SOURCE: Taleo Corporation

Taleo Corporation

February 10, 2010 16:05 ET

Taleo Reports Record Fourth Quarter and Fiscal Year 2009 Results

Q4 Revenue of $50.5 Million; Record Q4 GAAP and Non-GAAP Fully Diluted EPS of $0.13 and $0.23; Record Q4 Cash Flow From Operations of $20.6 Million; 186 New Customers Added in Q4; Posts 25% Year-Over-Year Growth in Application Revenue

DUBLIN, CA--(Marketwire - February 10, 2010) - Taleo Corporation (NASDAQ: TLEO), the leading provider of on demand talent management solutions, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.

"Like many of our world-class customers, Taleo invested through the recession in our people and in product innovation, and we are now stronger competitively and financially," said Michael Gregoire, Taleo Chairman and CEO. "We are in a tremendous position to take full advantage of the recovery, and we plan to keep up our blistering pace of innovation to help our customers drive their own re-invention and growth."

Annual business highlights included:

--  Product: Launched Taleo10™ Talent Management Solution for Enterprise
    and Small and Medium sized business.

--  Community: Delivered Talent Grid™, a set of three communities with
    online access to Taleo's ecosystem of customers, partners and
    candidates.

--  Acquisition: Announced a definitive agreement to acquire Worldwide
    Compensation, Inc. the leading independent provider of global
    compensation management technology. The acquisition was completed on
    January 1, 2010.

--  Accolades: Industry analysts from Gartner, Bersin & Associates and IDC
    lauded Taleo for Leadership and Innovation in their respective
    Recruiting, Performance Management and Talent Management market
    reports; Performance Management received "HR product of the year" CODiE
    Award and "Top 10 HR Products of the Year" from Human Resource
    Executive Magazine; and Taleo's Service and Support Organization
    received "Rated Outstanding" certification from the Service and
    Support Professionals Association and the Fall 2009 STAR Award for
    Service Excellence from the Technology Services Industry Association.

Fourth quarter highlights included:

--  GAAP revenues of $50.5 million, an increase of 5% year-over-year.
--  GAAP application revenue of $44.5 million, an increase of 11%
    year-over-year.
--  GAAP net income of $4.6 million or $0.13 per fully diluted share.
--  Non-GAAP net income of $8.6 million, or $0.23 per fully diluted share,
    an increase of 44% year-over-year.
--  Cash flow from operations of $20.6 million and free cash flow of
    $19.2 million.
--  Net cash at December 31, 2009 of more than $244 million.
--  Signed 186 new customers, including 18 new Taleo Enterprise customers
    and 168 new Taleo Business Edition customers.
--  Closed 7 large enterprise deals with annual contract values in excess
    of $250,000.
--  Signed more than 45 new performance management customers, increasing
    total performance management customer base to more than 200.

Fourth quarter customer momentum included:

--  New enterprise customers include: Associated Bank, Equifax, Kingfisher
    Plc, RTI International, Teradata Operations, Cook County, Illinois,
    Thales UK, Amalgamated Holdings Limited and Tyco International
    Management Company.
--  New small and medium-sized customers (companies with up to 5,000
    employees) include: Provenance Hotels, Association for the Blind and
    Vision Impaired, Teach for All, Rand McNally, Prosperity Bank, Munroe
    Regional Medical Center, JM Smucker, Delaware State University, Sherwin
    Williams, Janney Montgomery Scott, Warner Chilcott, and Alliance
    Building.
--  Continued momentum in joint Recruiting and Performance Management suite
    deals with several customers, including: American Life Insurance
    Company, Navteq, Acxiom, and the City of Edmonton. Additionally,
    existing customer VF Corporation added Compensation Management to its
    existing Taleo solution.

2009 highlights included:

--  GAAP revenues of $198.4 million, an increase of 18% year-over-year.
--  GAAP application revenue of $173.5 million, an increase of 25%
    year-over-year.
--  GAAP net income of $1.3 million or $0.04 per fully diluted share.
--  Non-GAAP net income of $26.4 million, or $0.77 per fully diluted
    share, an increase of 48% year-over-year.
--  Cash flow from operations of $50.7 million and free cash flow of
    $41.5 million.
--  Signed 664 new customers, including 65 new Taleo Enterprise customers
    and 599 new Taleo Business Edition customers.
--  Closed 25 large enterprise deals with annual contract values in excess
    of $250,000.
--  Application revenue backlog increases to more than $350 million as of
    December 31, 2009.

