##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 001-33755
 SUCCESSFACTORS, INC.
  Delaware
    
    94-3398453(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1500 Fashion Island Blvd., Suite 300San Mateo, California
    
    94404(Address of principal executive offices)
    
    (Zip Code)
 (650) 645-2000
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



SUCCESSFACTORS, INC.
 Table of Contents
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Condensed Consolidated Financial Statements:
    
    
    3Condensed Consolidated Balance Sheets-June 30, 2009 (unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations-Three and six months ended June 30, 2009 and 2008
(unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows-Six months ended June 30, 2009 and 2008 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    33Signatures
    
    
    34EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1.
    
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (Note 1)Assets:Current assets:Cash and cash equivalents
    
    $
    37,065
    
    
    $
    69,859Marketable securities
    
    
    70,741
    
    
    
    32,505Accounts receivable, net of allowance for
doubtful accounts of $1,172 and $727
    
    
    35,998
    
    
    
    44,446Deferred commissions
    
    
    5,195
    
    
    
    5,721Prepaid expenses and other current assets
    
    
    4,408
    
    
    
    3,224Total current assets
    
    
    153,407
    
    
    
    155,755Restricted cash
    
    
    1,223
    
    
    
    1,248Property and equipment, net
    
    
    5,298
    
    
    
    6,933Deferred commissions, net of current portion
    
    
    5,667
    
    
    
    6,292Other assets
    
    
    303
    
    
    
    198Total assets
    
    $
    165,898
    
    
    $
    170,426Liabilities and stockholders deficit:Current liabilities:Accounts payable
    
    $
    653
    
    
    $
    1,960Accrued expenses and other current liabilities
    
    
    6,186
    
    
    
    8,777Accrued employee compensation
    
    
    12,240
    
    
    
    12,159Deferred revenue
    
    
    132,550
    
    
    
    128,940Current portion of capital lease obligations
    
    
    38
    
    
    
    37Total current liabilities
    
    
    151,667
    
    
    
    151,873Capital lease obligations, net of current portion
    
    
    
    
    
    
    19Deferred revenue, net of current portion
    
    
    17,274
    
    
    
    20,858Long-term taxes payable
    
    
    1,161
    
    
    
    855Other long-term liabilities
    
    
    1,068
    
    
    
    2,197Total liabilities
    
    
    171,170
    
    
    
    175,802Stockholders deficit:Preferred stock, $0.001 par value, 5,000 shares
authorized; no shares issued or outstanding
    
    
    57
    
    
    
    56Common stock, $0.001 par value; 200,000 shares
authorized 56,925 and 55,990 shares issued and
outstanding (excluding 154 and 337 legally issued and
outstanding) as of June 30, 2009 and December 31, 2008,
respectively
    
    
    208,979
    
    
    
    200,907Accumulated other comprehensive income
    
    
    (40
    )
    
    
    (74
    )Accumulated deficit
    
    
    (214,268
    )
    
    
    (206,265
    )Total stockholders deficit
    
    
    (5,272
    )
    
    
    (5,376
    )Total liabilities and stockholders deficit
    
    $
    165,898
    
    
    $
    170,426
  3




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    36,940
    
    
    $
    25,714
    
    
    $
    72,160
    
    
    $
    49,175Cost of revenue (1)
    
    
    7,947
    
    
    
    9,244
    
    
    
    16,436
    
    
    
    18,580Gross profit
    
    
    28,993
    
    
    
    16,470
    
    
    
    55,724
    
    
    
    30,595Operating expenses: (1)Sales and marketing
    
    
    19,996
    
    
    
    23,261
    
    
    
    39,552
    
    
    
    44,870Research and development
    
    
    6,073
    
    
    
    6,250
    
    
    
    11,624
    
    
    
    11,459General and administrative
    
    
    5,282
    
    
    
    6,144
    
    
    
    12,526
    
    
    
    13,042Gain on settlement of litigation, net
    
    
    
    
    
    
    684
    
    
    
    
    
    
    
    878Total operating expenses
    
    
    31,351
    
    
    
    36,339
    
    
    
