SOURCE: Taleo Corporation

Taleo Corporation

October 28, 2009 16:10 ET

Taleo Delivers Strong Third Quarter Results

Posts Record Revenue of $50.7 Million; Generates $13.6 Million in Cash Flow From Operations; Adds More Than 40 New Performance Management Customers; Increases Sales Across Enterprise Segment for Full Talent Management Suite of Solutions

DUBLIN, CA--(Marketwire - October 28, 2009) - Taleo Corporation (NASDAQ: TLEO), the leading provider of on demand talent management solutions, today announced its financial results for the quarter ended September 30, 2009.

Summary quarterly highlights:

--  GAAP revenues of $50.7 million for the third quarter of 2009, an
    increase of 9% year-over-year.
--  GAAP application revenue increased to $44.9 million, growth of 20%
    year-over-year and 5% quarter-over-quarter.
--  GAAP net loss of $(1.1) million or $(0.04) per share.
--  Non-GAAP net income of $6.7 million, or $0.20 per fully diluted share.
--  Cash flow from operations of $13.6 million; total year-to-date cash
    flow from operations increases to $30.1 million.
--  Signed 167 new customers, including 17 new Taleo Enterprise customers
    and 150 new Taleo Business Edition customers.
--  Closed 7 large enterprise deals with annual contract values in excess
    of $250,000.
--  Signed more than 40 new performance management customers across both
    enterprise and SMB segments, increasing the company's total performance
    management customer base to more than 160.
--  Announced an agreement to acquire the remaining shares of strategic
    partner Worldwide Compensation, Inc.
--  Launched the Talent Grid 'cloud community' set of online exchanges to
    the market, and announced plans to deliver Taleo 10 in the fourth quarter
    of 2009.
    

"Strategic talent management is driving innovation, growth and business success for companies of all sizes," said Michael Gregoire, Taleo Chairman and CEO. "Those that are locking in their growth plans for 2010 are choosing Taleo to transform how they optimize their businesses by using the most advanced talent management system, Taleo. An example of this is Harris Teeter, the grocery store chain, which standardized their recruiting on Taleo in Q2 2008, and based on the positive impact on their business, expanded their use of Taleo this quarter."

Significant achievements included:

--  Acquired 17 new enterprise customers, and closed 7 large enterprise
    deals with annual contract values in excess of $250,000. New enterprise
    customers include: Cognizant Technology Solutions, Shaw Industries, U.S.
    Cellular, Lifespan, Xcel Energy, Itron, Atmos Energy, and Centegra Health
    System.
--  Signed 150 new small and medium-sized customers. Taleo Business
    Edition, a talent management solution targeted at companies with less than
    5,000 employees, now has more than 3,500 customers. New Taleo Business
    Edition customers include: Skymall, Medical Management Resource Group,
    Wesley Homes, vCustomer Corp., RQ Construction, Lakeside Schools, TIB Bank,
    Talyst and Communications Infrastructure Group.
--  Received Human Resource Executive magazine's Product of the Year award
    for Taleo Perform, the company's performance management solution for small-
    to-medium sized businesses.
--  Continued momentum in enterprise talent management suite sales. Sales
    this quarter included both new and existing customers, with several long-
    standing Taleo recruiting customers choosing to power their talent
    management initiatives with Taleo's performance management solutions and
    new customer Penske Truck Leasing selecting Taleo to start with a unified
    offering.
--  Strong quarter in new performance management deals across both
    enterprise and SMB segments. Taleo now has more than 160 performance
    management customers, up from roughly 120 at the end of the second quarter
    of 2009. New enterprise performance management customers include: RSC
    Equipment Rental, SavaSeniorCare, Talisman Energy and a Fortune 500
    customer closed through IBM.
--  Hosted its annual user conference, Taleo WORLD, in Las Vegas to its
    largest audience of customers, prospects, partners and industry
    influencers.
--  Announced plans to deliver to market a complete Talent Management
    suite of solutions for enterprise and small-to-medium sized businesses,
    called Taleo 10. The enterprise solution includes a unified interface
    across all components, and new capabilities in recruiting, development
    planning, and also mobile/social networking enablement. The SMB solution
    will add compensation management functionality. Taleo 10 is expected to be
    generally available in the fourth quarter of 2009.
--  Launched the Talent Grid to offer customers and partners online access
    to a broad collection of talent management domain expertise.  The Talent
    Grid is comprised of the Knowledge Exchange, providing an online customer
    community for best practices; the Solution Exchange, providing a wide range
    of partner solutions; and the Talent Exchange, providing a global network
    of candidates and careers.
--  Announced plans to acquire the remaining shares of strategic partner
    Worldwide Compensation, Inc., adding best-in-class compensation management
    functionality to our suite of unified talent management applications.
--  Continued to achieve Vurv customer conversions and commitments to
    convert to Taleo. Recent Vurv customers committing to Taleo include:
    Northrup Grumman, Perot Systems, Magellan Health Services, Adventist Health
    System, United Stationers, Harland Clarke and Total System Services.
    