Taleo delivered the following financial results for the fourth quarter of 2009:

Revenue: Total revenue for the fourth quarter was $50.5 million, an increase of 5% on a year-over-year basis. Application revenue for the fourth quarter was $44.5 million, an increase of 11% on a year-over-year basis.

Net Income (Loss) and Net Income (Loss) Per Share to Common Stockholders: Net income was $4.6 million for the fourth quarter, compared to a net loss of $(2.5) million for the same period last year. Net income includes $3.6 million in amortization expense related to the acquisition of Vurv, $2.9 million in stock-based compensation expense and a gain of $2.5 million related to settlement of Vurv escrow claims. Net income per fully diluted share was $0.13 for the fourth quarter of 2009, based on 35.6 million fully diluted shares outstanding, compared to a net loss per share of $(0.08) for the same period in 2008, based on 29.8 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net income was $8.6 million for the fourth quarter of 2009, compared to non-GAAP net income of $5.0 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 gain associated with the settlement of the Vurv escrow account. Non-GAAP net income per fully diluted share was $0.23 for the fourth quarter of 2009 based on 37.5 million fully diluted weighted average shares outstanding, compared to non-GAAP net income per fully diluted share of $0.16 for the same period in 2008 based on 31.1 million fully diluted 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 PST (4:30pm EST), 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 PST (5:30pm EST), 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 (NASDAQ: TLEO) is the leader in on demand unified talent management solutions that empower organizations of all sizes to better understand and engage their best talent for improved business performance. More than 4,400 organizations use Taleo for talent acquisition, performance and compensation management, including 47 of the Fortune 100 and over 3,700 small and medium sized businesses across 200 countries and territories. Known for its strong configurability and usability, Taleo runs on a world-class infrastructure and offers 99.9% availability. Taleo's Talent Grid harnesses the resources of the Taleo community of customers, candidates, and partners to power the talent needs of companies around the world.

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 benefits from the use of Taleo's solutions, the impact of Taleo's acquisition of Worldwide Compensation, Inc. 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, as filed with the SEC on November 4, 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, non-cash income tax audit settlement, the gain associated with the settlement of the Vurv escrow account and the write-off of the Worldwide Compensation purchase option. 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.

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

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Revenue:
    Application                 $  44,507  $  40,266  $ 173,495  $ 138,628
    Consulting                      5,993      7,775     24,917     29,791
                                ---------  ---------  ---------  ---------
      Total revenue                50,500     48,041    198,412    168,419
                                ---------  ---------  ---------  ---------

Cost of revenue (note 1):
    Application                     9,816      9,094     38,435     30,784
    Amortization of acquired
     intangibles                      761        760      3,043      1,592
                                ---------  ---------  ---------  ---------
      Total cost of application
       revenue                     10,577      9,854     41,478     32,376
    Consulting                      5,856      6,662     24,614     25,269
                                ---------  ---------  ---------  ---------
      Total cost of revenue        16,433     16,516     66,092     57,645
                                ---------  ---------  ---------  ---------

                                ---------  ---------  ---------  ---------
Gross profit                       34,067     31,525    132,320    110,774
                                ---------  ---------  ---------  ---------
Operating expenses (note 1):
    Sales and marketing            13,385     13,321     54,488     49,610
    Sales - amortization of
     acquired intangibles           2,810      2,035     11,243      4,217
    Research and development        8,709      8,047     34,847     30,994
    General and administrative      7,410      9,233     33,152     32,382
    Restructuring and severance         -        303          -      1,914
                                ---------  ---------  ---------  ---------
        Total operating expenses   32,314     32,939    133,730    119,117
                                ---------  ---------  ---------  ---------

                                ---------  ---------  ---------  ---------
Income / (loss) from operations     1,753     (1,414)    (1,410)    (8,343)
                                ---------  ---------  ---------  ---------
Other income / (expense):
    Interest income                    83        160        329      1,717
    Interest expense                  (36)       (55)      (166)      (199)
    Settlement of Vurv escrow
     account                        2,471          -      2,471          -
    Worldwide Compensation
     purchase option write-off          -          -     (1,084)         -
                                ---------  ---------  ---------  ---------
       Total other income           2,518        105      1,550      1,518
                                ---------  ---------  ---------  ---------

Income / (loss) before provision
 for / (benefit from) income tax    4,271     (1,309)       140     (6,825)