    63,702
    
    
    
    70,249Loss from operations
    
    
    (2,358
    )
    
    
    (19,869
    )
    
    
    (7,978
    )
    
    
    (39,654
    )Interest income and other, net
    
    
    481
    
    
    
    729
    
    
    
    613
    
    
    
    1,369Loss before provision for income taxes
    
    
    (1,877
    )
    
    
    (19,140
    )
    
    
    (7,365
    )
    
    
    (38,285
    )Provision for income taxes
    
    
    (444
    )
    
    
    (147
    )
    
    
    (638
    )
    
    
    (300
    )Net loss
    
    $
    (2,321
    )
    
    $
    (19,287
    )
    
    $
    (8,003
    )
    
    $
    (38,585
    )Net loss per common share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.37
    )
    
    $
    (0.14
    )
    
    $
    (0.74
    )Shares used in computing net loss per
common share, basic and diluted
    
    
    56,754
    
    
    
    52,298
    
    
    
    56,536
    
    
    
    51,973
 
 (1)
    
    Amounts include stock-based compensation expenses as follows: Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of revenue
    
    $
    367
    
    
    $
    227
    
    
    $
    698
    
    
    $
    409Sales and marketing
    
    
    966
    
    
    
    900
    
    
    
    2,090
    
    
    
    1,685Research and development
    
    
    307
    
    
    
    265
    
    
    
    592
    
    
    
    480General and administrative
    
    
    804
    
    
    
    604
    
    
    
    1,478
    
    
    
    1,175$
    2,444
    
    
    $
    1,996
    
    
    $
    4,858
    
    
    $
    3,749
  4




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Six Months EndedJune 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (8,003
    )
    
    $
    (38,585
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,960
    
    
    
    1,496Gain on retirement of fixed asset
    
    
    (65
    )
    
    
    Amortization of deferred commissions
    
    
    3,614
    
    
    
    3,167Stock-based compensation expense
    
    
    4,858
    
    
    
    3,749Changes in assets and liabilities:Accounts receivable
    
    
    8,448
    
    
    
    8,593Deferred commissions
    
    
    (2,463
    )
    
    
    (3,028
    )Prepaid expenses and other current assets
    
    
    (1,184
    )
    
    
    (2,741
    )Other assets
    
    
    (103
    )
    
    
    36Accounts payable
    
    
    (1,307
    )
    
    
    (2,974
    )Accrued expenses and other current liabilities
    
    
    (2,578
    )
    
    
    787Accrued employee compensation
    
    
    81
    
    
    
    (4,230
    )Long-term taxes payable
    
    
    306
    
    
    
    855Other liabilities
    
    
    36
    
    
    
    (123
    )Deferred revenue
    
    
    26
    
    
    
    22,624Net cash provided by (used in) operating activities
    
    
    3,626
    
    
    
    (10,374
    )Cash flows from investing activities:Restricted cash
    
    
    24
    
    
    
    61Capital expenditures
    
    
    (348
    )
    
    
    (2,605
    )Proceeds from sale of assets
    
    
    88
    
    
    
    Purchases of available-for-sale securities
    
    
    (78,626
    )
    
    
    (33,364
    )Proceeds from maturities of available-for-sale securities
    
    
    39,803
    
    
    
    14,503Proceeds from sales of available-for-sale securities
    
    
    546
    
    
    
    Net cash used in investing activities
    
    
    (38,513
    )
    
    
    (21,405
    )Cash flows from financing activities:Proceeds from exercise of stock options, net
    
    
    2,049
    
    
    
    660Proceeds from initial public offering, net of offering costs
    
    
    
    
    
    
    (545
    )Proceeds from follow-on public offering, net of offering costs
    
    
    
    
    
    
    27,688Principal payments on capital lease obligations
    
    
    (18
    )
    
    
    (17
    )Net cash provided by financing activities
    
    
    2,031
    
    
    
    27,786Effect of exchange rate changes on cash and cash equivalents
    
    
    62
    
    
    
    43Net decrease in cash and cash equivalents
    
    
    (32,794
    )
    
