Good day everyone and welcome to the ServiceSource First Quarter 2014 Earnings Results Conference Call. This call is being recorded. With us today from the company is Mike Smerklo, the Chairman and Chief Executive Officer; Ashley Johnson, the Chief Financial Officer and Erik Bylin from Investor Relations. At this time, I would like to turn the call over to Erik. Please go ahead.

[Technical Difficulty] for joining us. Before we begin, I'd like to remind you that during the course of this webcast and call, we may make projections of or forward-looking statements that reflect our views as of today, and are based upon the information currently available to us. This information will likely change overtime. By discussing our current perception of our market and the future performance of our company and our solutions with you today, we are not undertaking an obligation to provide future updates. We caution you that such statements are just projections, and actual events and results may materially differ from what we discuss. Please refer to documents we have filed with the SEC. These documents contain and identify important factors that could cause actual results to materially differ from those contained in our projections and forward-looking statements. During the course of this call, we will also be discussing certain non-GAAP financial results. We direct your attention to the reconciliation between GAAP and non-GAAP measures, which can be found in today's earnings press release posted on the Investor Relations portion of the ServiceSource website. And with that, I'll turn the call over to Mike.

Thank you, and welcome to our call today. Thanks everyone for joining us. As you saw on our earnings release, we reported results near or below the low end of our guidance for Q1, and Ashley will be sharing revised outlook for the second half of the year. As a results, I want to use time today communicate what we are seeing in our business and what we have learned over the last 18 months accommodating in today’s disappointing announcement. And we also share the direct in the decisive actions we are taking immediately to incorporate those earnings into our operations. Let me start a little bit of history to explain how we got to where we are today. To remind you three years ago, right about the time we went public, we accelerated our journey to build the SaaS offering to address the unique opportunity we saw in the market. 18 months later in early 2013, we announced our flagship renew on demand SaaS applications to serve that market. At the same time, we announced a significant change in our go to market strategy. Historically, we sold our solution on a bundled basis pricing on various managed services, combined with our technology stack on a pay per performance basis. Our decision to unbundle the solution last year reflects or believe then and now that our customers want greater choice as to how do they address their recurring revenue management needs. Beside it showed great early success and customers such as Dell in other Fortune 50 companies embrace the flexibility provided by this unbundled approach. These early proof points gave us confidence to build on this strategy. We continue to invest in our SaaS business and we expanded our initial customer wins across a number of new logos and expansions…

Thanks Mike. I'd like to take a moment to provide some commentary on our quarterly results as well as update guidance for Q2 and fiscal year 2014. I will follow to the same format for guidance as I did for our Q4 earnings results, providing a view to our consolidated business, as well as guidance by segment. There are also slides posted to our IR website, but the details for our guidance as well as GAAP to non-GAAP reconciliations. Before we dive in, please note that this quarter we referenced non-GAAP revenue which excludes the impact of the haircut to deferred revenue from our acquisition of Scout as required by purchase accounting. As a reminder, the remainder of our non-GAAP metrics do not include non-cash expenses related to stock-based compensation the amortization of internally developed software, amortization of intangibles acquired from our acquisition of Scout, acquisition-related costs to non-cash and interest expense related to the issuance of convertible notes. As always you can find a reconciliation of GAAP to non-GAAP metrics in today’s press release and on the Investor Relations section of our website. Now let me turn to our first quarter results. As Mike already highlighted our Q1 results were below our expectations across most key metrics, due to the operational challenges we’ve been facing in our business. Starting with bookings, while we don’t provide updated ACV for managed services on a quarterly basis because this metric is an estimate of how we believe new business will perform. We added several extensions to our managed services portfolio with some of our blue chip customers. We also added approximately $1 million of new SaaS subscription ARR in the quarter which was below our expectations and reflective of some of the operational challenges in our hybrid selling motion Mike alluded to…

(Operator Instructions). Our first question is from Jennifer Lowe of Morgan Stanley. You may begin.

Hey, good afternoon guys. This is Stan Zlotsky sitting in for Jennifer and thank you for taking my question. So to kick it off, I think we all understand that there are some underperformance in the business, but has any of it been as a result of the transition you had in the sales in the head of sales position?

