SOURCE: Taleo

July 31, 2008 16:48 ET

Taleo Reports Strong Second Quarter 2008 Results

Posts Record Revenues; New Customers Reach All-Time High

DUBLIN, CA--(Marketwire - July 31, 2008) - Taleo (NASDAQ: TLEO), the leading provider of on demand talent management solutions, today announced financial results for the second quarter ended June 30, 2008.

Quarterly Highlights Include:

--  Record revenues of $38.8 million for the second quarter of 2008, an
    increase of 25% year-over-year.
--  Signed over 225 new customers, an all-time high.
--  Signed definitive agreement to acquire Vurv.
--  GAAP net income of $1.1 million, or $0.04 per fully diluted share.
--  Non-GAAP net income of $4.2 million, or $0.15 per fully diluted share.
--  Customer base grew to over 1,900 customers with more than 1.5 million
    users.
    

"Taleo achieved record performance across the organization, posted record revenues, and set a record for the number of new customers. Our results highlight both the growing demand for talent management solutions in large and small companies regardless of the economic environment," stated Michael Gregoire, Chairman and CEO of Taleo. "I am also proud that we were able to perform at this level, while simultaneously working on closing our acquisition of Vurv. Taleo's ability to innovate and execute has helped enhance our leadership position."

Other significant achievements during the second quarter 2008 include:

--  Acquired 25 New Taleo Enterprise Edition™ Customers. Demand for
    Taleo's talent management solutions continued with the Company signing 25
    new enterprise customers bringing Taleo's customer base to over 350
    organizations around the world.  New Taleo Enterprise Edition™ customers
    in North America included AT&T, Adobe, Allergan, Avanade, Blue Cross Blue
    Shield of Michigan, CSX Transportation, Cymer, Enterprise Product Partners,
    Harris Teeter, Herbalife, Manpower, Plantronics, The Nielsen Company and US
    Foodservice.
--  Achieved Significant International Growth. Revenues from outside of
    North America grew by 83% over the same period last year and represented
    13% of total revenues. New international customers included Cargotec,
    Veolia, AirFrance, Baloise, Eiffage, Manpower and Vic Roads.
--  Momentum in Performance Management. Just one quarter after the general
    availability of Taleo Performance™, the Company closed enterprise deals
    in North America and Europe, including InterContinental Hotels Group,
    Children's Healthcare of Atlanta, and North Shore Long Island Jewish Health
    System.
--  Signed Record Number of New SMB Customers. Taleo Business Edition™,
    a recruiting solution targeted at companies with less than 3,000 employees,
    welcomed over 200 new customers further establishing Taleo as the leader
    for SMB Recruiting. New TBE customers include Eclipse Aviation Corp, RAND
    Worldwide, RightNow Technologies, Pearl Izumi, Masimo Corporation, Verified
    Person, Conklin Cars, Yelp, Inc., First Guaranty Bank, Taco Johns, Wolfgang
    Puck Express, Red Bull Australia, SABMiller (makers of MillerCoors), and
    the Abu Dhabi Audit Authority.
--  Launched Taleo Edge. Taleo Edge is a tailored offering of Taleo
    Enterprise for  mid-market companies with between 2,500 and 10,000
    employees. During the quarter, Taleo closed its first Taleo Edge deal with
    NetJets.
--  Expanded User Community. Taleo grew its global presence by adding more
    than 116,000 new users to bring the total number of users to over 1.5
    million worldwide, working with candidates in 25 languages and more than
    190 countries and territories.
--  Recognized as Breakaway Leader. Taleo was positioned by Gartner, Inc.
    as the clear leader within the Leaders' Quadrant in Gartner's "Magic
    Quadrant for E-Recruitment Software, 2008" report.
--  Demonstrated Industry Leading Scale and Stability. Taleo processed
    more than 394,000 hires, from over 9.3 million applicants through its
    unified on demand platform.
    

"Subsequent to the close of the second quarter, we completed the acquisition of Vurv, bolstering Taleo's leadership position in talent management. Vurv brings additional scale, resources and expertise to meet the growing demand for Taleo's solutions. Together we look forward to bringing innovative new offerings to market and defining the future of talent management," concluded Michael Gregoire, Chairman and CEO of Taleo.

