Record Q4 Revenues $24.1 million; Up 40% Year Over Year: Record Fiscal Year 2006 Revenues $76.1 Million, Up 24% Callidus Software, a leading provider of Sales Performance Management (SPM) and Enterprise Incentive Management (EIM) software, has announced financial results for the fourth quarter and the year ended December 31, 2006. Total fourth quarter revenues were the highest in the Company's history at $24.1 million, an increase of 40% compared to the fourth quarter 2005. Fourth quarter license revenues were $9.1 million, an increase of 25% compared to the fourth quarter 2005. Fourth quarter maintenance and service revenues were $15.0 million, an increase of 50% compared to the fourth quarter 2005. In addition, hosted on-demand bookings were $1.6 million in the fourth quarter compared to zero in the fourth quarter of 2005. Fourth quarter net income was $0.1 million, or $0.00 per share, and included $1.1 million of stock-based compensation expense. This compares to a net loss of $1.5 million, or ($0.06) per share, for the fourth quarter of 2005 which included a reversal of $0.4 million of stock-based compensation expense. For fiscal year 2006, total revenues were up 24% from $61.5 million in 2005 to $76.1 million. License revenues were up 56% from $17.8 million in 2005 to $27.8 million in 2006. Net loss for fiscal 2006, including $4.8 million of stock-based compensation, was $8.7 million, or ($0.31) per share. This compares to 2005 net loss of $8.6 million, or ($0.33) per share which included $0.5 million of stock-based compensation expense. Stock-based compensation expense increased in 2006 with the adoption of new accounting rules compared to 2005. "Our record revenues in the quarter helped us achieve a record year. License revenues were strong, and I am particularly pleased with our maintenance and service revenues which reflected the hard work we've done to build new services to generate revenue," said Robert Youngjohns, president and CEO. "We continue to build momentum and expand our product offering in Sales Performance Management; we believe there is substantial opportunity for growth in both our traditional enterprise software model and through our hosted on-demand offering," Mr. Youngjohns concluded. Recent Business Highlights * Some of the customers purchasing Callidus solutions in the fourth quarter included, AAA Michigan, ABN Amro, Mentor Graphics, Network Appliance, Nokia, North Carolina Farm Bureau, Proximus, Safety-Kleen Systems, Sun Life Financial, Sybase and UCB Pharma. * Callidus held its sixth annual user conference, Callidus TrueConnection, with record attendance of nearly 500 attendees. The event featured over 50 sessions devoted to best practices in sales performance and incentive compensation. Customer presentations included Allstate, BellSouth, CUNA Mutual, Embarq, HP, HSBC, Network Appliance, Telus Communications and Wachovia. Partners at the conference included Accenture, Actuate, Compensation Technologies, Deloitte Consulting LLP, Hexaware Technologies, IBM, Iconixx Corporation, Saama Technologies and SAP. * Callidus received a "Positive" rating from Gartner, Inc. in the firm's MarketScope for North American Insurance Incentive Compensation Management Applications, 2006. Gartner indicated North American insurance companies are showing renewed interest in upgrading producer compensation systems to better manage and service their producers. The report recognizes Callidus as one of the leading incentive compensation management solution vendors for the insurance industry. Only three companies were ranked "Positive" and no higher rankings were given. * Callidus and SAP completed their first sale of Callidus' products in the fourth quarter, within 90 days of executing the cooperative development agreement. In September, Callidus announced that SAP is authorized to promote and market TrueComp and TrueInformation products in the United States and Canada. In December, Callidus TrueComp became an SAP-endorsed business solution. * Callidus signed an agreement with The TerrAlign Group, Inc. to promote TerrAlign, an advanced territory design and optimization application with the power, speed, and flexibility for the largest, most sophisticated field forces. The ability for Callidus to promote TerrAlign quickly broadens Callidus product offering in the Sales Performance Management space. The TerrAlign Group is also authorized to promote Callidus' industry leading products to their installed based and prospective customers. Callidus completed the first TerrAlign-referred sale of its products in the fourth quarter, within 90 days of executing the partnership agreement. * Callidus announced Callidus Virtual Training, an online virtual training center for administrators and users of Callidus Software's best of breed TrueComp Manager software. Callidus Virtual Training makes TrueComp knowledge accessible anywhere, anytime for global compensation professionals. Q1 2007 Financial Outlook * Total revenues for the first quarter 2007 are expected to be between $20.5 million and $22.0 million. This would represent a 21% to 29% increase compared to first quarter 2006 total revenues of $17.0 million. * Operating expenses, including stock-based compensation, are expected to be between $14.4 million and $14.9 million. * Total stock-based compensation is expected to be approximately $1.2 million.