    Provision for / (benefit
     from) income taxes              (322)     1,214     (1,153)     1,303
                                ---------  ---------  ---------  ---------

Income (loss) attributable to
 Class A common stockholders    $   4,593  $  (2,523) $   1,293  $  (8,128)
                                =========  =========  =========  =========
Income / (loss) per share
 attributable to Class A common
 stockholders - basic           $    0.13  $   (0.08) $    0.04  $   (0.29)
                                =========  =========  =========  =========
Income / (loss) per share
 attributable to Class A common
 stockholders - diluted         $    0.13  $   (0.08) $    0.04  $   (0.29)
                                =========  =========  =========  =========

Weighted average Class A common
 shares - basic                    34,425     29,805     31,507     27,569
                                =========  =========  =========  =========
Weighted average Class A common
 shares - diluted                  35,594     29,805     32,406     27,569
                                =========  =========  =========  =========

NOTES

1. Includes stock-based
    compensation expense
      Application cost of
       revenue                  $     167  $     141  $     647  $     569
      Consulting cost of
       revenue                        320        252      1,195        956
                                ---------  ---------  ---------  ---------
      Cost of revenue subtotal        487        393      1,842      1,525

      Sales and marketing
       operating expense              833        662      3,011      3,132
      Research and development
       operating expense              402        394      1,516      1,465
      General and administrative
       operating expense            1,142      1,516      4,660      5,311
                                ---------  ---------  ---------  ---------
      Operating expense subtotal    2,377      2,572      9,187      9,908


   Total stock-based            ---------  ---------  ---------  ---------
    compensation expense        $   2,864  $   2,965  $  11,029  $  11,433
                                =========  =========  =========  =========




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


Reconciliation of GAAP net income / (loss) and non-GAAP net income:

                                   Three Months Ended  Twelve Months Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

GAAP net income / (loss) reported
 above                              $  4,593  $ (2,523) $  1,293  $ (8,128)
Add back:

Revenue
      Non-GAAP application revenue        15     1,376       841     4,996
      Non-GAAP service revenue             -        95        13       328
                                    --------  --------  --------  --------
         Total Non-GAAP revenue           15     1,471       854     5,324

Expenses
      Revenue review                       -         -     1,631         -
      Stock-based compensation
       expense                         2,864     2,965    11,029    11,433
      Amortization of acquired
       intangibles                     3,571     2,795    14,286     5,809
      Restructuring and severance
       expense                             -       303         -     1,914
      Non-cash tax valuation
       adjustment                          -         -         -      (332)
      Non-cash income tax audit
       settlement                          -         -    (1,335)        -
                                    --------  --------  --------  --------
                                       6,435     6,063    25,611    18,824

Other Income - Settlement of Vurv
 escrow account                       (2,471)        -    (2,471)        -
Other Expense - Worldwide
 Compensation purchase option
 write-off                                 -         -     1,084         -

                                    --------  --------  --------  --------
Non-GAAP net income                 $  8,572  $  5,011  $ 26,371  $ 16,020
                                    ========  ========  ========  ========

Non-GAAP net income per share
      Basic                         $   0.25  $   0.17  $   0.84  $   0.58
                                    ========  ========  ========  ========
      Diluted                       $   0.23  $   0.16  $   0.77  $   0.52
                                    ========  ========  ========  ========

Reconciliation of basic and fully
 diluted Non-GAAP share count:
                                    --------  --------  --------  --------
Basic                                 34,425    29,805    31,507    27,569
                                    --------  --------  --------  --------
Add:  Weighted Average - Series B
       common stock                        -       336         -       455
      Weighted Average - options
       and unreleased restricted
       stock                           2,938       434     2,331     2,400
      Weighted Average - Vurv
       escrow shares                     127       478       344       240
                                    --------  --------  --------  --------
Diluted                               37,490    31,053    34,182    30,664
                                    --------  --------  --------  --------



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


                                               December 31,   December 31,
                                                   2009           2008
                                               ------------   ------------
ASSETS
   Current assets:
      Cash and cash equivalents                $    244,229   $     49,462
      Restricted cash                                   409            521
      Accounts receivable, net                       43,928         49,167
      Prepaid expenses and other current
       assets                                        10,126         10,977
      Investment credits receivable                   5,499          6,087
                                               ------------   ------------
      Total current assets                          304,191        116,214