Taleo delivered the following results for the second quarter ended June 30, 2008:

Revenue: Total revenue for the second quarter was $38.8 million, representing an increase of 25% on a year-over-year basis. Application revenue for the second quarter was $30.9 million, an increase of 21% on a year-over-year basis.

Net Income (Loss) and Net Income (Loss) Per Share to Common Stockholders: Net income in accordance with accounting principles generally accepted in the United States, or GAAP, was $1.1 million for the second quarter, compared to a net loss of ($1.8) million for the same period last year, driven primarily from the recording of a net, non-cash income tax reserve of $2.9 million. Net income for the second quarter of 2008 and 2007 includes share-based compensation expense of $2.8 million and $1.6 million, respectively, pursuant to the adoption on January 1, 2006 of Financial Accounting Standards Board (FASB) Statement No. 123(R), "Share-Based Payment" (SFAS 123(R)), which requires companies to expense the fair value of employee stock options and similar stock based compensation awards. Net income per fully diluted share was $0.04 for the second quarter of 2008 based on 29.1 million weighted average shares outstanding compared to net loss per fully diluted share of ($0.07) for the same period in 2007 based on 23.9 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net income, which excludes share-based compensation expense pursuant to SFAS 123(R), amortization of acquired intangibles, restructuring charges, non-cash income tax reserve, and non-cash tax valuation adjustments was $4.2 million for the second quarter of 2008, compared to a non-GAAP net income of $2.8 million in the same period last year. Non-GAAP net income per fully diluted share was $0.15 for the second quarter of 2008 based on 29.1 million weighted average shares outstanding compared to non-GAAP net income per fully diluted share of $0.10 for the same period in 2007 based on 28.2 million weighted average shares outstanding.

Conference Call Details

In conjunction with this announcement, Taleo will host a conference call today at 5:00 p.m. EDT to discuss the Company's second quarter 2008 financial results. A live and replay Webcast of the call will be available at the Investor Relations section of Taleo's website at www.taleo.com. The live call may be accessed by dialing 800-901-5213 (domestic) or 617-786-2962 (international) and referencing passcode: 2831-3733. A replay of the call can also be accessed by dialing 888-286-8010 (domestic) or 617-801-6888 (international), and referencing passcode: 5357-4949.

About Taleo

Taleo (NASDAQ: TLEO) is the leader in on demand unified talent management solutions that empower organizations of all sizes, around the world to assess, acquire, develop and align their workforce for improved business performance. Following its acquisition of Vurv, more than 3,600 organizations use Taleo, including 47 of the Fortune 100 and over 150 of the Fortune 500, for talent acquisition and performance management, in 200 countries and territories. Known for its strong configurability and usability, Taleo's talent management platform runs on a world-class infrastructure and offers 99.9% availability.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Taleo's future financial performance, new product development, 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 I, Item 1A of Taleo's Annual Report on Form 10-K, as filed with the SEC on March 14, 2008, in part II, Item 1A of Taleo's Quarterly Report on Form 10-Q, as filed with the SEC on May 12, 2008, 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 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 financial measures discussed above exclude share-based compensation expense pursuant to SFAS 123(R), amortization of acquired intangibles, restructuring charges, non-cash income tax reserve and non-cash tax valuation adjustments. 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.

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




                                                  June 30,    December 31,
                                                    2008          2007
                                                ------------  ------------
ASSETS
   Current assets:
      Cash and cash equivalents                 $    104,735  $     86,135
      Restricted cash                                    289           288
      Accounts receivable, net                        29,558        30,255
      Prepaid expenses and other current assets        6,152         5,912
      Investment credit receivable                     5,985         4,734
                                                ------------  ------------
      Total current assets                           146,719       127,324

   Property and equipment, net                        21,131        23,178
   Restricted Cash                                       628           838
   Other assets                                        5,721         2,147
   Goodwill                                            9,707         9,785
   Other Intangibles, net                              1,186         1,404
                                                ------------  ------------
   Total assets                                 $    185,092  $    164,676
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
      Accounts payable and accrued liabilities  $     24,558  $     20,623
      Deferred revenue and customer deposits          42,498        36,752
      Capital lease obligation, short-term                18            38
                                                ------------  ------------
      Total current liabilities                       67,074        57,413

   Customer deposits and long term deferred
    revenue                                            1,254           273
   Other liabilities                                   3,684         4,535
   Capital lease obligation, long-term                    11            16
   Class B redeemable common stock                         -             -
                                                ------------  ------------
   Total liabilities                                  72,023        62,237
                                                ------------  ------------