Taleo delivered the following financial results:

Revenue: Total revenue for the third quarter was $50.7 million, representing an increase of 9% on a year-over-year basis. Application revenue for the third quarter was $44.9 million, an increase of 20% on a year-over-year basis.

Net Income (Loss) and Net Income (Loss) Per Share to Common Stockholders: Net loss was $(1.1) million for the third quarter, compared to a net loss of $(5.9) million for the same period last year. Net loss includes $3.6 million in amortization expense related to the acquisition of Vurv, stock-based compensation expense of $3.1 million and $1.1 million of other expense related to the write-off of the Worldwide Compensation purchase option. Net loss per share was $(0.04) for the third quarter of 2009 based on 30.9 million weighted average shares outstanding compared to a net loss per share of $(0.20) for the same period in 2008 based on 29.4 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net income was $6.7 million for the third quarter of 2009, compared to non-GAAP net income of $5.1 million in the same period last year. Non-GAAP net income includes amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for the Vurv acquisition, and excludes stock-based compensation expense, amortization of acquired intangibles, restructuring and severance expense and the write-off of the Worldwide Compensation purchase option. Non-GAAP net income per fully diluted share was $0.20 for the third quarter of 2009 based on 33.9 million weighted average shares outstanding compared to non-GAAP net income per fully diluted share of $0.15 for the same period in 2008 based on 33.3 million weighted average shares outstanding.

Conference Call Details

The company will issue a pre-recorded webcast and transcript of prepared remarks regarding the quarter at 1:30pm PDT (4:30pm EDT), both of which will be available on the Investor Relations section of www.taleo.com. The company will then host a live Q&A call at 2:30pm PDT (5:30pm EDT), with Michael Gregoire, Chairman and CEO, and Katy Murray, CFO. This call will also be available via webcast on the Investor Relations section of www.taleo.com.

About Taleo

Taleo Corporation (NASDAQ: TLEO) is the leading global provider of on-demand, unified talent management software solutions. Our goal is to help our customers improve business results through better talent management. We offer recruiting, performance management, compensation, internal mobility, onboarding, analytics and other software solutions that help our customers attract and retain high quality talent, more effectively match workers' skills to business needs, reduce the time and costs associated with manual and inconsistent processes, ease the burden of regulatory compliance, and increase workforce productivity through better alignment of workers' goals and career plans with corporate objectives.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Taleo's future financial performance, new product development, the release of Taleo 10, market growth, the demand for Taleo's solutions, the impact of Taleo's acquisition of Vurv, and general business conditions. Any forward-looking statements contained in this press release are based upon Taleo's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Taleo's expectations as of the date of this press announcement. Subsequent events may cause these expectations to change, and Taleo disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Further information on potential factors that could affect actual results is included in Part II, Item 1A of Taleo's Quarterly Report on Form 10-Q/A, for the period ending June 30, 2009, as filed with the SEC on October 27, 2009, and in other reports filed by Taleo with the SEC.

