Callidus Software Reports Record Fourth Quarter 2003 Results

Callidus Software Inc. (Nasdaq: CALD), Enterprise Incentive Management (EIM) software systems, today announced financial results for the fourth quarter and fiscal year ended December 31, 2003.

Total fourth quarter revenues grew 176% to $22.3 million compared to $8.1 million in the fourth quarter of 2002 and increased 13% sequentially from the preceding third quarter. This represents Callidus Softwareís eighth consecutive quarter of revenue growth. Fourth quarter net income was $0.7 million, or $0.03 per share, compared to a net loss of $4.9 million, or $3.50 per share, for the fourth quarter of 2002 and break-even in the third quarter of 2003.

Non-GAAP net income for the fourth quarter was $2.0 million, or $0.08 per share, as compared to a non-GAAP net loss of $4.8 million in the fourth quarter of 2002 and non-GAAP net income of $0.9 million in the third quarter of 2003. A reconciliation between GAAP and non-GAAP information, which excludes stock-based compensation and applies an effective tax rate of 26%, is contained in the attached tables.

For 2003, total revenues were $71.7 million, an increase of 170% over total revenues of $26.6 million in 2002. Net income was $0.8 million, or $0.04 per share, compared to a net loss of $19.1 million, or $13.98 per share, in 2002. Excluding stock-based compensation and applying an effective tax rate of 26%, non-GAAP net income was $4.2 million, or $0.20 per share, for 2003 compared to a non-GAAP net loss of $18.7 million, or $13.67 per share, in 2002.

ìCallidus achieved record revenues in 2003, finishing the year with a strong fourth quarter,î said Reed Taussig, president and CEO of Callidus Software. ìOur products are helping customers turn incentive compensation into a competitive advantage by truly influencing employee and channel partner behaviors. We continued to demonstrate our market leadership position in the fourth quarter by selling to top quality customers across a number of vertical markets, including America Online, Auto Club Insurance Association, BMC Software, SBC Communications and Wachovia Securities.î

Q4 Financial Highlights

License revenues were a record $10.9 million, a growth rate of 261% year-over-year and 9% sequentially.
Callidus Software sold 5,750,000 shares of common stock in an initial public offering priced at $14.00 per share in November 2003. Net proceeds to the company totaled approximately $72.2 million.
Net cash provided by operating activities for the fiscal year was $0.9 million. Cash and investments totaled $80.3 million at December 31, 2003 and includes the net proceeds from the companyís initial public offering.
Days Sales Outstanding (DSO) in accounts receivable at the end of the fourth quarter of 2003 was 51 days, compared to 51 days at the end of the third quarter of 2003.

Q4 Business Highlights

IBM and Callidus Software formed a global strategic alliance to deliver comprehensive incentive compensation management solutions.
Callidusí TruePerformance product won the prestigious industry award ìHR Product of The Year,î as featured in the December 2003 issue of Human Resource Executive magazine.
Callidus exercised its option to purchase a perpetual license to the TruePerformance software code originally developed by Czanne Software. Callidus will no longer pay royalties to Czanne and will own and control future development of the award winning TruePerformance product.
John R. Eickhoff, Executive Vice President and Chief Financial Officer of Ceridian Corporation, joined Callidusí Board of Directors in November 2003.

Guidance

Calendar year 2004 total revenues are projected to be between $95 million and $100 million.
Calendar year 2004 earnings per share is projected to be between $0.08 and $0.16 on a GAAP basis and non-GAAP earnings per share is projected to be between $0.22 and $0.28. Diluted weighted average shares outstanding for 2004 is estimated to be 29.3 million shares.
First quarter 2004 total revenues are projected to be between $20 million and $22 million.
First quarter 2004 earnings per share, on a GAAP basis, is projected to be between a loss of ($0.05) and ($0.02) and non-GAAP earnings per share, excluding stock-based compensation charges, but giving effect to an effective tax rate of 26%, is projected to be between $0.01 and $0.03. Diluted weighted average shares outstanding for the first quarter of 2004 is estimated to be 28.9 million shares.