SOURCE: Taleo Corp

Taleo Corp

February 09, 2011 16:21 ET

Taleo Announces Record Quarterly Revenues of $67.2 Million, up 33% Year-Over-Year; Application Revenue Growth of 24% to $55.2 Million

Record Quarterly Non-GAAP Revenue of $71.2 Million, up 41% Year-Over-Year; Non-GAAP Application Revenue of $57.8 Million, up 30% Year-Over-Year; Record Full Year GAAP Revenue of $237.3 Million, up 20% Year-Over-Year; Non-GAAP Revenue of $241.8 Million, up 21% Year-Over-Year

DUBLIN, CA--(Marketwire - February 9, 2011) - Taleo Corporation (NASDAQ: TLEO), the leading provider of on-demand Talent Management solutions, today announced record-setting results for its fiscal fourth quarter and the year ended December 31, 2010, completing a year of break-through performance.

"Taleo's Talent Intelligence value proposition -- providing insight for organizations to better know their people and grow their business -- is putting talent management at the front of the business agenda," said Michael Gregoire, Chairman and CEO of Taleo. "Our performance in 2010 reflects tremendous market adoption of our talent management suite of Recruiting, Performance, Compensation and Learning wrapped around powerful analytics."

Taleo delivered the following results for the fourth quarter and full year 2010:

Fourth Quarter Revenue: Total revenue for the fourth quarter was $67.2 million, an increase of 33% on a year-over-year basis. Application revenue for the fourth quarter was $55.2 million, an increase of 24% on a year-over-year basis. Services revenue for the fourth quarter was $12.0 million, an increase of 101% on a year-over-year basis.

Total fourth quarter non-GAAP revenue was $71.2 million, an increase of 41% on a year-over-year basis. Non-GAAP application revenue for the fourth quarter was $57.8 million, an increase of 30% on a year-over-year basis. Non-GAAP services revenues for the fourth quarter was $13.4 million, an increase of 123% on a year-over-year basis.

2010 Revenue: Total revenue for the full year 2010 was $237.3 million, an increase of 20% on a year-over-year basis. Application revenue for the full year 2010 was $199.3 million, an increase of 15% on a year-over-year basis. Services revenue for the full year 2010 was $38.0 million, an increase of 52% on a year-over-year basis.

For the full year 2010, the company reported Non-GAAP revenue of $241.8 million, an increase of 21% from the prior year. Non-GAAP application revenue for the full year 2010 was $202.4 million, an increase of 16% on a year-over-year basis. Non-GAAP services revenue for the full year 2010 was $39.3 million, an increase of 58% on a year-over-year basis.

Fourth Quarter Earnings per Share: Fourth quarter loss per share was $(0.02), compared to net income per fully diluted share of $0.13 a year ago. Non-GAAP income per fully diluted share was flat year-over-year at $0.23. The company's non-GAAP results include amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for Worldwide Compensation and Learn.com, and exclude the effects of $3.9 million in stock-based compensation expense, $5.3 million in amortization of acquired intangibles, and $3.8 million in acquisition related transaction costs. GAAP fourth quarter EPS calculations are based on 40.3 million basic weighted average shares outstanding, while non-GAAP fourth quarter EPS calculations are based on 43.4 million fully diluted weighted average shares outstanding. The fully diluted weighted average shares outstanding used to compute non-GAAP earnings per share have been calculated without giving consideration to the treasury stock method.

2010 Earnings per Share: For the full year 2010, net income per fully diluted share declined to $0.01 from $0.04 a year ago. Non-GAAP net income per fully diluted share for the full year 2010 rose to $0.78 compared to $0.77 a year ago. The company's non-GAAP results include amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for Worldwide Compensation and Learn.com, and exclude the effects of $14.9 million in stock-based compensation expense, $14.5 million in amortization of acquired intangibles, and $6.8 million in acquisition related transaction costs. GAAP full year 2010 EPS calculations are based on 40.9 million fully diluted weighted average shares outstanding, while non-GAAP full year 2010 EPS calculations are based on 43.0 million fully diluted weighted average shares outstanding. The fully diluted weighted average shares outstanding used to compute non-GAAP earnings per share have been calculated without giving consideration to the treasury stock method.

Customers: In the fourth quarter, 304 new businesses chose Taleo's Talent Management solutions for recruiting, performance, learning and/or compensation management, including: DHL Global, Panda Restaurant Group, Southern California Edison, St. Joseph Health systems and Universal City Studios. A record 16 new contracts in the fourth quarter were larger than $250,000 in first year application revenue, underscoring the market interest in larger, global deployments and in multiple component suite solutions. The performance management product line performed exceptionally well with a record 57 transactions in our fourth quarter and over 170 transactions in 2010.

