Subscription Revenue Increased 7% Year-Over-Year to $14.9 Million First Quarter Total Revenues of $26.8 Million, Up 4% Year-Over-Year Added 30 New Enterprise Customers During the First Quarter; Including 3 Transactions Exceeding $1 Million

REDWOOD SHORES, Calif. (September 23, 2010) – Saba (NASDAQ:SABA), the premier provider of people systems, today reported financial results for its first fiscal quarter ended August 31, 2010.

“The first quarter increase in total revenues reflects solid growth in our subscription and professional services revenues,” said Bobby Yazdani, Chairman and CEO of Saba. “Customers’ buying preferences in the quarter validated their enthusiasm for our advanced SaaS offerings and yielded an approximately three-fold increase in the annual contract value of new SaaS bookings over the same period last year.”

First Fiscal Quarter 2011 Results

Revenue. For the first quarter ended August 31, 2010, total revenues increased 3.9% to $26.8 million from $25.8 million in the same period of the prior year. Subscription revenue was $14.9 million, an increase of 6.6% on a year-over-year basis. License revenue was $4.5 million, a decline of 22.1% on a year-over-year basis. Professional services revenue was $7.5 million, an increase of 22.0% on a year-over-year basis.

Gross Margin. Gross margin was 63.1% in the first quarter compared to 64.7% in the same period of the prior year. The gross margin reflects higher levels of subscription revenue and professional service revenue relative to license revenue.

Earnings per Share. First quarter GAAP net loss per share of $0.06 compares to fully diluted earnings per share of $0.03 in the same period of the prior year. Non-GAAP diluted earnings in the first quarter of breakeven compares to $0.07 per share in the first quarter of the prior year.

Non-GAAP results are computed by adjusting GAAP results to exclude the impact of certain items including (i) non-cash amortization of intangibles, (ii) non-cash charges related to share-based compensation expenses, and (iii) restructuring costs. A reconciliation of GAAP to non-GAAP results is included in the financial statements accompanying this press release.

Cash. Cash generated from operations in the first quarter increased to $1.4 million from $0.7 million in the same period of the prior year. Total cash and cash equivalents at the end of the first quarter were $33.2 million, an increase of 53.8% from the end of the first quarter of the prior fiscal year.

Deferred Revenue. Deferred revenue at the end of the first fiscal quarter was $34.4 million, an increase of 11.6% from the end of the first quarter in the prior fiscal year.

Customers. Saba added 30 new customers during the first quarter of fiscal 2011.

Share Repurchase Program. In March 2010, Saba announced that its Board of Directors authorized the use of up to $5.0 million in the aggregate for the repurchase of shares of the company’s common stock. Under the share repurchase program, Saba repurchased 150,000 shares during the fiscal quarter ended August 31, 2010 and had $4.2 million available for future repurchases.

First Quarter Highlights

During the first quarter, Saba signed 30 new customers worldwide, including Cummins, Halliburton, France Telecome Espana Sa, Isuzu Australia, ITC Hotels, New Balance Athletic Shoe and Sony Pictures Entertainment. Saba also expanded existing relationships with a number of organizations worldwide, including: Baker Hughes, Bank of Tokyo, Hartford Financial Services, Mitsubishi Research Institute, Sydney Water, Six Continents Hotels, Saudi Aramco, and Solutia.

In addition, key announcements by Saba since the beginning of the first quarter include:

• Saba announced the general availability of Saba Live, its next-generation cloud-based enterprise business networking solution. Saba Live includes powerful Web 2.0 social tools integrated with Saba Centra Web Conferencing for real time collaboration. Saba Live provides users with rich personal profiles, competency-driven expertise, blended learning, secure groups and workplace analytics to deliver an unprecedented collaboration experience. Saba Live is another proof point that Saba is reinventing the collaborative Learning space.
• Saba announced its inclusion in Forbes Magazine’s ranking of “Most Trustworthy Companies” for 2010. Saba has been determined to exhibit transparent accounting and prudent management by Audit Integrity, an independent financial analytics company. The ranking is based upon more than 100 factors used to assess corporate accounting and management practices.