                                                ------------  ------------
   Exchangeable share obligation                         226           331
                                                ------------  ------------

   Stockholders' equity:
      Capital stock                                        -             -
      Additional paid-in capital                     159,765       151,593
      Accumulated deficit                            (48,712)      (51,387)
      Treasury stock                                     (66)         (195)
      Accumulated other comprehensive income           1,856         2,097
                                                ------------  ------------
      Total stockholders' equity                     112,843       102,108
                                                ------------  ------------
   Total liabilities and stockholders' equity   $    185,092  $    164,676
                                                ============  ============




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


                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------
Revenue:
     Application                    $ 30,875  $ 25,596  $ 61,076  $ 49,251
     Consulting                        7,929     5,358    14,967    10,420
                                    --------  --------  --------  --------
       Total revenue                  38,804    30,954    76,043    59,671
                                    --------  --------  --------  --------

Cost of revenue (note 1):
     Application                       6,320     5,304    12,574    10,368
     Amortization of acquired
      intangibles                         36        36        72        72
                                    --------  --------  --------  --------
       Total cost of application
        revenue                        6,356     5,340    12,646    10,440
     Consulting                        5,559     4,670    11,283     8,459
                                    --------  --------  --------  --------
       Total cost of revenue          11,915    10,010    23,929    18,899
                                    --------  --------  --------  --------

                                    --------  --------  --------  --------
Gross profit                          26,889    20,944    52,114    40,772
                                    --------  --------  --------  --------
Operating expenses (note 1):
     Sales and marketing              11,832     8,471    22,502    16,988
     Research and development          7,366     5,492    14,399    10,895
     General and administrative        7,196     6,482    13,763    11,876
     Restructuring                       281         -       281         -
                                    --------  --------  --------  --------
       Total operating expenses       26,675    20,445    50,945    39,759
                                    --------  --------  --------  --------

                                    --------  --------  --------  --------
Income from operations                   214       499     1,169     1,013
                                    --------  --------  --------  --------
Other income / (expense):
     Interest income                     518       676     1,296     1,349
     Interest expense                    (41)      (10)      (86)      (29)
                                    --------  --------  --------  --------
       Total other income                477       666     1,210     1,320
                                    --------  --------  --------  --------

Income before provision / (benefit)
 for income tax                          691     1,165     2,379     2,333
     Provision / (benefit) for
      income taxes                      (383)    2,918      (296)    3,178
                                    --------  --------  --------  --------

Net income / (loss) attributable to
 Class A common stockholders        $  1,074  $ (1,753) $  2,675  $   (845)
                                    ========  ========  ========  ========
Net income / (loss) per share
 attributable to Class A common
 stockholders - basic               $   0.04  $  (0.07) $   0.10  $  (0.04)
                                    ========  ========  ========  ========

Net income / (loss) per share
 attributable to Class A common
 stockholders - diluted             $   0.04  $  (0.07) $   0.09  $  (0.04)
                                    ========  ========  ========  ========

Weighted average Class A common
 shares - basic                       25,708    23,908    25,538    23,359
                                    ========  ========  ========  ========

Weighted average Class A common
 shares - diluted                     29,070    23,908    28,994    23,359
                                    ========  ========  ========  ========
NOTES

1. Includes share-based
    compensation expense pursuant to
    SFAS 123(R)
        Application cost of revenue $    134  $     79  $    260  $    142
        Consulting cost of revenue       192       121       374       211
                                    --------  --------  --------  --------
        Cost of revenue subtotal         326       200       634       353

        Sales and marketing
         operating expense               886       403     1,522       763
        Research and development
         operating expense               287       285       586       528
        General and administrative
         operating expense             1,256       692     2,490     1,321
                                    --------  --------  --------  --------
        Operating expense subtotal     2,429     1,380     4,598     2,612

                                    --------  --------  --------  --------
     Total share-based compensation
      expense                       $  2,755  $  1,580  $  5,232  $  2,965
                                    ========  ========  ========  ========