Non-GAAP Financial Measures

Taleo has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP revenue, non-GAAP net income and non-GAAP net income per share. Taleo uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Taleo's ongoing operational performance. Taleo 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 Taleo's industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP revenue discussed above includes amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for the Vurv acquisition, and other non-GAAP measures include amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for the Vurv acquisition and exclude costs associated with the restatement-related revenue review, stock-based compensation expense, amortization of acquired intangibles, restructuring and severance expense, non-cash tax valuation adjustment and non-cash income tax audit settlement. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure as detailed above. As previously mentioned, a reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release.

A historical reconciliation of GAAP to non-GAAP financial measures for past periods can be located on the investor relations section of www.taleo.com (see www.taleo.com -- About Taleo -- Investor Relations -- Restated Financials GAAP & Non-GAAP Reconciliation, and www.taleo.com -- About Taleo -- Investor Relations -- Quarterly Report to Restated Financials GAAP & Non-GAAP Reconciliation).

                            Taleo Corporation
              Condensed Consolidated Statements of Operations
             (All amounts in thousands except per share data)
                                (Unaudited)

                                    Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

                                                 As                  As
Revenue:                                      restated            restated
                                              --------            --------
    Application                     $ 44,870  $ 37,469  $128,988  $ 98,362
    Consulting                         5,866     9,177    18,924    22,015
                                    --------  --------  --------  --------
      Total revenue                   50,736    46,646   147,912   120,377
                                    --------  --------  --------  --------

Cost of revenue (note 1):
    Application                        9,838     9,106    28,620    21,690
    Amortization of acquired
     intangibles                         761       760     2,281       831
                                    --------  --------  --------  --------
      Total cost of application
       revenue                        10,599     9,866    30,901    22,521
    Consulting                         6,203     7,245    18,758    18,607
                                    --------  --------  --------  --------
      Total cost of revenue           16,802    17,111    49,659    41,128
                                    --------  --------  --------  --------

                                    --------  --------  --------  --------
Gross profit                          33,934    29,535    98,253    79,249
                                    --------  --------  --------  --------
Operating expenses (note 1):
    Sales and marketing               13,671    13,844    41,103    36,289
    Sales - amortization of
     acquired intangibles              2,810     2,035     8,433     2,182
    Research and development           8,666     8,444    26,138    22,948
    General and administrative         8,486     9,430    25,742    23,147
    Restructuring and severance            -     1,330         -     1,611
                                    --------  --------  --------  --------
      Total operating expenses        33,633    35,083   101,416    86,177
                                    --------  --------  --------  --------

                                    --------  --------  --------  --------
Income / (loss) from operations          301    (5,548)   (3,163)   (6,928)
                                    --------  --------  --------  --------
Other income / (expense):
    Interest income                       52       261       246     1,556
    Interest expense                     (42)      (58)     (130)     (144)
    Worldwide Compensation purchase
     option write-off                 (1,084)        -    (1,084)        -
                                    --------  --------  --------  --------
      Total other income / (expense)  (1,074)      203      (968)    1,412
                                    --------  --------  --------  --------

Loss before provision / (benefit)
 for income tax                         (773)   (5,345)   (4,131)   (5,516)
    Provision / (benefit) for
     income taxes                        329       561      (831)       89
                                    --------  --------  --------  --------

Loss attributable to Class A common
 stockholders                       $ (1,102) $ (5,906) $ (3,300) $ (5,605)
                                    ========  ========  ========  ========
Loss per share attributable to
 Class A common stockholders -
 basic and diluted                  $  (0.04) $  (0.20) $  (0.11) $  (0.21)
                                    ========  ========  ========  ========


Weighted average Class A common
 shares - basic and diluted           30,883    29,388    30,540    26,818
                                    ========  ========  ========  ========