What it is, this is (inaudible) assurance is no. I think that that was a catalyst for some of this discussions we mentioned in the script that we have seen three quarters a row now of slowing ACB growth and that really force us to take a hard look at what’s working and what’s not working and actually being that some of the new sales leadership and some of the strategies we put in place has furthered our thinking on this in a good way, and kind of the fresh set of eyes coming in and looking at what’s working and what’s not working. And that’s really brought us forward as we talked about, taking a harder look in go to market and how do we align the selling motions of the two distinct and unique businesses with value proposition and customer needs. So, in some regards, I think it was a bit of a foreshadowing that made us take a harder look, but also a fresh set of eyes that's probably helped us get a little more clarity and begin us on this path in a different direction.

Okay. So maybe I'm looking at it another way. Is there anything specific, maybe that happened in the quarter that kind of opened your eyes or was just continuation of the trend and you decided that you needed to take action?

I would say Q1 unfortunately was a combination if you will, the some trends that we've been seeing in the business now and we shared with the Street. So, you've seen us talk about [ACB] growth slowing, we sell that in H2 of last year, as I mentioned we're continuing in Q1. This is our first revenue mess as a public company and we also highlighted that this was a lot because of some inconsistency and performance on our managed service business, which has been, I'd say that's certainly something new for us and made us take a harder look. All of which allowed us to step back and as I said it's a bit of a combination, let’s dig into determining the strategy to go forward. The good news here is that, it's clear to us that that market needs both of our solutions. And that we are convinced in the opportunity, in terms of what we're doing in the business, but yes, we need to get focused on how we have locked this potential and now we have netted out to say our focus here is how do you take two businesses and make them both great. And the current reality is they are both sub-optimized.

Okay. And then just a last one for me. How has the churn been within the sales organization and how did the actual sales kick-off go in the quarter? Thank you.

Yes. So on the sales kick-off we mentioned forward I think there was a decent on enthusiasm we brought so forth and really saw messaging in terms of where renew is and that’s helped with the when to release. I think the addition to Scout in terms of the portfolio has been very well received. And I think the partnerships that we have highlighted in the past help us expand our marketplace. So all the things you have heard us mention before really brought good momentum into the sales teams. I would say that on your question it is hard and one of the reasons it accelerated is we have seen a pickup in some sales turnover, it hasn’t been wide spread but we’ve seen some pick up. It’s hard if you had three quarters where you haven’t hit your plan, you’re going to start to see sales team look around I mean it’s a competitive market. And that’s another one of the reasons why we’ve accelerated if you will this plan. We’ve talked in the past with investors that we expected to look to realign our go-to-market at the end of this year. But the urgency of the situation has forced us to bring this forward. And frankly I think we are going to come out with the better solution and I do believe it will be well received by our field once we get the actual plan in place which will take us to next 90 days.

Okay. Thank you, guys.

Thanks Stan.

Thank you. Our next question is from Mark Murphy of Piper Jaffray. You may begin.

Hi, good afternoon. This is Matt Coss on for Mark Murphy. Just continuing on the same subject, as you get through some of the organizational changes and plans that you want to put in place. I mean, do you anticipate an updated guidance metrics to further revise revenue downward and costs upward? I mean the reason I asked about costs going up is if you’re looking at having a separate maybe separate go-to-market for Renew OnDemand and managed services. It seems like there'd be no way around it, or am I thinking about that the right way?

So what I'd say that is we're giving you the best estimate of the business that we have today. And one of the considerations that we're looking at is any incremental investment that would be required to execute against this plan. But as Mike said, we're also looking at where we have frankly just become inefficient and we believe there is opportunity to take costs out. So, at this point, the guidance I've given is the best information that we have.

Okay. And then, on Scout Analytics, is it fair to say that the contribution was roughly between $1.5 million and $2 million in the quarter?

So, we don't break that revenue out separately. So I don't have that at fingertips.

Okay. And then, just finally, is there anything that investors have been that you've been, I guess talking to investors about that maybe they're are missing or just anything that the Street is missing on how we should be thinking about list the transition right now?

