Revenue Grows a Strong 71% Year-over-Year

Deferred revenue grew to a new high of $123.6M, up 94%

year-over-year

Non-GAAP gross margin improves sequentially from 61% to 65%

Non-GAAP operating margin improves sequentially 7 full percentage

points

Cash flow used in operating activities improves 7 full percentage

points to ($6.4) million compared to ($6.9) million in Q207

Raises full year fiscal 2008 guidance

SAN MATEO, Calif.–(EMWNews)–SuccessFactors, Inc. (NASDAQ:SFSF), the global leader in on-demand

performance and talent management solutions, today announced results

for its second fiscal quarter of 2008 which ended June 30, 2008.

“SuccessFactors again delivered a strong

quarter with outstanding execution, resulting in superior year-over-year

revenue growth of 71% and deferred revenue growth year-over-year of 94%

in what continues to be a challenging economy,”

said Lars Dalgaard, chief executive officer for SuccessFactors. “At

the same time as outgrowing the industry, we delivered our best non-GAAP

operating margin in more than three years. In the last 6 months,

non-GAAP gross margin was improved 12 full percentage points from 53% to

65%, and non-GAAP operating margin improved 39 full percentage points.”

Discussing strategic areas of investment, Dalgaard continued, “The

reductions in COGS (cost of goods sold) and general & administrative

expenses were due to the productivity of our professional services team

and leverage across our G&A functions which allowed us to invest more

aggressively in the revenue generating areas of research & development

and sales & marketing. We continue to be impressed with the strength and

depth of our entire team, not just the management team but throughout

the organization.”

SuccessFactors’ results for the second

quarter of fiscal year 2008:

• Q2 FY08 Revenue: Revenue was $25.7 million, compared to $15.0

  million for the same period last year, an increase of 71%, and an

  increase of 10% sequentially from Q108.

• Q2 FY08 Customers: Added approximately 190 new customers during

  the quarter. The company had approximately 2,140 customers as of June

  30, 2008, an increase of 83% from 1,167 customers as of June 30, 2007,

  and an increase of 10% from 1,950 customers as of March 31, 2008.

• Q2 FY08 Margins: Non-GAAP gross margin improved to 65% for the

  quarter ended June 30, 2008, up from 61% for the quarter ended March

  31, 2008. Non-GAAP operating margin improved by 7 full percentage

  points to (70%) for the quarter ended June 30, 2008, compared to (77%)

  for the quarter ended March 31, 2008.

• Q2 FY08 Expenses: Total non-GAAP operating expenses were held

  to 7% sequential growth from the first quarter of 2008, versus growth

  of 107% over fiscal 2007. During the quarter ended June 30, 2008,

  non-GAAP sales and marketing expenses were held to 7% sequential

  growth from the first quarter of 2008, versus 115% over fiscal 2007.

  Non-GAAP general and administrative expenses declined 5% sequentially

  from the first quarter of 2008, versus 149% growth over fiscal 2007.

  Non-GAAP research and development expenses increased 20% sequentially

  from the first quarter of 2008, versus 54% growth over fiscal 2007.

  For the quarter ended June 30, 2008, the non-GAAP total operating

  expenses excluded approximately $1.8 million in stock-based

  compensation expense.

• Q2 FY08 Cash Flows Used in Operations: For the quarter ended

  June 30, 2008, the company used $6.4 million of cash in operating

  activities, down from the $6.9 million used in the quarter ended June

  30, 2007. Total cash, cash equivalents and marketable securities at

  June 30, 2008 were $105.7 million. The company’s

  secondary offering was completed on June 23, 2008 and raised total net

  proceeds of approximately $27.7 million to the company.

• Q2 FY08 Net Loss per Share: On a GAAP basis, for the quarter

  ended June 30, 2008, the net loss per common share, basic and diluted,

  was $0.37. The non-GAAP net loss per common share, basic and diluted,

  was $0.33, which excludes approximately $2.0 million in stock-based

  compensation expense, compared to a non-GAAP net loss per share, basic

  and diluted, of $0.34 in Q108. GAAP and non-GAAP net loss per common

  share calculations are based on 52.3 million weighted average shares

  outstanding during the quarter.

• Q2 FY08 Total Deferred Revenue: Total deferred revenue as of

  June 30, 2008 was $123.6 million, an increase of 94% compared to June

  30, 2007 and 10% compared to March 31, 2008.

Additional Second Quarter Fiscal 2008 Highlights:

• Continued to gain strong traction within the SMB group adding new

  customers including Noblis, Omaha World-Herald Company, Syniverse

  Technologies, Goodwill of San Francisco, Philadelphia Gas Works, Bates

  College, OpenTV, 3PAR, Perceptive Software, Trident Microsystems,

  Paylocity, Ingres, Chyron Corporation, Supfina Machine Company, Office

  of Financial Management State of Washington, Bare Escentuals Beauty,

  Samsung Telecommunications America, 1^st

  Franklin Financial Corp., and The Recording Academy.

