媒体发布室

WAYNE, Pa. – May 11, 2009 – Kenexa (Nasdaq: KNXA), a global provider of talent acquisition and retention solutions, today announced operating results for the first quarter ended March 31, 2009. 

For the first quarter of 2009, Kenexa reported total revenue of $38.8 million for the first quarter of 2009, compared to $48.2 million reported for the first quarter of 2008. Subscription revenue was $33.3 million for the first quarter of 2009, compared to $39.2 million for the first quarter of 2008, while professional services and other revenue was $5.6 million for the first quarter of 2009, compared to $9.1 million for the first quarter of 2008.   

Rudy Karsan, Chief Executive Officer of Kenexa, stated, “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. This performance, combined with the company’s continued focus on operational efficiency, enabled Kenexa to generate a record level of cash flows from operations for a first fiscal quarter, expanding its already large cash balance.”

Karsan added, “We are encouraged to see a growing number of customers evaluating talent management vendors based on their ability to provide a comprehensive, integrated suite of solutions. We believe Kenexa is uniquely positioned to meet this demand based on our differentiated business model, industry leading product breadth and depth and continued global expansion, including our recently announced entry into China. We believe these factors enable Kenexa to deliver an unmatched value proposition to HR organizations, and they are among the reasons we remain highly confident in Kenexa’s long-term market position.”

Non-GAAP income from operations, which excludes share-based compensation expense, amortization of intangibles associated with previous acquisitions, a non-cash goodwill impairment charge, severance expenses and professional fees related to our Chinese expansion, was $3.9 million for the three months ended March 31, 2009, compared to $9.1 million for the three months ended March 31, 2008 and represented a 10% non-GAAP operating margin. Non-GAAP net income was $3.2 million, or $0.14 per basic and diluted share, for the quarter ended March 31, 2009, compared to $7.3 million, or $0.31 per basic and diluted share in the first quarter of 2008.  

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.

Kenexa’s loss from operations for the three months ended March 31, 2009, determined in accordance with GAAP, was $33.6 million, compared with income from operations of $6.5 million for the same period of 2008. GAAP net loss was $34.3 million, or $(1.52) per basic and diluted share, compared to net income of $4.8 million and $0.20 per basic and diluted share in the same period of 2008. The results above include the non-cash goodwill impairment charge.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Kenexa had cash and cash equivalents and short and long-term investments of $46.7 million at March 31, 2009, an increase from $42.8 million at the end of the prior quarter.  The Company generated positive cash from operations of $8.9 million and deferred revenue was $41.4 million at March 31, 2009, an increase of $2.8 million compared to $38.6 million at the end of the fourth quarter 2008.

Business Outlook

Based on information as of today, May 11, 2009, the Company is issuing guidance for the second quarter 2009 as follows: 

Second Quarter 2009: The Company expects revenue to be $36 million to $39 million, non-GAAP operating income to be $3.6 million to $4.6 million. Assuming a 23% effective tax rate for reporting purposes and 22.7 million shares outstanding, Kenexa expects its non-GAAP net income per diluted share to be $0.13 to $0.16. 

Conference Call Information

Kenexa will host a conference call today, May 11, 2009, at 5:00 pm (Eastern Time) to discuss the Company's financial results. To access this call, dial 888-218-8032 (domestic) or 913-981-5549 (international). A replay of this conference call will be available through May 18, 2009, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 4827689. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's Web site, (www.kenexa.com) and a replay will be archived on the Web site as well. 

This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These statements may contain, among other things, guidance as to future revenue and earnings, operations, expected benefits from acquisitions, prospects of the business generally, intellectual property and the development of products. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Kenexa’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by Kenexa’s quarterly reports on Form 10-Q. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors, Kenexa’s ability to implement business and acquisition strategies or to complete or integrate acquisitions. Kenexa does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

This press release contains non-GAAP financial measures. Kenexa believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Kenexa’s financial condition and results of operations. The Company’s management uses these non-GAAP results to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company’s Board of Directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in the Company’s industry, many of which present similar non-GAAP financial measures to investors.