Well, I would say, I would net out this way, which is what we know today is again, if there is good news here is that, we don't see it is a market issue and it really is execution related to this hybrid model. We started this at the start of last year, we aimed to go to market with one salesforce, one combined marketing offering and one customer success organization and really we try to take an ala carte message to the market, that has proved challenging. I'd say the other message that is on the positive side is the shift we're seeing in recurring revenue and the interest in what we're doing hasn't dissipated. So, that's a little bit of the conflicting messages that we've been working through, which is how can you continue to see demand and pipeline build, but those rates suffer, and then we also step back and say we have injected a lot of changes in this business, and we unbundled our solution in just four quarter or five quarters, we focus on launching the SaaS business and we’ve highlighted in under invested managed services that is still doing okay, just not great and we acquired a company. So when you step back and think about the change we put in place, it is a little bit hate to see we’re by puller but the market opportunity and the interest we are seeing is still quite strong, our fundamental belief is that our we have not optimized our business or businesses to capitalize on that opportunity. And I think there is a lot of questions we will be getting from investors. So I don’t know if they are surprised, but I think when we come forward with this plan and we focus on how we improve managed services and get that back to great. How we look at cloud and data services really un-tether it from managed services and give it more flexibility and then we’ll miss in the market, how we realign our selling motions and then also benchmark our cost structure, I think when we do those four things and come forward with specific plan I personally hope that investors are enthusiastic about what we are doing. And I am certainly acknowledgeable and continue acknowledge this is going to take time to make that plan a reality.

All right, thanks Mike and Ashley.

Thank you.

Thank you. Our next is from Scott Berg of Northland. You may begin.

This is Mark Rosenkranz in for Scott Berg. Just a few quick questions. You've touched on the operational difficulty in the managed service business. Can you comment a little further on the current pipeline strength in that segment?

Yes, I mean the pipeline strength continues to be good, one other things that we realize is that, we have seen a lot of interest from existing customers, as they bought the bundle solution they enjoying on more than a year and half ago, we are performing well for the most part. We've got global inconsistency and so we continue to see expansion opportunities. We see a still a strong interest in how we provide a solution. And I hope that we can despite this distraction have a strong Q2 I’d highlighted the partnership, the key partnership on the go-to-market side, that we mentioned in the past with Accenture continues to gain momentum. And that's both introducing us to renew opportunities, as well as overall managed service opportunities. And so I net it out to say again, back to my comment I just made it, so a little bit of a bipolar nature which is the pipeline and the market opportunity seem to be as strong as they have ever been. But having a commingled selling motion, marketing message and sales team isn't serving us well and that's really what we are talking about here.

Got it. And then could you just discuss maybe the cross-sell opportunities you're seeing between Renew OnDemand and Scout, if you're seeing anything yet today?

Well, on the cross-sell opportunity, it's probably more across our entire portfolio base and that's one of things we have to work through in this strategic planning process, which is how do you capitalize on our overall customer base, I think there is a lot of interest, when we step back with Scout 90 days in, one of the most exciting part has been, I think the market opportunity interest is even greater than we've thought. We've worked through in the first 90 days of pretty good integration plan, as planned and we'll continue on Q2 and we really need to step up our sales efforts there. So, I think from a interest level, it's good, now it's about taking a company that literally had almost no investment sales trouble charging that, getting that employees and really letting that, hopefully take off in H2.

All right. That is all I have for now. I'll jump back in the queue. Thanks a lot guys.

Thank you. Our next question is from Ed Maguire of CLSA. You may begin.

Hi. Good afternoon. I was wondering if you could talk about what the trends in your underlying MSS contracts are. I noticed the comps are going up for a few reasons and you discussed ACV. But, you know what's the quality of the underlying contracts, and I would say, the mix of business that you are chasing for your customers? Have you seen a change, or is the disruption purely in your view based on the shifts from MSS to Cloud?

Yes, thanks Ed. What I would say on the managed service business another good news point is we saw the very satisfied blue chip customer base and when we highlight some of these performance issues, I again underscore that they’re inconsistent. So there is I think some pockets where we haven’t performed as well as we should have. But for the most part I think our customer satisfaction level is still high it’s evidenced by the 90% retention rate that we mentioned. And we continue to expand with existing customers on both the renew side and the managed services side. So when we really look at this and I think this is what you’re driving at the decrease in the top-line is really dominated by the go-to-market and that’s why it’s our number one priority to redesign. So when we look at this pipeline there is still a lot of interest, I netted out, I’ll net it out this way when I look at a sales rep, a sales rep today service source has to go out, they have to be conversing in on managed service offering, which is a complex to global solution, they have to be conversive and Renew OnDemand and how that’s differentiated is in emerging growth or new market entry. If I ask they also have to be able talk about Scout Analytics and then they have to talk about on-boarding for managed service or professional services for the SaaS applications. That is a lot for anyone rep to be able to message, they also have quotas that are some of these parts if you will and so what I think and that’s why this is our number one priority is that a sales rep is challenged to really have the right selling motion, the speed of execution and to be able to design a solution in a very distinct way with what the customer needs are and this is something we’ve been talking about in the past, but as I said the situation point was in Q1 where we said we really can’t afford to wait week until the end of the year to redesign this let’s bring it forward, let’s take a sense of urgency and let’s get both businesses to great.

