Kenexa (Nasdaq: KNXA), a global provider of talent acquisition and retention solutions, today updated its financial guidance for the year ended December 31, 2008.

Based on information as of today, September 10, 2008, the Company is updating its guidance for the third quarter and full year 2008 as follows:

For the third quarter of 2008, the Company currently expects revenue of $54 to $56 million, non-GAAP operating income of $10.3 to $10.6 million and non-GAAP net income per diluted share of $0.35 to $0.36. This is a reduction from the Company’s previous estimate of third quarter revenue of $57 million to $59 million, non-GAAP operating income of $11.4 million to $11.8 million and non-GAAP net income per diluted share of $0.38 to $0.39.

For the full year 2008, the Company currently expects revenue of $213 to $217 million, non-GAAP operating income of $42.6 to $43.4 million and non-GAAP net income per diluted share of $1.43 to $1.46. This is a reduction from the Company’s previous estimate of full year 2008 revenue of $225 million to $230 million, non-GAAP operating income of $45.2 million to $46.2 million and non-GAAP net income per diluted share of $1.52 to $1.55. The guidance for the year ended December 31, 2008 includes a one-time expense of $2.3 million, which will be recognized over the course of the year, associated with the opening of a new office location in India in the first quarter of 2008.

Rudy Karsan, Chief Executive Officer of Kenexa, stated, “The macroeconomic environment continues to be challenging, and as a result we have seen an increased number of project implementations that have slowed or been delayed. The strengthening of the U.S. dollar since the end of the second quarter has created an additional headwind considering the fact that international operations are the fastest growing segment of Kenexa’s overall business.” Karsan added, “In the short-term, we will continue to focus on driving profitability and cash flow, which is evidenced by the fact that our non-GAAP net income per diluted share guidance remains above our initial expectations entering the year. From a longer-term perspective, we continue to be positive about Kenexa’s unique value proposition, strong competitive position and the growth opportunity associated with talent management market.”

Webcast and Conference Call Information

As previously announced, the Company is hosting a one day analyst conference today, which has been webcast beginning at 3:30 p.m. EDT. At approximately 5:15 p.m. EDT, the Company’s CEO and CFO will conduct a presentation and question and answer session that includes the information contained in this press release. The live audio webcast of the presentation will be available on the Investor Relations section of Kenexa’s website (www.kenexa.com) and at: http://viavid.net/dce.aspx?sid=00005616. An archive will also be available for a limited time on the Investor Relations section of Kenexa’s website. Investors may also listen to the analyst conference via telephone by dialing 888-204-4519 (domestic) or 913-312-0722 (international). A replay of the analyst conference will be available through September 17, 2008, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 4927225.

Forward-Looking Statements

This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These statements may contain, among other things, guidance as to future revenue and earnings, operations, expected benefits from acquisitions, prospects of the business generally, intellectual property and the development of products. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Kenexa’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by Kenexa’s quarterly reports on Form 10-Q. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors, Kenexa’s ability to implement business and acquisition strategies or to complete or integrate acquisitions. Kenexa does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Kenexa believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Kenexa’s financial condition and results of operations. The Company’s management uses these non-GAAP results to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company’s Board of Directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in the Company’s industry, many of which present similar non-GAAP financial measures to investors.

Management of the Company does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures.

In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results. Kenexa urges investors and potential investors in the Company’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures which it includes in press releases announcing earnings information, and not to rely on any single financial measure to evaluate the Company’s business.

The Company’s non-GAAP financial measures exclude stock-based compensation and amortization of acquired intangible assets related to the Company’s acquisitions.

About Kenexa

Kenexa (NASDAQ:KNXA) is a global leader in building the world’s greatest workforces using a combination of software, employee research science and business process optimization. Kenexa’s global solutions include applicant tracking, onboarding, recruitment process outsourcing, employment branding, skills and behavioral assessments, structured interviews, performance management, multi-rater feedback surveys, employee engagement surveys and HR Analytics. Kenexa is headquartered in Wayne, PA. (outside Philadelphia). Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.

Note to Editors: Kenexa is a registered trademark of Kenexa Corporation. Other product or service names mentioned herein remain the property of their respective owners.

MEDIA:
Kenexa
Sarah Teten, 800-391-9557
sarah.teten@kenexa.com
OR
The Devon Group
Jeanne Achille, 732-224-1000, ext. 11
jeanne@devonpr.com
OR
INVESTORS:
ICR
Kori Doherty, 617-956-6730
kdoherty@icrinc.com