Cash: Cash from operations for full year 2010 was $35.8 million, down 29% from $50.7 million in 2009. Cash flow from operations was down in 2010 due primarily to the impact of operating liabilities assumed in our 2010 acquisitions of Worldwide Compensation and Learn.com, and the timing of fourth quarter 2010 billings. Total cash and cash equivalents finished the year at $141.6 million, a decrease of $102.6 million from the prior year, which includes approximately $137.5 million in net outflow from the company's acquisitions of Worldwide Compensation and Learn.com in 2010.

Quarterly Conference Call

Taleo will host a conference call to discuss its fourth quarter fiscal year 2010 results at 1:30 p.m. Pacific Time today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.taleo.com/ir. Please join the conference call at least 10 minutes early to register. A replay of the conference call will be available until midnight PT on February 13, 2011 at www.taleo.com, or via dial-in at 800-642-1687 or 706-645-9291. The pass code for the replay is 37598073.

About Taleo

Taleo's (NASDAQ: TLEO) cloud-based talent management platform unites products and an ecosystem to drive business performance through talent intelligence. Over 5,000 customers use Taleo for talent acquisition, performance and compensation management, including 47 of the Fortune 100. Further, Taleo's Talent Grid cloud community harnesses the expertise of Taleo customers, more than 200 million candidates to date, and 140 partners and industry experts.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Taleo's future financial performance, market growth, the demand for and benefits from the use of Taleo's solutions, 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 10Q, as filed with the SEC on November 5, 2010, 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 and non-GAAP earnings 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. The non-GAAP measures include amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for the Worldwide Compensation, Vurv and Learn.com acquisitions, and exclude costs associated with our 2009 restatement-related revenue review, acquisition related transaction costs, stock-based compensation expense, amortization of acquired intangibles, an income tax benefit related to the acquisition of Learn.com, a non-cash income tax audit settlement, the gain on re-measurement of a previously held interest in Worldwide Compensation, the write-off of the Worldwide Compensation purchase option, and settlement of the Vurv escrow account. 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. 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,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Revenue:
            Application         $  55,179  $  44,507  $ 199,302  $ 173,495
            Consulting             12,037      5,993     37,973     24,917
                                ---------  ---------  ---------  ---------
              Total revenue        67,216     50,500    237,275    198,412
                                ---------  ---------  ---------  ---------
Cost of revenue (Note 1):
            Application            12,305      9,816     44,532     38,435
            Amortization of
             acquired
             intangibles            1,499        761      4,233      3,043
                                ---------  ---------  ---------  ---------
              Total cost of
               application
               revenue             13,804     10,577     48,765     41,478
            Consulting              9,204      5,856     29,671     24,614
                                ---------  ---------  ---------  ---------
              Total cost of
               revenue             23,008     16,433     78,436     66,092
                                ---------  ---------  ---------  ---------

                                ---------  ---------  ---------  ---------
Gross profit                       44,208     34,067    158,839    132,320
                                ---------  ---------  ---------  ---------
Operating expenses (Note 1):
            Sales and marketing    20,478     13,385     67,445     54,488
            Sales - amortization
             of acquired
             intangibles            3,803      2,810     10,276     11,243
            Research and
             development           12,257      8,709     43,431     34,847
            General and
             administrative        13,511      7,410     43,834     33,152
                                ---------  ---------  ---------  ---------
              Total operating
               expenses            50,049     32,314    164,986    133,730
                                ---------  ---------  ---------  ---------
                                ---------  ---------  ---------  ---------
Income (loss) from operations      (5,841)     1,753     (6,147)    (1,410)
                                ---------  ---------  ---------  ---------
Other income (expense):
            Interest and other
             income                    84         83        482        329
            Interest expense          (29)       (36)      (106)      (166)
            Worldwide
             Compensation, Inc.
             purchase option
             write-off                  -          -          -     (1,084)
            Gain on
             remeasurement of
             previously held
             interest in
             Worldwide
             Compensation, Inc.         -          -        885          -
            Settlement of Vurv
             escrow account             -      2,471          -      2,471
                                ---------  ---------  ---------  ---------
              Total other income       55      2,518      1,261      1,550
                                ---------  ---------  ---------  ---------