    
    (3,950
    )Cash and cash equivalents at beginning of period
    
    
    69,859
    
    
    
    82,274Cash and cash equivalents at end of period
    
    $
    37,065
    
    
    $
    78,324Supplemental cash flow disclosure:Cash paid during the period for:Interest
    
    $
    122
    
    
    $
    200Income taxes
    
    $
    152
    
    
    $
    95Non cash transactions:Property and equipment accrued in accounts payable
    
    $
    
    
    
    $
    112
  5




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
 1. Organization and Significant Accounting Policies
 Organization
  Basis of Presentation
   Principles of Consolidation
  Use of Estimates
  Revenue Recognition
  6




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##### Table of Contents



Revenue Recognition, Application of AICPA Statement of Position 97-2 (SOP 97-2) to
Arrangements That Include the Right to Use Software Stored on Another Entitys Hardware, Revenue Arrangements with Multiple Deliverables
 
    
    there is persuasive evidence of an arrangement;
    
    the subscription or services have been delivered to the customer;
    
    the collection of related fees is reasonably assured; and
    
    the amount of related fees is fixed or determinable.
   Deferred Revenue
  Cost of Revenue
  7




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##### Table of Contents



Deferred Commissions
   Comprehensive Loss
  Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Reclassification
  Subsequent Events
  2. Recent Accounting Pronouncements
 Subsequent Events
 Disclosures about Fair Value of Financial Instruments
 8




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##### Table of Contents



Recognition and Presentation of Other-Than-Temporary Impairments
 3. Cash, Cash Equivalents and Marketable Securities
 Accounting for Certain Investments in Debt and Equity Securities
  As of June 30, 2009Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueCash
    
    $
    3,802
    
    
    $
    
    
    
    $
    
    
    
    $
    3,802Cash equivalents:Money market funds
    
    
    33,263
    
    
    
    
    
    
    
    
    
    
    
    33,263Total cash equivalents
    
    
    33,263
    
    
    
    
    
    
    
    
    
    
    
    33,263Total cash and cash equivalents
    
    
    37,065
    
    
    
    
    
    
    
    
    
    
    
    37,065Marketable securities:U.S. Treasury bills and bonds
    
    
    39,163
    
    
    
    9
    
    
    
    
    
    
    
    39,172U.S. Government and Agency securities
    
    
    31,491
    
    
    
    27
    
    
    
    
    
    
    
    31,518Marketable equity securities
    
    
    50
    
    
    
    1
    
    
    
    
    
    
    
    51Total marketable securities
    
    
    70,704
    
    
    
    37
    
    
    
    
    
    
    
    70,741Total cash, cash equivalents and marketable securities
    
    $
    107,769
    
    
    $
    37
    
    
    $
    
    
    
    $
    107,806
   As of December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueCash
    
    $
    684
    
    
    $
    
    
    
    $
    
    
    
    $
    684Cash equivalents:Money market funds
    
    
    69,175
    
    
    
    
    
    
    
    
    
    
    
    69,175Total cash equivalents
    
    
    69,175
    
    
    
    
    
    
    
    
    
    
    
    69,175Total cash and cash equivalents
    
    
    69,859
    
    
    
    
    
    
    
    
    
    
    
    69,859Marketable securities:U.S. Treasury bills and bonds
    
    
    8,969
    
    
    
    26
    
    
    
    
    
    
    
    8,995U.S. government notes and bonds
    
    
    22,858
    
    
    
    67
    
    
    
    
    
    
    
    22,925Corporate notes
    
    
    542
    
    
    
    
    
    
    
    (1
    )
    
    
    541Marketable equity securities
    
    
    50
    
    
    
    
    
    
    
    (6
    )
    
    
    44Total marketable securities
    
    
    32,419
    
    
    
    93
    
    
    
    (7
    )
    
    
    32,505Total cash, cash equivalents and marketable securities
    
    $
    102,278
    
    
    $
    93
    
    
    $
    (7
    )
    
