Callidus Software Inc. has a market cap of $92.2 million; its shares were traded at around $2.96 with and P/S ratio of 1.2. CALD is in the portfolios of Wilbur Ross of Invesco Private Capital, Inc., Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:During the first quarter of 2010, the impact of prior quarter Software-as-a-Service (SaaS) bookings continue to drive increasing recurring revenues as our recurring revenues showed growth on a year on year basis. Our recurring revenues increased in the first quarter of 2010 by 5% to $12.3 million compared to $11.7 million in the first quarter of 2009. At the same time, existing customer attrition remains low. Our retention rates for our core SaaS offering as well as our legacy on-premise customers continue to be above 90%. Recurring revenue accounted for 76% of total revenues in the first quarter of 2010 as compared to 45% in the first quarter of 2009, continuing to reflect the diminished significance of perpetual license and services in our SaaS business model. We expect recurring revenues to continue to run at approximately 70% of revenues through 2010.
During the quarter we continued to make progress on reducing our operating expenses to better align our cost base with our new business model. Excluding stock-based compensation, amortization of acquired intangible assets and restructuring expenses, we have reduced our operating expenses by $2.4 million, or 20%, to $9.9 million for the first quarter of 2010 from $12.3 million for the first quarter of 2009. Stock-based compensation expenses increased by $0.2 million, amortization of acquired intangible assets increased by $32,000 and restructuring expenses increased by $0.6 million in the first quarter of 2010 compared to the same period in prior year.
As a result of our transition toward a recurring revenue business, our services and perpetual license revenues declined as expected. This shift in revenue mix from license revenue to recurring revenue has reduced our services revenues, as the average implementation time for an on-demand arrangement is significantly less than for an on-premise arrangement. The decrease in service revenues was also driven by the fact that a number of customers who signed agreements in prior quarters delayed the start of their implementation projects to future quarters, which negatively impacted both service revenues and gross margin. Services revenue decreased by $7.6 million, or 67%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. License revenue decreased by $2.8 million, or 92%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. We do not expect services and license to materially increase as percentage of our total revenues in future periods.
On January 1, 2010, we completed the 100% acquisition of Actek, Inc. Actek delivers commission and incentive compensation software solutions to automate the process of calculating and managing complex commission, incentive and bonus payment arrangements. The acquisition expanded our product offering to commissions and compliance software for complex selling environments for the insurance and financial services industries. Under the terms of the agreement, the Company paid Acteks sole stockholder $2.1 million in a combination of cash and stock and assumed debt of $0.9 million. In addition, the Company may pay up to approximately $1.2 million in the future in the form of cash, restricted stock units and stock options, depending on the achievement of specified operational milestones on January 1, 2011. In connection with the acquisition, we recorded intangible assets of $1.5 million, which will be amortized to cost and operating expenses over their useful lives of four to twelve years, except for the tradename which has an indefinite life, and $2.5 million of goodwill, which will not be amortized. Goodwill and the tradename will be tested for impairment at least annually.
Recurring Revenues. Recurring revenues, consisting of on-demand arrangements and maintenance revenues for both perpetual license and time-based on-premise arrangements, increased by $0.6 million, or 5%, in the three months ended March 31, 2010 compared to the same period last year. The increases were primarily due to the growth in our on-demand subscription revenues and our maintenance revenues for the time-based on-premise arrangements, which together were up 13% compared to the three months ended March 31, 2009. Support revenues for maintenance services associated with our perpetual license decreased by $0.5 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease was partially offset by $0.2 million maintenance revenues generated by Actek acquired in January 2010. The overall decrease in support revenues associated with perpetual license of $0.3 million was primarily a result of a number of on-premise customers converting to our on-demand service and decreased perpetual license sales to new customers.
Cost of Recurring Revenues. Cost of recurring revenues increased by $0.6 million, or 11%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The increase was primarily due to a combination of increased amortization of intangible assets resulting from higher cost of third-party technology used in our products and the allocation of a relatively greater portion of such amortization expense to the cost of recurring revenues as such revenues comprise a greater portion of total revenues of $0.7 million. The increase also reflected increased infrastructure cost of fulfilling a higher level of customer orders resulting from the increase in on-demand subscription revenue of $0.3 million. The increase was partially offset by a decrease in personnel cost of $0.3 million as a result of headcount reduction. The costs associated with supporting our on-demand offering are generally higher than the cost of maintenance related to our on-premise customers, as we are responsible for the full operation of the software that the customer has contracted for in our hosting facility.
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