Management of the Company does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures.

In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results. Kenexa urges investors and potential investors in the Company’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures which it includes in press releases announcing earnings information, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Kenexa presents the following non-GAAP financial measures in this press release: non-GAAP income from operations before income taxes and interest income; non-GAAP net income; non-GAAP sales and marketing expense; non-GAAP general and administrative expense; non-GAAP research and development expense; non-GAAP basic and diluted net income per share; and non-GAAP effective tax as described below. The Company’s non-GAAP financial measures exclude share-based compensation, amortization of acquired intangible assets related to the Company’s acquisitions, goodwill impairment charge, severance expenses and professional fees related to our Chinese expansion.

Share-based compensation. Share-based compensation consists of expenses for stock options and stock awards that the Company began recording in accordance with SFAS 123(R) during the first quarter of 2006. Share-based compensation was $1.2 million for the three months ended March 31, 2009 and $ 1.7 million for the three months ended March 31, 2008. Share-based compensation expenses are excluded in the Company’s non-GAAP financial measures because share-based compensation amounts are difficult to forecast. This is due in part to the magnitude of the charges which depends upon the volume and timing of stock option grants, which are unpredictable and can vary dramatically from period to period, and external factors such as interest rates and the trading price and volatility of the Company’s common stock. The Company believes that this exclusion provides meaningful supplemental information regarding the Company’s operating results because these non-GAAP financial measures facilitate the comparison of results for future periods with results from past periods. The dilutive effect of all outstanding options is included in the calculation of diluted earnings per share on both a GAAP and a non-GAAP basis.

Amortization of acquired intangible assets. In accordance with GAAP, operating expenses include amortization of acquired intangible assets which are amortized over the estimated useful lives of such assets.   Amortization of acquired intangible assets was $1.1 million for the three months ended March 31, 2009, and $0.8 million for the three months ended March 31, 2008. Amortization of acquired intangible assets is excluded from the Company’s non-GAAP financial measures because the Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.

Goodwill impairment charge. The company recorded a non-cash goodwill impairment charge as a result of the impact of the unprecedented turmoil in world economies and the resultant impact on business conditions and the broad-based downward pressure on equity share values in the amount of $33.3 million.

Severance expenses. The company incurred charges in the amount of $1.2 million in relation to additional severance expenses in the first quarter of 2009.

Professional fees related to our Chinese expansion. The company incurred professional fees in connection with its Chinese expansion in the amount of $0.7 million during the first quarter of 2009. Under previous accounting guidance, these charges would have previously been recorded as part of the investment amount and excluded from the statement of operations. The Company believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.

Each of non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP research and development expense, and estimated non-GAAP effective tax rate are each components necessary to calculate non-GAAP income from operations before income taxes and interest income, non-GAAP net income and non-GAAP basic and diluted net income per share and are calculated by adjusting the corresponding GAAP measure for the applicable period by the applicable portion of share-based compensation and severance expenses.

Kenexa (NASDAQ:KNXA) is a global leader in building the world’s greatest workforces using a combination of software, employee research science and business process optimization. Kenexa’s global solutions include applicant tracking, onboarding, recruitment process outsourcing, employment branding, skills and behavioral assessments, structured interviews, performance management, multi-rater feedback surveys, employee engagement surveys and HR Analytics. Kenexa is headquartered in Wayne, PA. (outside Philadelphia). Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.

Note to Editors: Kenexa is a registered trademark of Kenexa Corporation. Other product or service names mentioned herein remain the property of their respective owners.

MEDIA CONTACT:

Sarah Teten Kenexa (800) 391-9557 sarah.teten@kenexa.com

Jeanne Achille The Devon Group (732) 224-1000, ext. 11 jeanne@devonpr.com

Kori Doherty
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