    $
    102,364
  9




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##### Table of Contents



4. Accrued Expenses and Other Current Liabilities
  As of
    
    
    As ofJune 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Accrued royalties
    
    $
    546
    
    
    $
    1,039Accrued partner referral fees
    
    
    166
    
    
    
    209Accrued taxes payable
    
    
    513
    
    
    
    519Deferred rent
    
    
    174
    
    
    
    286Sale and use taxes
    
    
    1,304
    
    
    
    1,718Accrued other liabilities
    
    
    3,483
    
    
    
    5,006$
    6,186
    
    
    $
    8,777
  As of
    
    
    As ofJune 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Accrued bonuses payable
    
    $
    3,615
    
    
    $
    2,323Accrued commissions payable
    
    
    4,398
    
    
    
    4,919Accrued vacation
    
    
    3,388
    
    
    
    3,505All other accrued employee compensation
payable
    
    
    839
    
    
    
    1,412$
    12,240
    
    
    $
    12,159
 5. Fair Value Measurements
 Fair Value Measurements
  Level 1:
    
    Quoted prices (unadjusted) in active markets that are accessible at the measurement
date for assets or liabilities. The fair value hierarchy gives the highest priority to Level
1 inputs.Level 2:
    
    Observable prices that are based on inputs not quoted on active markets, but
corroborated by market data.Level 3:
    
    Unobservable inputs are used when little or no market data is available. The fair
value hierarchy gives the lowest priority to Level 3 inputs.
   Fair Value Measurements UsingQuoted Prices inAs of
    
    
    Active Market for
    
    
    Significant OtherJune 30,
    
    
    Identical Assets
    
    
    Observable InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)Cash equivalents(1)
    
    $
    33,263
    
    
    $
    
    
    
    $
    33,263Marketable
securities(2)
    
    
    70,741
    
    
    
    39,223
    
    
    
    31,518Total
    
    $
    104,004
    
    
    $
    39,223
    
    
    $
    64,781
 10




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##### Table of Contents



(1)
    
    Cash equivalents consist primarily of money market funds with original maturity dates of
three months or less.(2)
    
    Marketable securities consist of U.S. government and agency securities and marketable equity
securities.   6. Commitments and Contingencies
  7. Stock-Based Compensation
 Common Stock Options
 Share-Based Payment
  Shares Availablefor GrantBalance at December 31, 2008
    
    
    4,995Increase in authorized shares
    
    
    2,000Options granted*
    
    
    (1,199
    )Restricted stock units granted
    
    
    (500
    )Options canceled/forfeited
    
    
    859Balance at June 30, 2009
    
    
    6,155
 
 *
    
    Includes 10 thousand shares issued for services.  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008(Unaudited)
    
    (Unaudited)Expected life from grant date (in years)
    
    
    4.36
    
    
    
    3.76
    
    
    
    4.36
    
    
    
    3.78Risk-free interest rate
    
    
    1.78
    %
    
    
    2.84
    %
    
    
    1.73
    %
    
    
    2.78
    %Expected volatility
    
    
    73
    %
    
    
    51
    %
    
    
    68
    %
    
    
    51
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average estimated fair value of
options granted during the period
    
    $
    4.55
    
    
    $
    4.57
    
    
    $
    3.10
    
    
    $
    4.43
 11




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##### Table of Contents



Weighted-Shares
    
    AverageSubject to
    
    ExerciseOptions
    
    PriceOutstanding
    
    per Share(Shares in thousands)Balance at December 31, 2008
    
    
    12,131
    
    
    $
    6.18Granted
    
    
    1,189
    
    
    
    5.70Exercised (1)
    
    
    (924
    )
    
    
    3.48Canceled/forfeited
    
    
    (859
    )
    
    
    8.66Balance at June 30, 2009
    
    
    11,537
    
    
    $
    8.01
 
 (1)
    
    Includes previously early exercised option awards that vested during the period.   Weighted-AverageGrant-DateOutstanding
    
    Fair Value(Shares in thousands)Balance at December 31, 2008
    
    
    260
    
    
    $
    10.84Granted
    
    
    500
    
    
    
    5.80Vested
    
    
    (3
    )
    
