Down For The Quarter, Kenexa Still Meets Wall Street Expectations

Kenexa, a leading talent acquisition software provider, reported first quarter revenues today that were close to what analysts had expected, even if they were $9.4 million less than the same period last year.

The company reported revenues of $38.8 million and non-GAAP earnings per share of 14 cents. The per share earnings were in line with analyst estimates, though the Street had been expecting revenue of $39.05 million.

However, Kenexa took a big hit, booking $33.3 million as a reduction to goodwill. That one-time expense (included in GAAP reports but not in non-GAAP as it is not an actual cash expense. Confused? See this definition) drove profits into the minus column. That gave Kenexa a loss on the quarter of $34.3 million versus last year’s $4.8 million profit.

Without that charge and a few other charges that are not considered operating expenses under non-GAPP rules, Kenexa earned $3.9 million from operations versus last year’s $9.1 million.

The company explained it this way in its financial release: “As a result of a substantial decrease in the company’s stock price, reflecting the very difficult market conditions of recent months and the impact on its operations, the company evaluated its goodwill for potential impairment as of March 31, 2009 in accordance with accounting requirements. Based on the results of this evaluation, the company reported a non-cash goodwill impairment charge of $33.3 million, on a pretax tax basis. While the impairment charge reduced reported operating results under generally accepted accounting principles (GAAP), it is non-cash in nature and does not affect Kenexa’s liquidity or cash flow from operations.”

GAAP or not, the revenue side shows a wide gap between last year’s performance and this. Not unusual for an industry beset by the recession. But a hit nonetheless.

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Rudy Karsan, Kenexa’s CEO, said in the financial release, “While the business environment is challenging and we expect it to remain so for the remainder of the year, there are a number of positive developments related to Kenexa and the talent management market. During the first quarter, sales and renewals of Kenexa’s talent acquisition solutions remained solid, which was a primary contributor to the solid growth of our deferred revenue.”

The company said it expected the current quarter to have revenues in the $36 million to $39 million range and non-GAAP operating income to be $3.6 million to $4.6 million. Thet would give between 14 and 16 cents a share in earnings, which, at the high end, is what analysts are expecting.

The company’s stock closed at $7.85 a share, down 40 cents from the previous close.

John Zappe is the editor of and a contributing editor of John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.


1 Comment on “Down For The Quarter, Kenexa Still Meets Wall Street Expectations

  1. I also noticed a note from Morningstar today about Kenexa. Morningstar adds: “Kenexa’s core subscription service business line experienced the harshest head winds. In particular, the recruitment process outsourcing service experienced a 17% revenue decline as a material drop in the customer renewal rate played a major antagonistic role. Management was not specific as to how far the renewal rate has dropped, but it did express confidence that this rate can be brought back to around 90% once the economy starts to recover. We believe the firm can achieve this goal, but unemployment continues to rise and head winds will be substantial for Kenexa over the near term because of this factor.”

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