements entered into or materially modified after January 1, 2010 to the new accounting standard. Prior to adopting ASU 2009-13, we accounted for subscription and professional services deliverables of a contract as one unit of accounting with the entire arrangement fee recognized ratably over the noncancelable term of the contract, because historically, we were not able to establish vendor specific objective evidence (VSOE) of fair value for each deliverable. Upon adoption of ASU 2009-13, we began separately accounting for and allocating revenue to subscription and professional services deliverables of a contract using our best estimated selling price to recognize revenue when the basic revenue recognition criteria for each deliverable are met. ASU 2009-13 impacted our subscription revenue by allowing earlier commencement of revenue recognition upon delivery of specific subscription deliverables of a contract instead of upon delivery of all deliverables as required under the previous accounting guidance; and impacted professional services revenue by allowing earlier recognition of revenue upon completion of work instead of ratable over the contracted term of the subscription agreement, generally one to three years. We, however, continue to recognize revenue on all professional services contracts entered into prior to January 1, 2010, ratably over the associated subscription term.
We estimate the fair value of the contingent consideration related to the Inform and CubeTree acquisitions using various valuation approaches, as well as significant unobservable inputs reflecting our own assumptions in measuring fair value. The fair values of the contingent consideration are remeasured at each reporting period, with any changes in the value recorded as income or expense. Such remeasurments resulted in a gain of approximately $3.1 million for the three and nine months ended September 30, 2010. The potential undiscounted amount of all future cash payments that we could be required to make under the contingent consideration is between $0 and $62.9 million as of September 30, 2010.
sales to new customers. We define existing customers as companies that we have sold to before and are either renewing their subscriptions, purchasing additional modules and/or adding new users, and we define new customers as companies that have never purchased from us before. The companies acquired in the third quarter of 2010 contributed $2.1 million to revenue for both the three and nine months ended September 30, 2010, and we recognized additional revenues of $2.2 million and $5.8 million for the three and nine months ended September 30, 2010, respectively, due to the adoption of ASU 2009-13.
Subscription and support revenue for the three months ended September 30, 2010 increased by $11.0 million, or 36%, and increased by $28.3 million or 32% for the nine months ended September 30, 2010 compared to the corresponding periods of fiscal 2009. Substantially all of the increase in subscription and support revenue for the quarter ended and the three months ended September 30, 2010 came from increase in revenue from existing customers. The adoption of ASU 2009-13 contributed approximately $0 and $0.9 million of the increase in subscription and support revenue in the three and nine months ended September 30, 2010, respectively; and the companies acquired in the third quarter of 2010 contributed $2.0 million of the increase in subscription and support revenue for both the quarter ended and three months ended September 30, 2010.
Professional services and other revenue for the three months ended September 30, 2010 increased by $1.8 million, or 23%, and increased by $6.6 million, or 29%, for the nine months ended September 30, 2010, as compared to the corresponding periods of fiscal 2009. The increase in professional services and other primarily came from the adoption of ASU 2009-13, which contributed $2.2 million and $4.9 million of the increase in professional services revenues in the three and nine months September 30, 2010.
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