Income (loss) before provision
 for (benefit from) income
 taxes                             (5,786)     4,271     (4,886)       140
            Benefit from income
             taxes                 (5,166)      (322)    (5,306)    (1,153)
                                ---------  ---------  ---------  ---------

Income (loss) attributable to
 Class A common stockholders    $    (620) $   4,593  $     420  $   1,293
                                =========  =========  =========  =========
Income (loss) per share
 attributable to Class A common
 stockholders - basic           $   (0.02) $    0.13  $    0.01  $    0.04
                                =========  =========  =========  =========
Income (loss) per share
 attributable to Class A common
 stockholders - diluted         $   (0.02) $    0.13  $    0.01  $    0.04
                                =========  =========  =========  =========

Weighted average Class A common
 shares - basic                    40,339     34,425     39,685     31,507
                                =========  =========  =========  =========
Weighted average Class A common
 shares - diluted                  40,339     35,594     40,915     32,406
                                =========  =========  =========  =========

NOTES
1. Includes stock-based
 compensation expense
              Application cost
               of revenue       $     226  $     167  $     929  $     647
              Consulting cost
               of revenue             437        320      1,703      1,195
                                ---------  ---------  ---------  ---------
              Cost of revenue
               subtotal               663        487      2,632      1,842

              Sales and
               marketing
               operating
               expense              1,060        833      4,066      3,011
              Research and
               development
               operating
               expense                784        402      2,643      1,516
              General and
               administrative
               operating
               expense              1,425      1,142      5,598      4,660
                                ---------  ---------  ---------  ---------
              Operating expense
               subtotal             3,269      2,377     12,307      9,187
          Total stock-based
           compensation expense $   3,932  $   2,864  $  14,939  $  11,029
                                =========  =========  =========  =========




                            Taleo Corporation
        Condensed Consolidated Statements of Operations (continued)
             (All amounts in thousands except per share data)
                               (Unaudited)
Reconciliation of GAAP net
 income (loss) to non-GAAP net
 income:
                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                   2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

GAAP net income (loss) reported
 above                          $    (620) $   4,593  $     420  $   1,293
Add back:

Revenue
           Non-GAAP application
            revenue                 2,594         15      3,142        841
           Non-GAAP service
            revenue                 1,343          -      1,343         13
                                ---------  ---------  ---------  ---------
                 Total
                  Non-GAAP
                  revenue           3,937         15      4,485        854

Expenses
           Revenue review               -          -          -      1,631
           Acquisition related
            transaction costs       3,753          -      6,826          -
           Stock-based
            compensation
            expense                 3,932      2,864     14,939     11,029
           Amortization of
            acquired
            intangibles             5,302      3,571     14,509     14,286
           Non-Cash income tax
            audit settlement            -          -          -     (1,335)
                                ---------  ---------  ---------  ---------
                                   12,987      6,435     36,274     25,611

Other income (expense)
           Gain on
            remeasurement of
            previously held
            interest in
            Worldwide
            Compensation, Inc.          -          -       (885)         -
           Worldwide
            Compensation, Inc.
            purchase option
            write-off                   -          -          -      1,084
           Settlement of Vurv
            escrow account              -     (2,471)         -     (2,471)
                                ---------  ---------  ---------  ---------
                                        -     (2,471)      (885)    (1,387)
Provision for (benefit from)
 income taxes
           Income tax benefit
            related to
            acquisition of
            Learn.com              (6,546)         -     (6,546)         -
                                ---------  ---------  ---------  ---------
Non-GAAP net income             $   9,758  $   8,572  $  33,748  $  26,371
                                =========  =========  =========  =========

Non-GAAP net income per share
           Basic                $    0.24  $    0.25  $    0.85  $    0.84
                                =========  =========  =========  =========
           Diluted              $    0.23  $    0.23  $    0.78  $    0.77
                                =========  =========  =========  =========

Reconciliation of basic and
 fully diluted share count:
                                ---------  ---------  ---------  ---------
Basic                              40,339     34,425     39,685     31,507
                                ---------  ---------  ---------  ---------
Add:
           Weighted Average -
            options and
            unreleased
            restricted stock,
            without
            consideration for
            the treasury stock
            method                  3,015      2,938      3,330      2,331
           Weighted Average -
            Vurv escrow shares          -        127          -        344
                                ---------  ---------  ---------  ---------
Diluted                            43,354     37,490     43,015     34,182
                                ---------  ---------  ---------  ---------