   Property and equipment, net                       23,510         25,250
   Restricted cash                                      210            515
   Goodwill                                          91,027         91,626
   Other intangibles, net                            30,544         44,802
   Other assets                                       6,895          4,782
                                               ------------   ------------
   Total assets                                $    456,377   $    283,189
                                               ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
      Accounts payable and accrued liabilities $     23,592   $     24,877
      Deferred revenue - application services
       and customer deposits                         60,140         54,421
      Deferred revenue - consulting services         17,523         16,221
      Capital lease obligation, short-term              412          1,101
                                               ------------   ------------
      Total current liabilities                     101,667         96,620

   Long-term deferred revenue - application
    services and customer deposits                      201            777
   Long-term deferred revenue - consulting
    services                                         13,220          9,594
   Other liabilities                                  3,973          3,258
   Capital lease obligation, long-term                  107            519
                                               ------------   ------------
   Total liabilities                                119,168        110,768
                                               ------------   ------------

   Stockholders' equity:
      Capital stock                                       1              -
      Additional paid-in capital                    414,106        250,168
      Accumulated deficit                           (77,029)       (78,322)
      Treasury stock                                 (2,471)             -
      Accumulated other comprehensive income          2,602            575
                                               ------------   ------------
      Total stockholders' equity                    337,209        172,421
                                               ------------   ------------
   Total liabilities and stockholders' equity  $    456,377   $    283,189
                                               ============   ============




                            Taleo Corporation
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (All amounts in thousands)
                                (Unaudited)


                                                   Twelve Months Ended
                                                       December 31,
                                               ---------------------------
                                                   2009           2008
                                               ------------   ------------

Cash flows from operating activities:
  Net income / (loss)                          $      1,293   $     (8,128)
  Adjustments to reconcile net income / (loss)
   to net cash provided by operating activities:
     Depreciation and amortization                   27,437         16,453
     (Gain) / loss disposal of fixed assets              17            (64)
     Amortization of tenant inducements                (152)          (152)
     Tenant inducements from landlord                   114              -
     Stock-based compensation expense                11,029         11,433
     Excess tax benefit from stock options             (301)             -
     Director fees settled with stock                   247            242
     Settlement of Vurv escrow account               (2,471)             -
     Worldwide Compensation purchase option
      write-off                                       1,084              -
     Bad debt expense                                   840            237
     Changes in working capital accounts, net
      of effect of acquisition:
        Accounts receivable                           4,440        (11,663)
        Prepaid expenses and other assets            (1,576)        (3,836)
        Investment credit receivable                  1,471         (2,637)
        Accounts payable and accrued
         liabilities                                 (2,249)        (5,329)
        Deferred revenue and customer deposits        9,449         21,198
                                               ------------   ------------
          Net cash provided by operating
           activities                                50,672         17,754
                                               ------------   ------------
Cash flows from investing activities:
  Purchases of property and equipment                (9,140)       (11,055)
  Restricted cash - decrease                            418            375
  Purchase of investment                                  -         (2,498)
  Acquisition of business, net of cash acquired           -        (49,665)
                                               ------------   ------------
          Net cash used in investing
           activities                                (8,722)       (62,843)
                                               ------------   ------------
Cash flows from financing activities:
  Principal payments on loan and capital
   lease obligations                                 (1,591)          (667)
  Excess tax benefit from stock options                 301             56
  Treasury stock acquired to settle employee
   withholding liability                             (1,066)        (1,068)
  Proceeds from stock offering                      144,444              -
  Proceeds from stock options exercised and
   ESPP shares                                        9,640         10,178
                                               ------------   ------------
          Net cash provided by financing
           activities                               151,728          8,499
                                               ------------   ------------
Effect of exchange rate changes on cash and
 cash equivalents                                     1,089            (83)
                                               ------------   ------------
Increase / (decrease) in cash and cash
 equivalents                                        194,767        (36,673)
Cash and cash equivalents:
  Beginning of period                                49,462         86,135
                                               ------------   ------------
  End of period                                $    244,229   $     49,462
                                               ============   ============
Supplemental cash flow disclosures:
  Cash paid for interest                       $         64   $         60
                                               ------------   ------------
  Cash paid for income taxes                   $        275   $        278
                                               ------------   ------------
Supplemental disclosure of non-cash financing
 and investing activities:
     Property and equipment purchases included
      in accounts payable and accrued
      liabilities                              $      2,636   $      1,416
     Accrued stock offering cost               $        659   $          -
     Class B common stock exchanged for
      Class A common stock                     $          -   $        282
     Stock and stock options issued in
      connection with Vurv acquisition         $          -   $     75,189

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