Just to follow-up on that, I mean, you guys did a fairly significant rebranding last year. Now a quarter in you have a planning process and implementation process. I realize it is preliminary because you have a lot of work ahead of you, but do you have at least a time horizon about where you are hoping to get all these changes planned and implemented?

Absolutely. We’re not in the, we’re not going to take our time here. I mean we’re going to be thoughtful and robust in our examination. But our commitment to investors is that 90 days we will come back with specific plans, specific timelines and how we’re measuring our success against them. So I think we’ve put a lot of, we’ve done a lot of great things we’ve also done a lot of things to make it complex. And at the core this is really to think about what are we going to do about managed services and how does that business get back to grade. I mentioned declining data, I mentioned go-to-market and then the cost structure we really need to benchmark these businesses, they have been commingled for last three years, look at the benchmarks by each business assess what our peers are doing, in the respective peer groups, and then develop a plan to get to top-line and bottom-line levels that are at or above our peer groups. So very specific scope here, very specific timeline, we know it’s a bit frustrating, because we don’t have all the answers. But we do think that we do know that 90 days will come forward with a very specific plan as how we go forward from here.

Okay, thanks very much, appreciate it.

Thank you. Our next question is from Patrick Walravens of JMP Securities. You may begin.

Hi, actually it's Peter Lowry in for Pat. Just a quick question. It sounds like you're reevaluating your go-to-market with your un-bundled offering. And I was wondering are the challenges that you're addressing, are they more related to the Q1 go-to-market changes or do the challenges pre-date that? It might be hard to delineate, understood.

No, its actually, it’s a really good question, it’s pretty easy to delineate for us. As I mentioned on the call, we just started the unbundling last year, I think we saw some positive results in the early part of last year, but as we highlighted to investors, it was a pretty small sample size and we knew it have continued learning. I think we started to see, I know we start to see deterioration of this which we have highlighted in past calls, so this is not new news, but it just going to bring it all together. We saw deterioration in our close rates in Q3 that trend is continued in Q4 and then came together in Q1 and I’d also add that what it’s been really great about adding Scout to our team and among other reasons is we had a sample set if you will of a standalone SaaS how they think about it, and how they run their business and all the key metrics and selling motions and that helped us get a better handle on the fact that we are trying to bring together as I just went through it add two very different selling motions. And so when we look at it, we said this is why we have to move a little bit faster. So, I think it's been 15 months in the making if you will and learning that, they're just very different businesses and I think the good news is customers want to buy both. They are very good businesses, but to market them, to operate them is challenging in a commingled fashion. So, we're really talking about is moving to more differentiated business unit type approach for running our overall operations.

Okay. Thanks Mike.

Thank you.

Thank you. (Operator Instructions). Our next question comes from Raghavan Sarathy of Dougherty & Company. You may begin. Raghavan Sarathy - Dougherty & Company: Hi, good afternoon and thanks for taking my questions. So Mike, a couple of times you mentioned the close sale as being lower than what you had expected. Can you talk about, from a bookings perspective for the current quarter for the managed services, how does that trended relative to your expectations?

If I understand, when you talk about bookings, you mean in terms of our actual execution of renewals on behalf of our customers? Raghavan Sarathy - Dougherty & Company: I think on ACV.

ACV. No, I would say, as we highlighted in the script. The ACV, we had some nice expansions as I highlighted in the call, but on an overall basis, it's still came in below what we were expecting. So, I would say with both on the SaaS and the managed service side, where the net new signings, whether, it'd be in ACV or ARR. We had a good quarter, but it didn't hit our plan. Raghavan Sarathy - Dougherty & Company: Okay. And then in terms of Scout Analytics, how did that business formulate to your expectations?

Yes, I think it was as expected. It's always hard when you, we purchase this company in January. Right when we're getting ready to without the sales team they’re going through their own planning so taking that into account and really having it only be about 70 days as part of our solution. I highlighted some of the things before I think it contributed as expected, the big push for us now as I mentioned before is really to turbo charge our sales efforts. There is a lot more awareness in that space, I mentioned earlier the market need but also some aggressive start-ups out there trying to just stake their claim in the marketplace, there is a lot more awareness we just got to get the sales and marketing engine really going here. Raghavan Sarathy - Dougherty & Company: Thank you.