The mighty Callidus with disappointing third-quarter results

Callidus Software Inc. not, as,The Chump swears, the name of one of the rogues from the old “Legion of the Super Heroes” comic book, but instead a leading provider of enterprise incentive management software, today announced financial results for the third quarter of 2006.

It’s a gray day in Callidus’ land, whether or not Sun Boy cooked him up. The news as released actually ran a bit like a comic book story, in that our heroes seem to be losing the good fight for the first half of the narrative.

Total third quarter revenues were US $17.4 million, essentially flat compared to the third quarter 2005 and to the prior quarter. Third quarter license revenues were US $5.8 million, equal to the third quarter 2005 and down slightly from the prior quarter. Third quarter maintenance and service revenues were US $11.6 million, an increase of 3 percent over third quarter 2005 and a slight decrease compared to the prior quarter.

But growth is good and so our heroes rise from the rubble, angered and vengeful. Hosted on-demand bookings were US $1.5 million in the third quarter, up from a neat zero in the third quarter of 2005. License revenues plus hosted on-demand bookings in the quarter totaled US $7.3 million, an increase of 26 percent over third quarter 2005.

And it even gets better: On a year-to-date basis, total revenues are up 18 percent from US $44.2 million to US $52.0 million compared to 2005. Year-to-date license revenues are up 76 percent from US $10.6 million to US $18.7 million compared to 2005. Year-to-date hosted on-demand bookings were US $6.1 million, compared to a goose egg in 2005. Year-to-date license revenues plus on-demand bookings totaled US $24.8 million, an increase of a whopping 134 percent over 2005.

Clearly significant to Callidus is the launch and growth of its hosted on-demand offering. Starting from zero, the company has sold multi-year contracts totalling US $6.1 million over the past six months. These contracts are expected to generate annual recurring revenues of US $2.3 million.

But wait a minute, what’s this? Third quarter net loss was US $2.5 million; this is even bigger than the net loss of US $0.9 million for the third quarter 2005. Of course, in second quarter 2006, Callidus took a net loss hit of US $3.2 million. Cash and investments totaled US $53.2 million at September 30, 2006, a decrease of US $3.5 million from June 30, 2006. Ouch.

Oh boy, here comes the spin … The Chump loves the spin. "After a slow start,” started Callidus president / CEO Robert Youngjohns, “quarter three was a solid quarter where we continued to consolidate on progress made earlier in the year … Our service revenues were limited by capacity rather than demand as we diverted service resources to our hosted on-demand business and were not able to backfill as quickly as we would have liked.”

Our heroes may be down, folks, but they aren’t out. Get the next issue of Callidus’ adventures: Forecasted for quarter four, are total revenues between US $19.5 million and US $21.0 million, a 12 to 21 percent increase over third quarter total revenues. In a healthy scenario, this would represent a nice US $7 million in profit. We’ll see. A conference call to discuss the third quarter results was held yesterday and is now available at the Callidus Software website. Or you can click here.

Founded in 1996, Callidus Software Inc. is an enterprise incentive management provider to global companies across multiple industries. Customers include 7-Eleven, Accenture, CUNA Mutual, HP, IBM, Philips Medical Systems, Sprint Nextel, Sun Microsystems, Time Warner Corporation and Wachovia.