    
    6.22Canceled/forfeited
    
    
    
    
    
    
    Balance at June 30, 2009
    
    
    757
    
    
    $
    7.58
  Stock Plans
  12




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##### Table of Contents



8. Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (2,321
    )
    
    $
    (19,287
    )
    
    $
    (8,003
    )
    
    $
    (38,585
    )Change in foreign currency translation gain (loss), net
    
    
    (130
    )
    
    
    (5
    )
    
    
    (62
    )
    
    
    43Change in unrealized gain (loss) on marketable securities, net
    
    
    (6
    )
    
    
    (39
    )
    
    
    28
    
    
    
    (17
    )Comprehensive loss
    
    $
    (2,457
    )
    
    $
    (19,243
    )
    
    $
    (8,037
    )
    
    $
    (38,611
    )
 9. Net Loss Per Common Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(unaudited)
    
    
    (unaudited)2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (2,321
    )
    
    $
    (19,287
    )
    
    $
    (8,003
    )
    
    $
    (38,585
    )Shares used in computing net loss per
common share, basic and diluted
    
    
    56,754
    
    
    
    52,298
    
    
    
    56,536
    
    
    
    51,973Net loss per common share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.37
    )
    
    $
    (0.14
    )
    
    $
    (0.74
    )
   10. Income Tax
  13




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Overview
    Performance Management Goal Management
   14




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##### Table of Contents



Critical Accounting Policies and Estimates
  Managements Discussion and Analysis of Financial Condition
and Results of Operations
 
    
    Revenue Recognition
    
    Accounting for Commission Payments
    
    Accounting for Stock-Based Awards
    
    Sales and Use Taxes
    
    Allowance for Doubtful Accounts
  15




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##### Table of Contents



Results of Operations
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008Revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    22
    
    
    
    36
    
    
    
    23
    
    
    
    38Gross margin
    
    
    78
    
    
    
    64
    
    
    
    77
    
    
    
    62Operating expenses:Sales and marketing
    
    
    54
    
    
    
    90
    
    
    
    55
    
    
    
    91Research and development
    
    
    16
    
    
    
    24
    
    
    
    16
    
    
    
    23General and administrative
    
    
    14
    
    
    
    24
    
    
    
    17
    
    
    
    27Gain on legal settlement, net
    
    
    0
    
    
    
    3
    
    
    
    0
    
    
    
    1Total operating expenses
    
    
    84
    
    
    
    141
    
    
    
    88
    
    
    
    142Loss from operations
    
    
    (6
    )
    
    
    (77
    )
    
    
    (11
    )
    
    
    (80
    )Interest income and other, net
    
    
    1
    
    
    
    3
    
    
    
    1
    
    
    
    3Loss before provision for income taxes
    
    
    (5
    )
    
    
    (74
    )
    
    
    (10
    )
    
    
    (77
    )Provision for income taxes
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )Net loss
    
    
    (6
    )%
    
    
    (75
    )%
    
    
    (11
    )%
    
    
    (78
    )%
  Revenue
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)Revenue
    
    $
    36,940
    
    
    $
    25,714
    
    
    
    44
    %
    
    $
    72,160
    
    
    $
    49,175
    
    
    
    47
    %
     16




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##### Table of Contents



Cost of Revenue and Gross Margin
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(Dollars in thousands)Revenue
    
    $
    36,940
    
    
    $
    25,714
    
    
    
    44
    %
    
    $
    72,160
    
    
    $
    49,175
    
    
    
    47
    %Cost of revenue
    
    
    7,947
    
    
    
    9,244
    
    
    
    (14
    )%
    
    
    16,436
    
    
    
    18,580
    
    
    
    (12
    )%Gross profit
    
    $
    28,993
    
    
    $
    16,470
    
    
    
    76
    %
    
    $
    55,724
    
    
    $
    30,595
    
    
    
    82
    %Gross margin
    
    
    78
    %
    
    
    64
    %
    
    
    
    
    
    
    77
    %
    
    
    62
    %
     Operating Expenses
 Sales and Marketing
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)Sales and marketing
    