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


Reconciliation of GAAP net income /
 (loss) and non-GAAP net income:
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------- ------------------
                                      2008      2007      2008      2007
                                    --------- --------  --------  --------
GAAP net income / (loss) reported
 above                              $   1,074 $ (1,753) $  2,675  $   (845)
Add back:
     Share-based compensation
      expense (SFAS 123(R))             2,755    1,580     5,232     2,965
     Amortization of acquired
      intangibles                         109       97       218       149
     Restructuring expense                281        -       281         -
     Non-cash income tax reserve            -    2,899         -     2,899
     Non-cash tax valuation
      Adjustment                            -        -      (262)        -
                                    --------- --------  --------  --------
                                        3,145    4,576     5,469     6,013

                                    --------- --------  --------  --------
Non-GAAP net income                 $   4,219 $  2,823  $  8,144  $  5,168
                                    ========= ========  ========  ========

Non-GAAP net income per share
     Basic                          $    0.16 $   0.12  $   0.32  $   0.22
                                    ========= ========  ========  ========
     Diluted                        $    0.15 $   0.10  $   0.28  $   0.20
                                    ========= ========  ========  ========



Reconciliation of basic and fully
 diluted share count:
Basic                                  25,708   23,908    25,538    23,359
Add: Weighted Average - Series B
      common stock                        462    1,274       512     1,476
     Weighted Average - warrants &
      options                           2,900    3,057     2,944     1,545
                                    --------- --------  --------  --------
Diluted                                29,070   28,239    28,994    26,380
                                    --------- --------  --------  --------




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


                                                        Six Months Ended
                                                            June 30,
                                                      --------------------
                                                        2008       2007
                                                      ---------  ---------
Cash flows from operating activities:
   Net income / (loss)                                $   2,675  $    (845)
   Adjustments to reconcile net income / (loss) to net
    cash provided by operating activities:
     Depreciation and amortization                        4,726      2,827
     Amortization of tenant inducements                     (76)       (93)
     Stock-based compensation expense                     5,232      2,965
     Director fees settled with stock                       119        112
     Bad debt expense                                       100        310
     Interest earned on restricted cash                        -          1
     Changes in working capital accounts:
       Accounts receivable                                  544     (5,986)
       Prepaid expenses and other assets                 (3,824)    (1,272)
       Investment credit receivable                      (1,393)     1,115
       Accounts payable and accrued liabilities           4,355       (218)
       Deferred revenue and customer deposits             6,818     10,747
                                                      ---------  ---------
         Net cash provided by operating activities       19,276      9,663
                                                      ---------  ---------
Cash flows from investing activities:
   Acquisition of property and equipment                 (3,625)    (4,082)
   Restricted cash - decrease                               210      2,704
   Acquisition of business                                    -     (3,071)
                                                      ---------  ---------
         Net cash used in investing activities           (3,415)    (4,449)
                                                      ---------  ---------
Cash flows from financing activities:
   Principal payments on capital lease obligations          (24)      (308)
   Proceeds from stock options and warrants exercised     2,725      5,083
                                                      ---------  ---------
         Net cash provided by financing activities        2,701      4,775
                                                      ---------  ---------
Effect of exchange rate changes on cash and cash
 equivalents                                                 38        246
                                                      ---------  ---------
Increase in cash and cash equivalents                    18,600     10,235
Cash and cash equivalents:
   Beginning of period                                   86,135     58,785
                                                      ---------  ---------
   End of period                                      $ 104,735  $  69,020
                                                      =========  =========
Supplemental cash flow disclosures:
   Cash paid for interest                             $       1  $       7
                                                      ---------  ---------
   Cash paid for income taxes                         $      44  $     124
                                                      ---------  ---------
Supplemental disclosure of non-cash financing and
 investing activities:
     Property and equipment purchases included in
      accounts payable and accrued liabilities        $   2,487  $   3,686
     Class B common stock exchanged for Class A common
      stock                                           $      96  $     393*
     Treasury stock issued under ESPP                 $     701  $     450
     Treasury stock acquired to settle employee
     withholding liability                            $     573  $     292

*  The amount previously reported in noncash activity disclosure of the
condensed consolidated statements of cash flows for the quarter ended June
30, 2007 was erroneously based on the fair value (rather than the book
value) of such shares exchanged of $16,101, and such error in disclosure
has been corrected to reflect the exchange at book value of $393.

Contact Information

  • Media Contact:
    Jaime Spuhler
    Taleo Corporation
    (904) 493-8851
    jspuhler@taleo.com

    Investor Relations Contact:
    Carolyn Bass
    Market Street Partners
    (415) 445-3234
    ir@taleo.com