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


                                                December 31,  December 31,
                                                    2010          2009
                                                ------------  ------------
ASSETS
  Current assets:
      Cash and cash equivalents                 $    141,588  $    244,229
      Restricted cash                                      8           409
      Accounts receivable, net                        58,120        43,928
      Prepaid expenses and other current assets       18,460        10,126
      Investment credits receivable                    6,033         5,499
                                                ------------  ------------
      Total current assets                           224,209       304,191

  Property and equipment, net                         26,552        23,510
  Restricted cash                                        210           210
  Goodwill                                           206,418        91,027
  Other intangibles, net                              59,478        30,544
  Other assets                                         1,562         6,895
                                                ------------  ------------
  Total assets                                  $    518,429  $    456,377
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
      Accounts payable and accrued liabilities  $     36,377  $     23,592
      Deferred revenue - application services
       and customer deposits                          79,704        60,140
      Deferred revenue - consulting services          19,692        17,523
      Capital lease obligation, short-term               105           412
                                                ------------  ------------
      Total current liabilities                      135,878       101,667

  Long-term deferred revenue - application
   services and customer deposits                        150           201
  Long-term deferred revenue - consulting
   services                                           10,006        13,220
  Other liabilities                                    3,834         3,973
  Capital lease obligation, long-term                     46           107
                                                ------------  ------------
  Total liabilities                                  149,914       119,168
                                                ------------  ------------

  Stockholders' equity:
      Capital stock                                        1             1
      Additional paid-in capital                     443,256       414,106
      Accumulated deficit                            (76,609)      (77,029)
      Treasury stock                                  (1,518)       (2,471)
      Accumulated other comprehensive income           3,385         2,602
                                                ------------  ------------
      Total stockholders' equity                     368,515       337,209
                                                ------------  ------------
  Total liabilities and stockholders' equity    $    518,429  $    456,377
                                                ============  ============




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


                                                      Twelve Months Ended
                                                          December 31,
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------

Cash flows from operating activities:
  Net income                                          $     420  $   1,293
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                        28,720     27,437
    Loss disposal of fixed assets                            98         17
    Amortization of tenant inducements                     (176)      (152)
    Tenant inducements from landlord                          -        114
    Stock-based compensation expense                     14,939     11,029
    Excess tax benefits from employee stock plans          (293)      (301)
    Director fees paid with stock in lieu of cash           240        247
    Gain on remeasurement of previously held interest
     in Worldwide Compensation, Inc.                       (885)         -
    Worldwide Compensation, Inc. purchase option
     write-off                                                -      1,084
    Bad debt expense (reversal)                             (83)       840
    Settlement of Vurv escrow account                         -     (2,471)
    Changes in assets and liabilities, net of effect
     of acquisitions:
      Accounts receivable                               (11,046)     4,440
      Prepaid expenses and other assets                  (3,030)    (1,576)
      Deferred income taxes                              (6,546)         -
      Investment credit receivable                         (275)     1,471
      Accounts payable and accrued liabilities            2,965     (2,249)
      Deferred revenue and customer deposits             10,744      9,449
                                                      ---------  ---------
         Net cash provided by operating activities       35,792     50,672
                                                      ---------  ---------
Cash flows from investing activities:
  Purchases of property and equipment                   (14,517)    (9,140)
  Change in restricted cash                                 401        418
  Acquisition of business, net of cash acquired        (137,504)         -
                                                      ---------  ---------
         Net cash used in investing activities         (151,620)    (8,722)
                                                      ---------  ---------
Cash flows from financing activities:
  Principal payments on loan and capital lease
   obligations                                           (1,652)    (1,591)
  Payments for expenses associated with 2009 equity
   offering                                                (657)         -
  Net proceeds from stock offering                            -    144,444
  Excess tax benefits from employee stock plans             293        301
  Treasury stock acquired to settle employee
   withholding liability                                 (2,824)    (1,066)
  Treasury stock issued to employees for ESPP             3,777          -
  Proceeds from stock options exercised and ESPP
   shares                                                13,676      9,640
                                                      ---------  ---------
         Net cash provided by financing activities       12,613    151,728
                                                      ---------  ---------
Effect of exchange rate changes on cash and cash
 equivalents                                                574      1,089
                                                      ---------  ---------
Increase in cash and cash equivalents                  (102,641)   194,767
Cash and cash equivalents:
  Beginning of period                                   244,229     49,462
                                                      ---------  ---------
  End of period                                       $ 141,588  $ 244,229
                                                      =========  =========

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