    $
    19,996
    
    
    $
    23,261
    
    
    
    (14
    )%
    
    $
    39,552
    
    
    $
    44,870
    
    
    
    12
    %Percent of revenue
    
    
    54
    %
    
    
    90
    %
    
    
    
    
    
    
    55
    %
    
    
    91
    %
   17




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##### Table of Contents



Research and Development
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)Research and development
    
    $
    6,073
    
    
    $
    6,250
    
    
    
    (2
    )%
    
    $
    11,624
    
    
    $
    11,459
    
    
    
    1
    %Percent of revenue
    
    
    16
    %
    
    
    24
    %
    
    
    
    
    
    
    16
    %
    
    
    23
    %
  General and Administrative
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)General and administrative
    
    $
    5,282
    
    
    $
    6,144
    
    
    
    (14
    )%
    
    $
    12,526
    
    
    $
    13,042
    
    
    
    4
    %Percent of revenue
    
    
    14
    %
    
    
    24
    %
    
    
    
    
    
    
    17
    %
    
    
    27
    %
   Gain on Settlement of Litigation, Net
  Interest Income and Other, Net
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)Interest
income and other,
net
    
    $
    481
    
    
    $
    729
    
    
    
    (34
    )%
    
    $
    613
    
    
    $
    1,369
    
    
    
    (55
    )%Percent of revenue
    
    
    1
    %
    
    
    3
    %
    
    
    
    
    
    
    1
    %
    
    
    3
    %
  Provision for Income Taxes
  18




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##### Table of Contents



Liquidity and Capital Resources
   Six Months Ended June 30,2009
    
    2008(Unaudited)Net cash provided by (used in)
operating activities
    
    $
    3,626
    
    
    $
    (10,374
    )Net cash used in investing activities
    
    
    (38,513
    )
    
    
    (21,405
    )Net cash provided by financing activities
    
    
    2,031
    
    
    
    27,786
 Net Cash Provided By (Used in) Operating Activities
   Net Cash Used in Investing Activities
  Net Cash Provided by Financing Activities
  19




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##### Table of Contents



Capital Resources
  Off-Balance Sheet Arrangements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Sensitivity
   Fair Value of Financial Instruments
  20




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##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
  (b) Changes in Internal Control Over Financial Reporting
  21




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
 A restated description of the risk factors associated with our business is set forth below.
This description includes any material changes to and supersedes the description of the risk
factors included in our Annual Report on Form 10-K for the year ended December 31, 2008 and in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009. The risks and uncertainties
described below are not the only ones facing us. Other events that we do not currently anticipate
or that we currently deem immaterial also may affect our results of operations and financial
condition.
 We have a history of losses and we may not achieve or sustain profitability in the future.
  Current uncertainty in global economic conditions makes it particularly difficult to predict
demand and other related matters and makes it more likely that our actual results could differ
materially from expectations.
  Because we recognize revenue from our customers over the term of their agreements, downturns
or upturns in sales may not be immediately reflected in our operating results.
  22




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##### Table of Contents



Because we recognize revenue from our customers over the term of their agreements but incur
most costs associated with generating customer agreements upfront, rapid growth in our customer
base will result in increased losses.
  Our business depends substantially on customers renewing their agreements and purchasing
additional modules or users from us. Any decline in our customer renewals would harm our future
operating results.
  If our security measures are breached or unauthorized access to customer data is otherwise
obtained, our application suite may be perceived as not being secure, customers may curtail or stop
using our application suite, and we may incur significant liabilities.
  Because our application suite collects, stores and reports personal information of job
applicants and employees, privacy concerns could result in liability to us or inhibit sales of our
application suite.
   We have experienced rapid changes in our organization in recent periods. If we fail to manage
these changes effectively, we may be unable to execute our business plan, maintain high levels of
service or adequately address competitive challenges.
  23