• Saba also announced People 2010

Business Outlook

The following statements are based on current expectations as of the date of this release. These statements are forward-looking, and actual results may differ materially. Saba does not undertake to update these forward-looking statements in any way or for any reason.

For fiscal 2011, ending May 31, 2011, we confirm our prior guidance of total revenues between $121 million and $124 million, GAAP net earnings of $0.15 to $0.19 per share on a fully diluted basis and non-GAAP net earnings of $0.34 to $0.38 per share on a fully diluted basis. Due to customers’ seasonal spending patterns, Saba continues to expect that revenues, earnings and cash flows will be weighted more heavily towards the second half of the fiscal year.

The fiscal year 2011 non-GAAP outlook excludes non-cash amortization of intangibles and charges related to stock-based compensation expenses.

Conference Call

Saba will host a teleconference on Thursday, September 23, 2010, commencing at 2:00 p.m. Pacific Time, to discuss fiscal year 2011 first quarter financial results. All interested parties may listen by dialing 800.288.8961 or +1.612.332.0345, access code 170968, or by tuning into the webcast at http://investor.saba.com.

A replay of the call is scheduled to be available by calling 800.475.6701 or +1.320.365.3844 and entering code 170968, after 5:30 p.m. Pacific Time on September 23, 2010 through 11:59 p.m. Pacific Time on October 21, 2010.

Safe Harbor

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation: statements regarding Saba’s business outlook, including total revenues, anticipated GAAP and non-GAAP net earnings per share and Saba’s expectation that revenues, earnings and cash flows will be weighted more heavily towards the second half of fiscal 2011. Saba’s actual results could differ materially from those expressed in any forward-looking statements. Risks and uncertainties Saba faces that could cause results to differ materially include risks associated with: dependence on growth of the markets for Saba’s products, fluctuations in Saba’s quarterly results, variability in the mix of Saba’s license, subscription and professional services revenues and bookings, dependence on acceptance of Saba’s products by customers and channel partners, the success of Saba’s alliances and partnerships, fluctuation in customer spending, any changes in the length of Saba’s sales cycle, new product offerings or pricing changes introduced by our competitors, technological changes that could make our products less attractive to customers or require new product development investments, dependence on new product introductions and enhancements in order to meet the changing needs of our customers and markets, and potential software defects. Readers should also refer to the section entitled “Risk Factors” in Form 10-K for the fiscal year ended May 31, 2010 and similar disclosures in subsequent reports filed with the SEC. The forward-looking statements and risks stated in this press release are based on information available to Saba today. Saba assumes no obligation to update them.

Non-GAAP Financial Information

Saba has provided its non-GAAP net income and net income per share data in this press release as additional information for investors. This measure is not in accordance with, or an alternative to, generally accepted accounting principles (“GAAP”), is intended to supplement GAAP financial information, and may be different from non-GAAP measures used by other companies. Saba believes that the presentation of non-GAAP financial measures provides useful information to investors regarding its results of operations. Saba believes it also provides an alternative method of assessing Saba’s operating results that Saba believes is focused on its core on-going operations and may allow investors to perform additional meaningful period-to-period comparisons of its operating results. In addition, Saba’s management team uses these measures for reviewing its financial results, and for budget and planning purposes.

About Saba

Saba (NASDAQ:SABA) provides a new class of people systems that combine enterprise learning, people management and collaboration technologies. Today’s people-driven enterprises are using Saba’s solutions to mobilize and engage people around new strategies and initiatives, align and connect people to accelerate the flow of business, and cultivate, capture and share individual and collective knowhow to effectively compete and succeed.

Saba’s premier customer base includes major global organizations and industry leaders in financial services, life sciences and healthcare, high tech, automotive and manufacturing, retail, energy and utilities, packaged goods, and public sector organizations. Saba’s solutions are available both on-premise and in the cloud, and are underpinned by global services capabilities and partnerships encompassing strategic consulting, comprehensive implementation services, and ongoing worldwide support.

Headquartered in Redwood Shores, California, Saba has offices on five continents. For more information, please visit www.saba.com or call +1-877-SABA-101 or +1-650-779-2791.

Source: Saba