• Added enterprise customers including Alticor, CH2M Hill, Wellstar

  Health Systems, EMC, Hollister Incorporated, PCL Constructors, Salina

  Regional Health Care, Woodward Governor, Starkey Laboratories,

  Daughters of Charity Health System, and United Industries Corporation.

• Recorded strongest European performance ever, adding new customers in

  over 9 countries including Hilti in Lichtenstein, TetraPak in

  Switzerland, General Dynamics in Germany, Société

  Générale and SKF

  in France, Cable and Wireless in the United Kingdom, Novozymes and

  Kongsberg in Denmark, and Sky Italia and Navionics in Italy.

• Made outstanding progress in Asia Pacific, adding new customers

  including Lend Lease Management Services and Super Partners in

  Australia, LG Electronics, SaeJong Industries, and Inter-M in Korea,

  Prince Court Medical Center in Singapore, and Saigon Postel in

  Malaysia.

• New partner-driven customers included TriNet with InfoPartners,

  Tibion, Rockwall Hospital and SteelEye; Riverside Group with Polar

  Window; GeoLearning with Kingland; and Sistemas CBT with Grupo Copri

  Mexico.

• Hosted 2,000+ customers and prospects for more than 15 SuccessFactors

  seminars, events, and other sponsored activities across North America

  in cities such as Toronto, Boston, Minneapolis, Houston, Phoenix,

  Washington, D.C., Chicago, New York, San Francisco, Nashville, and

  Philadelphia. In Q3 FY08 more than 20 similar events are planned

  globally.

• Hosted more than 700 people from over 300 companies at SuccessFactors’

  2008 Global User Conference, with more than 40 customer-led sessions.

• Announced first SuccessFactors European User Conference to be held in

  Q408.

• CEO Lars Dalgaard was named winner of the 2008 Ernst & Young

  Entrepreneur of the Year Award in Northern California/Silicon Valley

  in the Software-as-a-Service category. Dalgaard was selected a winner

  from an extraordinary pool of 27 finalists that were culled from more

  than 90 nominations of business leaders by a panel of independent

  judges.

Guidance:

SuccessFactors is initiating guidance for its third quarter and is

raising its full fiscal year 2008 guidance.

• Q3 FY08: Revenue for the company’s

  third fiscal quarter is projected to be in the range of approximately

  $27.5 million to $28 million. Non-GAAP net loss per common share,

  basic and diluted, is expected to be in the range of approximately

  ($0.35) to ($0.37). Non-GAAP net loss per common share estimates

  exclude the effects of estimated stock-based compensation expense and

  assume an average weighted share count of approximately 56 million

  shares.

• Full Year FY08: The company is raising guidance for full year

  revenue for fiscal 2008 from approximately $104 million to $106

  million, to approximately $107 million to $108 million. The company

  now expects the non-GAAP net loss per common share for fiscal 2008 to

  be in the range of ($1.39) to ($1.43); previous guidance had been in

  the range of ($1.55) to ($1.59). Non-GAAP net loss per common share

  estimates exclude the effects of estimated stock-based compensation

  expense and assume an average weighted share count of approximately

  54.3 million shares.

Conference Call

SuccessFactors will host a conference call to discuss its second quarter

fiscal 2008 results today at 2:00 p.m. Pacific Daylight Time. A live

audio webcast of the conference call, together with detailed financial

information, can be accessed through the company’s Investor Relations

website at http://www.successfactors.com/investor.

In addition, an archive of the webcast can be accessed through the same

link until August 15, 2008. Participants who choose to call into the

conference call can do so by dialing domestically at 866-923-9739 and

internationally at 706-634-0915. A domestic replay will be available at

800-642-1687 or 706-645-9291 internationally, passcode 56449183, until

August 15, 2008.

Use of Non-GAAP Financial Information

SuccessFactors provides quarterly and annual financial statements that

are prepared in accordance with generally accepted accounting principles

(GAAP). To help understand SuccessFactors’

past financial performance and future results, SuccessFactors has

supplemented its financial results that it provides in accordance with

GAAP, with non-GAAP financial measures. The method SuccessFactors uses

to produce non-GAAP financial results is not computed according to GAAP

and may differ from the methods used by other companies. The non-GAAP

measures used by SuccessFactors exclude the impact of stock-based

compensation expense recorded under SFAS 123(R). SuccessFactors’

reference to these non-GAAP financial results should be considered in

addition to results that are prepared under current accounting standards

but should not be considered as a substitute for, or superior to, the

financial results that are presented as consistent with GAAP.

SuccessFactors’ management uses the

supplemental non-GAAP financial measures internally to understand,

manage and evaluate SuccessFactors’ business

and make operating decisions. These non-GAAP financial measures are

among the factors SuccessFactors’ management

uses in planning for and forecasting future periods. Reconciliation to

the nearest GAAP financial measures of the non-GAAP financial measures

is included in this press release.

