Record total bookings of $37.1 million, up 15% year-over-year 351% increase in annual contract value of new SaaS bookings year-over-year Subscription revenue up 17% year-over-year Added 113 new enterprise customers year-to-date; 41 in the third quarter Cash flow from operations grew 52% year-over-ye

REDWOOD SHORES, Calif. (March 24, 2011) – Saba (NASDAQ:SABA), the premier provider of people systems, today reported financial results for its third fiscal quarter ended February 28, 2011.

“Saba delivered record total revenues, subscription revenue, bookings and deferred revenue in the quarter,” said Bobby Yazdani, Chairman and CEO of Saba. “Exemplified by new enterprise wins at organizations such as Eli Lilly and John Deere, this quarter we once again experienced accelerating adoption of the Saba People Cloud. With our unified and complete set of cloud applications, Saba is well positioned for long-term growth.”

In the quarter, Saba achieved record total bookings of $37.1 million. The growth in total bookings was fueled by a four-fold increase year-over-year in the number of new SaaS transactions over $50,000. Our top 4 transactions in the quarter, and 9 of our 12 largest deals in the quarter, were for Saba People Cloud offerings. The growth in the Saba People Cloud business is driving increased recurring revenue, with year-over-year subscription revenue growth rates increasing from 7% in the first quarter to 10% in the second quarter and now 17% this quarter.

Results for the Third Quarter of Fiscal Year 2011

Revenues: Total revenues increased 14% to a record $30.3 million in the third quarter ended February 28, 2011 from $26.7 million in the same period last year. Subscription revenue increased 17% to a record $16.7 million in the third quarter of fiscal year 2011 over the same period last year.

Total revenues, deferred revenue, and earnings per share were impacted by the accounting changes described below.

Deferred Revenue: Deferred revenue increased 18% to a record $42.4 million at the end of the third fiscal quarter of 2011, from $36.0 million at the end of the same period last year.

Earnings per Share: GAAP earnings per share was breakeven in the third quarter of fiscal year 2011 compared to fully diluted earnings per share of $0.01 in the same period last year. Non-GAAP fully diluted earnings per share was $0.05 in the third quarter of fiscal year 2011 compared to non-GAAP fully diluted earnings per share of $0.07 in the third quarter of last year. These results reflect the acceleration toward Saba People Cloud offerings over traditional license transactions and our continued investment in sales and marketing in support of our strong bookings growth.

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

Share Repurchase: The Company repurchased 201,417 shares of common stock during the quarter for $1.3 million, bringing the total number of shares repurchased under its share repurchase program to 533,643 shares for an aggregate purchase price of approximately $3.1 million. The Company now has approximately $6.9 million remaining under the repurchase program.

Customers: We added 41 new enterprise customers in the quarter including: Eli Lilly, John Deere, Bloomberg, Boston Consulting Group, Infocomm International, Illumina, Mead Johnson, Pioneer Natural Resources, and Tele Tech.

In addition, we expanded our footprint with a number of our existing customers in the quarter including: Sanofi Aventis, Stanford University, Western Australia Department of Education, Saudi Aramco, Novartis, Allina Hospital, Guitar Center, Halliburton, and Chrysler.

Partners: We added 12 partners in the third quarter including Wipro, Pinneast, Dingxum in China and Kbizz in Brazil to join our existing partners IBM, HP, ACS, Comenius, and HCL among others. These partners helped us win a number of deals this quarter, including deals at Eli Lilly, Italian Ministry of Finance, Tim Cellular, and Falabella.

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 any obligations to update these forward-looking statements.

For fiscal year 2011, ending May 31, 2011, we are forecasting bookings to grow in the range of 14% to 16% over fiscal year 2010.

Total revenues are forecasted to be in the range of approximately $117 million to $119 million. We expect our license revenue contribution to account for approximately 16% of total revenues in fiscal year 2011. Due to the anticipated higher revenue contribution from our Saba People Cloud business, we expect GAAP net loss to range from $0.10 to $0.14 per share and non-GAAP fully diluted earnings to be in the range of $0.08 to $0.12 per share.

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

Accounting Changes

Beginning with the third quarter of fiscal year 2011, Saba adopted Financial Accounting Standards Board standard for multiple-element revenue arrangements, ASU 2009-13 for applicable arrangements entered into or materially modified after June 1, 2010 (the beginning of the Company’s fiscal year). ASU 2009-13 allows for separate revenue recognition for professional services, with stand-alone value, performed for cloud customers. Professional services revenue for cloud contracts are now recognized as delivered rather than being recognized over the life of the cloud contract, as in periods prior to June 1, 2010.

Saba also changed its accounting policy for sales commissions related to cloud transactions from expensing as incurred to capitalizing commissions and expensing them ratably over the life of the contract. This change in commission accounting more closely aligns the expense recognition for cloud transactions with the time period in which revenue is recognized and conforms to prevailing industry practice.

Please refer to the attached tables for the impact of these changes on current and prior period results. You can also visit our website at http://investor.saba.com to view the updated balance sheet and income statement for fiscal year 2010 and the first three quarters of fiscal year 2011.

Call

Saba will host a teleconference call and live webcast on Thursday, March 24, 2011 commencing at 2:00 p.m. Pacific Time to discuss its financial results. To join the call, please dial +1.800.230.1092 or +1.612.234.9959. The access code for the conference call is 195348. To listen to the live webcast, please go to the Investor Relations page of the Saba web site at http://investor.saba.com and click on the Live Webcast icon.

A replay of the conference call will be available shortly after its conclusion. The replay dial-in number is +1.800.475.6701 or +1.320.365.3844. The access code for the conference call replay is 195348. The replay can also be accessed from the Investor Relations page of the Saba web site at http://investor.saba.com.

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 expected total revenues, anticipated GAAP and non-GAAP results of operations, Saba’s expectation that adoption of the Saba People Cloud offerings will continue to accelerate and Saba’s belief that it is well positioned for long-term growth. 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 the 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”), and is intended to supplement GAAP financial information, and may be different from non-GAAP measures used by other companies. Other non-GAAP measures provided by the Company in this press release include bookings, defined as total revenues plus the change in total deferred revenue, and annual contract value, defined as the amount of a transaction generally recognized within a twelve month period.

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 people learning, people performance and people collaboration solutions. 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 know how 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 in the cloud (both the public and private) 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.

SABA, the Saba logo, Saba Centra, and the marks relating to Saba products and services referenced herein are either trademarks or registered trademarks of Saba Software, Inc. or its affiliates. All other trademarks are the property of their respective owners.

Source: Saba