NOTES
1. Includes stock-based
 compensation expense
      Application cost of revenue   $    189  $    158  $    480  $    428
      Consulting cost of revenue         346       252       875       704
                                    --------  --------  --------  --------
      Cost of revenue subtotal           535       410     1,355     1,132

      Sales and marketing operating
       expense                           846       858     2,178     2,470
      Research and development
       operating expense                 441       380     1,114     1,071
      General and administrative
       operating expense               1,241     1,354     3,518     3,795
                                    --------  --------  --------  --------
      Operating expense subtotal       2,528     2,592     6,810     7,336

                                    --------  --------  --------  --------
   Total stock-based compensation
    expense                         $  3,063  $  3,002  $  8,165  $  8,468
                                    ========  ========  ========  ========


                            Taleo Corporation
         Condensed Consolidated Statements of Operations (Continued)
             (All amounts in thousands except per share data)

Reconciliation of GAAP net loss and
 non-GAAP net income:
                                    Three Months Ended   Nine Months Ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
                                                 As                  As
                                              restated            restated
                                              --------            --------
GAAP net loss reported above        $ (1,102) $ (5,906) $ (3,300) $ (5,605)
Add back:

Revenue
    Non-GAAP application revenue          53     3,619       825     3,619
    Non-GAAP service revenue               -       233        13       233
                                    --------  --------  --------  --------
      Total  Non-GAAP revenue             53     3,852       838     3,852

Expenses
    Revenue review expense                 -         -     1,631         -
    Stock-based compensation
     expense                           3,063     3,002     8,165     8,468
    Amortization of acquired
     intangibles                       3,571     2,795    10,714     3,013
    Restructuring and severance
     expense                               -     1,330         -     1,611
    Non-cash tax valuation
     adjustment                            -         -         -      (332)
    Non-cash income tax audit
     settlement                            -         -    (1,335)        -
                                    --------  --------  --------  --------
                                       6,634     7,127    19,175    12,760

Other Expense - Worldwide
 Compensation purchase option
 write-off                             1,084         -     1,084         -

                                    --------  --------  --------  --------
Non-GAAP net income                 $  6,669  $  5,073  $ 17,797  $ 11,007
                                    ========  ========  ========  ========

Non-GAAP net income per share
    Basic                           $   0.22  $   0.17  $   0.58  $   0.41
                                    ========  ========  ========  ========
    Diluted                         $   0.20  $   0.15  $   0.55  $   0.36
                                    ========  ========  ========  ========


Reconciliation of basic and fully
 diluted share count:
                                    --------  --------  --------  --------
Basic                                 30,883    29,388    30,540    26,818
                                    --------  --------  --------  --------
Add:   Weighted Average - Series B
 common stock                              -       462         -       495
    Weighted Average - options and
     unreleased restricted stock       2,715     2,940     1,390     2,954
    Weighted Average - Vurv escrow
     shares                              300       478       418       160
                                    --------  --------  --------  --------
Diluted                               33,898    33,268    32,348    30,427
                                    --------  --------  --------  --------


                            Taleo Corporation
                  Condensed Consolidated Balance Sheets
                        (All amounts in thousands)
                                (Unaudited)

                                              September 30,  December 31,
                                                  2009           2008
                                              -------------  -------------
ASSETS                                                         As restated
                                                             -------------
   Current assets:
      Cash and cash equivalents               $      76,513  $      49,462
      Restricted cash                                   617            521
      Accounts receivable, net                       46,155         49,167
      Prepaid expenses and other current
       assets                                        10,622         10,977
      Investment credits receivable                   6,973          6,087
                                              -------------  -------------
      Total current assets                          140,880        116,214

   Property and equipment, net                       24,198         25,250
   Restricted cash                                      210            515
   Goodwill                                          91,027         91,626
   Other intangibles, net                            34,116         44,802
   Other assets                                       5,470          4,782
                                              -------------  -------------
   Total assets                               $     295,901  $     283,189
                                              =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
      Accounts payable and accrued
       liabilities                            $      21,094  $      24,877
      Deferred revenue - application services
       and customer deposits                         55,714         54,421
      Deferred revenue - consulting services         16,841         16,221
      Capital lease obligation, short-term              573          1,101
                                              -------------  -------------
      Total current liabilities                      94,222         96,620