About SuccessFactors, Inc.

SuccessFactors is one of the fastest growing public software companies

and the leading provider of on-demand employee performance and talent

management solutions. The company enables organizations of every size,

and across every industry and geography, to achieve high-performing

workforces through goal alignment and execution, talent development and

planning, and pay-for-performance initiatives. From 92 customers and

approximately 282,000 end users in 2003 to more than 2,140 customers and

more than 4 million end users today, SuccessFactors’ solutions are

widely deployed across 60 industries in over 185 countries in 22

languages. Founded in 2001 with offices around the world, the company

employs more than 700 people, all passionately focused on

revolutionizing the future of work. For more information, visit: http://www.successfactors.com.

“Safe harbor”

statement under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933 and Section 21E of

the Securities Exchange Act of 1934. These forward-looking statements

are SuccessFactors’ current expectations and

beliefs.

These forward-looking statements include statements about expected

revenue and non-GAAP net loss per share for the third fiscal quarter of

2008, the full fiscal year 2008 and related items. Factors that could

cause actual results to differ materially include: our ability to

continue to experience high customer renewal rates; whether customers

renew their agreements for additional modules or users; levels of new

customers; pricing pressures; the fact that our market is at an early

stage of development, and it may not develop as rapidly as we

anticipate; competitive factors; outages or security breaches; our

ability to develop, and market acceptance of, new services; our ability

to manage our growth; our ability to improve our internal controls; our

ability to successfully expand our sales force and its effectiveness;

our ability to continue to manage expenses; the impact of unforeseen

expenses; and general economic conditions worldwide. If any such risks

or uncertainties materialize or if any of the assumptions proves

incorrect, our results could differ materially from the results

expressed or implied by the forward-looking statements we make.

Further information on these and other factors that could affect our

financial results is included in the section entitled “Risk

Factors” in our Annual Report on Form 10-K,

and as amended on Form 10-K/A, for 2007 and in the reports on Form 10-Q

and in other filings we make with the Securities and Exchange Commission

from time to time.

These documents are or will be available on the SEC Filings section of

the Investor Relations section of our website at www.successfactors.com/investor.

SuccessFactors, Inc. assumes no obligation and does not intend to update

these forward-looking statements, except as required by law.

“SuccessFactors”

is a trademark of SuccessFactors, Inc., San Mateo, California. Other

names used may be trademarks of their respective owners.

SuccessFactors, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
		As of June 30,				As of December 31,
			2008				2007
		(unaudited)					(1)
Assets:
Current assets:
Cash and cash equivalents		$	78,324			$	82,274
Marketable securities			27,357				8,513
Accounts receivable, net of allowance for doubtful accounts			33,479				42,072
Deferred commissions			4,884				4,199
Prepaid expenses and other current assets			5,088				2,347
Total current assets			149,132				139,405
Restricted cash			903				964
Property and equipment, net			7,752				6,532
Deferred commissions, net of current portion			6,519				7,343
Other assets			264				300
Total assets		$	164,570			$	154,544
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable		$	537			$	3,595
Accrued expenses and other current liabilities			8,559				7,016
Accrued employee compensation			14,035				18,265
Deferred revenue			102,223				84,624
Current portion of capital lease obligations			35				34
Total current liabilities			125,389				113,534
Capital lease obligations, net of current portion			38				56
Deferred revenue, net of current portion			21,411				16,386
Other long-term liabilities			3,418				4,625
Total liabilities			150,256				134,601
Stockholders’ equity:
Common stock			55				51
Additional paid-in capital			194,076				161,150
Accumulated other comprehensive income			81				55
Accumulated deficit			(179,898	)			(141,313	)
Total stockholders’ equity			14,314				19,943
Total liabilities and stockholders’ equity		$	164,570			$	154,544
_____________
(1)  The condensed consolidated balance sheet as of December 31, 2007  has been derived from audited financial statements.

SuccessFactors, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2008				2007				2008				2007
Revenue	$	25,714			$	15,004			$	49,175			$	27,395
Cost of revenue (1)		9,244				5,686				18,580				10,737
Gross profit		16,470				9,318				30,595				16,658
Operating expenses: (1)
Sales and marketing		23,261				15,686				44,870				29,308
Research and development		6,250				3,664				11,459				7,221
General and administrative		6,828				4,653				13,920				7,304
Total operating expenses		36,339				24,003				70,249				43,833
Loss from operations		(19,869	)			(14,685	)			(39,654	)			(27,175	)
Interest income (expense) and other, net		SuccessFactors, Inc. Dominic Paschel, 415-262-4641 (Investor Relations) [email protected] or LaunchSquad Jesse Odell, 415-625-8555 (Public Relations) [email protected] Major Newsire & Press Release Distribution with Basic Starting at only $19 and Complete OTCBB / Financial Distribution only $89 Get Unlimited Organic Website Traffic to your Website  TheNFG.com now offers Organic Lead Generation & Traffic Solutions