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##### Table of Contents



Failure to adequately expand and ramp our direct sales force and develop and expand our
indirect sales channel will impede our growth.
  The market for our application suite depends on widespread adoption of strategic HR software.
  We have derived a substantial portion of our subscription revenue from sales of our
performance management and goal management modules. If these modules are not widely accepted by new
customers, our operating results will be harmed.
 Performance
Management Goal Management
 The market for on-demand applications is at an early stage of development, and if it does not
develop or develops more slowly than we expect, our business will be harmed.
  
    
    perceived security capabilities and reliability;
    
    perceived concerns about ability to scale operations for large enterprise customers;
    
    concerns with entrusting a third party to store and manage critical employee data; and
    
    the level of configurability of on-demand applications.
  The market in which we participate is intensely competitive, and if we do not compete
effectively, our operating results could be harmed.
  24




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##### Table of Contents



Our quarterly results can fluctuate and, if we fail to meet the expectations of analysts or
investors, our stock price and the value of your investment could decline substantially.
  
    
    our ability to attract new customers;
    
    customer renewal rates;
    
    the extent to which customers increase or decrease the number of modules or users upon
any renewal of their agreements;
    
    the effects of changes in global economic conditions and announcements of economic data
and government initiatives to address the global economic downturn;
    
    the level of new customers as compared to renewal customers in a particular period;
    
    the addition or loss of large customers, including through acquisitions or
consolidations;
    
    the mix of customers between small, mid-sized and enterprise customers;
    
    changes in our pricing policies or those of our competitors;
    
    seasonal variations in the demand for our application suite, which has historically been
highest in the fourth quarter of a year;
    
    the amount and timing of operating expenses, particularly sales and marketing, related to
the maintenance and expansion of our business, operations and infrastructure;
    
    the timing and success of new product and service introductions by us or our competitors
or any other change in the competitive dynamics of our industry, including consolidation
among competitors, customers or strategic partners;
    
    network outages or security breaches;
    
    the timing of expenses related to the development or acquisition of technologies or
businesses and potential future charges for impairment of goodwill from acquired companies;
and
 25




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##### Table of Contents




    
    other general economic, industry and market conditions.
  The market for our application suite among large customers may be limited if they require
customized features or functions that we do not intend to provide.
  We depend on our management team, particularly our Chief Executive Officer and our development
personnel, and the loss of one or more key employees or groups could harm our business and prevent
us from implementing our business plan in a timely manner.
   If we cannot maintain our corporate culture as we grow, we could lose the innovation,
teamwork, passion and focus on execution that we believe contribute to our success, and our
business may be harmed.
  Our growth depends in part on the success of our strategic relationships with third parties.
   We rely on a small number of third-party service providers to host and deliver our application
suite, and any interruptions or delays in services from these third parties could impair the
delivery of our application suite and harm our business.
  26




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##### Table of Contents



If our application suite becomes unavailable or otherwise fails to perform properly, our
reputation will be harmed, our market share would decline and we could be subject to liability
claims.
  
    
    lost or delayed market acceptance and sales;
 
    
    breach of warranty claims;
 
    
    sales credits or refunds to our customers;
 
    
    loss of customers;
 
    
    diversion of development and customer service resources; and
 
    
    injury to our reputation.
    We rely on third-party computer hardware and software that may be difficult to replace or
which could cause errors or failures of our service.
  27




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##### Table of Contents



If we are not able to develop enhancements and new features that achieve market acceptance or
that keep pace with technological developments, our business will be harmed.
   If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
  Because our long-term success depends, in part, on our ability to expand the sales of our
application suite to customers located outside of the United States, our business will be
susceptible to risks associated with international operations.
  
    
    our ability to comply with differing technical and certification requirements outside the
United States;
 
    
    difficulties and costs associated with staffing and managing foreign operations;
 
    
    greater difficulty collecting accounts receivable and longer payment cycles;
 
    
    unexpected changes in regulatory requirements;
 
    
    the need to adapt our application suite for specific countries;
 
    
    difficulties in understanding and complying with local laws, regulations and customs in
foreign jurisdictions;
 
    
    tariffs, export controls and other non-tariff barriers such as quotas and local content
rules;
 
    
    more limited protection for intellectual property rights in some countries;
 
    
    adverse tax consequences;
 
    
    fluctuations in currency exchange rates;
 
    
    restrictions on the transfer of funds; and
 
    
    new and different sources of competition.
 28




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##### Table of Contents



Because competition for our target employees is intense, we may not be able to attract and
retain the quality employees we need to support our planned growth.
  Any failure to protect our intellectual property rights could impair our ability to protect
our proprietary technology and our brand.
   We may be sued by third parties for alleged infringement of their proprietary rights.
  Our use of open source and third-party technology could impose limitations on our ability to
commercialize our application suite.
  29