   Long-term deferred revenue - application
    services and customer deposits                      631            777
   Long-term deferred revenue - consulting
    services                                         12,424          9,594
   Other liabilities                                  4,239          3,258
   Capital lease obligation, long-term                  162            519
                                              -------------  -------------
   Total liabilities                                111,678        110,768
                                              -------------  -------------

   Stockholders' equity:
      Capital stock                                       -              -
      Additional paid-in capital                    264,224        250,168
      Accumulated deficit                           (81,622)       (78,322)
      Treasury stock                                   (543)             -
      Accumulated other comprehensive income          2,164            575
                                              -------------  -------------
      Total stockholders' equity                    184,223        172,421
                                              -------------  -------------
   Total liabilities and stockholders' equity $     295,901  $     283,189
                                              =============  =============

                            Taleo Corporation
                  Consolidated Statements of Cash Flows
                        (All amounts in thousands)
                                (Unaudited)

                                                    Nine Months Ended
                                                      September 30,
                                                  2009           2008
                                              -------------  -------------
                                                               As restated
                                                             -------------
Cash flows from operating activities:
 Net loss                                     $      (3,300) $      (5,605)
 Adjustments to reconcile net loss to net
  cash provided by operating activities:
  Depreciation and amortization                      20,581         10,582
  Loss on disposal of fixed assets                       17              -
  Amortization of tenant inducements                   (114)          (114)
  Tenant inducements from landlord                        6              -
  Stock-based compensation expense                    8,165          8,468
  Director fees settled with stock                      186            172
  Worldwide Compensation purchase
   option write-off                                   1,084              -
  Bad debt expense                                      704            259
  Changes in working capital accounts:
   Accounts receivable                                2,248         (4,539)
   Prepaid expenses and other assets                   (845)        (2,483)
   Investment credit receivable                        (112)        (2,055)
   Accounts payable and accrued liabilities          (2,744)        (3,413)
   Deferred revenue & customer deposits               4,175         12,412
                                              -------------  -------------
         Net cash provided by operating
          activities                                 30,051         13,684
                                              -------------  -------------
Cash flows from investing activities:
 Purchases of property and equipment                 (7,720)        (5,853)
 Restricted cash - decrease                             210            210
 Purchase of investment                                   -         (2,498)
 Acquisition of business, net of cash
  acquired                                                -        (49,646)
                                              -------------  -------------
         Net cash used in investing
          activities                                 (7,510)       (57,787)
                                              -------------  -------------
Cash flows from financing activities:
 Principal payments on loan and capital lease
  obligations                                        (1,376)          (344)
 Treasury stock acquired to settle employee
  withholding liability                                (661)          (791)
 Excess tax benefit from stock options                  257              -
 Proceeds from stock options exercised and
  ESPP shares                                         5,566          8,221
                                              -------------  -------------
         Net cash provided by financing
          activities                                  3,786          7,086
                                              -------------  -------------
Effect of exchange rate changes on cash and
 cash equivalents                                       724           (114)
                                              -------------  -------------
Increase in cash and cash equivalents                27,051        (37,131)
Cash and cash equivalents:
 Beginning of period                                 49,462         86,135
                                              -------------  -------------
 End of period                                $      76,513  $      49,004
                                              =============  =============
Supplemental cash flow disclosures:
 Cash paid for interest                       $          54  $          33
                                              -------------  -------------
 Cash paid for income taxes                   $         273  $         207
                                              -------------  -------------
Supplemental disclosure of non-cash financing
 and investing activities:
  Property and equipment purchases included
   in accounts payable and accrued
   liabilities                                $       1,530  $       2,691
  Class B common stock exchanged for Class A
   common stock                               $           -  $          96
  Stock and stock options issued in
   connection with Vurv acquisition           $           -  $      75,189


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