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Callidus Software provides Enterprise Incentive Management software that enables large businesses to plan model and manage pay-for-performance compensation programs designed to align employee sales and channel tactics with targeted business objectives. Callidus Software Inc. has a market cap of $82 million; its shares were traded at around $2.73 with and P/S ratio of 0.8. Highlight of Business Operations: During the third quarter of 2009, we continued to build momentum in our recurring revenue business model. A key metric in our model is quarterly additions to net annual contract value (ACV) generated from the sale of our on-demand and time based term license offerings. Our net ACV grew by $3.6 million during the third quarter of 2009 to $28.6 million in cumulative net ACV, an increase of 15% from $24.8 million at the end of the third quarter of 2008. Net ACV booked in the third quarter is comprised of gross ACV of $4.3 million offset by attrition of $0.7 million. The attrition is due to the loss of one customer and reduction in commitment from two continuing customers.
Our financial results for the third quarter of 2009 reflect the progress we have made in the past year transitioning to a recurring revenue business. Recurring revenue accounted for 64% of total revenues in the third quarter of 2009 as compared to 38% in the third quarter of 2008. Recurring revenue accounted for 53% of our total revenues in the nine months ended September 30, 2009 compared to 37% in the same period of 2008. Our recurring revenue increased in the third quarter of 2009 by 3% to $11.2 million as compared to $10.9 million in the third quarter of 2008. Recurring revenue increased 19% to $34.7 million in the nine months ended September 30, 2009 as compared to $29.2 million in the same period of 2008.
Primarily as a result of our transition toward a recurring revenue business, our services and license revenues declined as expected. Services revenue decreased by $5.2 million, or 50%, in the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Services revenue decreased by $12.0 million, or 32%, in the nine months ended September 30, 2009 compared to the same period in 2008. License revenue decreased by $5.9 million, or 87%, in the three months ended September 30, 2009 compared to the three months ended September 30, 2008. License revenue decreased by $7.6 million, or 60%, compared to the same period in 2008.
During the past year of our transition to a recurring revenue business model, we have made significant progress in reducing our operating expenses to better align our cost base with our new business model. Excluding restructuring expenses and stock-based compensation, we have reduced our operating expenses by $3.3 million, or 24%, to $10.3 million for the third quarter of 2009 from $13.6 million for the third quarter of 2008. Restructuring expenses increased by $2.0 million, while stock-based compensation decreased by $0.8 million in the third quarter of 2009 compared to the prior year period.
Our progress in reducing our operating expenses is also reflected in the comparison for the nine months ended September 30, 2009 to the same period in 2008. Excluding restructuring expenses and stock-based compensation, we have reduced our operating expenses by $5.4 million, or 14%, to $33.7 million in the nine months ended September 30, 2009 as compared to $39.1 million in the same period of 2008. Restructuring expenses increased by $2.4 million while stock-based compensation decreased by $2.0 million in the nine months ended September 30, 2009 compared to the prior year period.
Read the The complete ReportCALD is in the portfolios of Wilbur Ross of Invesco Private Capital, Inc..
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