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##### Table of Contents



Changes in laws and/or regulations related to the Internet or changes in the Internet
infrastructure itself may cause our business to suffer.
   We may acquire other companies or technologies, which could divert our managements attention,
result in additional dilution to our stockholders and otherwise disrupt our operations and harm our
operating results.
   
    
    unanticipated costs or liabilities associated with the acquisition;
 
    
    incurrence of acquisition-related costs, which would be recognized as expense under
Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007) (SFAS 141R),
Business Combinations.
 
    
    diversion of managements attention from other business concerns;
 
    
    harm to our existing business relationships with business partners and customers as a
result of the acquisition;
 
    
    the potential loss of key employees;
 
    
    use of resources that are needed in other parts of our business; and
 
    
    use of substantial portions of our available cash to consummate the acquisition.
   Our business is subject to changing regulations regarding corporate governance and public
disclosure that will increase both our costs and the risk of noncompliance.
  30




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##### Table of Contents



Changes in financial accounting standards or practices may cause adverse, unexpected financial
reporting fluctuations and affect our reported results of operations.
  If there are substantial sales of shares of our common stock, the price of our common stock
could decline.
  If securities or industry analysts do not publish research or publish inaccurate or
unfavorable research about our business, our stock price and trading volume could decline.
  Our directors, executive officers and principal stockholders have substantial influence over
us and could delay or prevent a change in corporate control.
  
    
    delaying, deferring or preventing a change in our control;
 
    
    impeding a merger, consolidation, takeover or other business combination involving us; or
 
    
    discouraging a potential acquirer from making a tender offer or otherwise attempting to
obtain control of us.
  Delaware law and provisions in our restated certificate of incorporation and restated bylaws
could make a merger, tender offer or proxy contest difficult, which could depress the trading price
of our common stock.
  
    
    our Board of Directors is classified into three classes of directors with staggered
three-year terms;
 
    
    only our Chairperson of the Board of Directors, our Chief Executive Officer, our
President or a majority of our Board of Directors are authorized to call a special meeting
of stockholders;
 31




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##### Table of Contents




    
    our stockholders can only take action at a meeting of stockholders and not by written
consent;
 
    
    vacancies on our Board of Directors can be filled only by our Board of Directors and not
by our stockholders;
 
    
    our restated certificate of incorporation authorizes undesignated preferred stock, the
terms of which may be established and shares of which may be issued without stockholder
approval; and
 
    
    advance notice procedures apply for stockholders to nominate candidates for election as
directors or to bring matters before an annual meeting of stockholders.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
 None
 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  1.
    
    To elect two Class II directors, Eric C.W. Dunn and David N. Strohm, to serve for a term of
three years and until their successors are elected and qualified:
 For
    
    WithheldEric C.W. Dunn
    
    
    42,902,516
    
    
    
    307,940David N. Strohm
    
    
    42,993,341
    
    
    
    217,115
 2.
    
    To ratify the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2009:
 For
    
    Against
    
    Withheld43,075,028
    
    132,178
    
    3,250
  
 Item 5.
    
    Other Information
 None
 32




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##### Table of Contents



Item 6.
    
    Exhibits
 EXHIBIT INDEX
 Exhibit No.
    
    Document31.1
    
    Certification of Chief Executive Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 33




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##### Table of Contents



SIGNATURES
  SuccessFactors, Inc.By:
    /s/ Bruce FeltBruce FeltChief Financial Officer
(Principal Financial and Accounting Officer)Date: August 5, 2009 34




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Document31.1
    
    Certification of Chief Executive Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 35