SOURCE: Taleo

November 10, 2008 16:01 ET

Taleo Delays Quarterly Financial Report; Announces Re-Evaluation of Timing of Revenue Recognition

DUBLIN, CA--(Marketwire - November 10, 2008) - Taleo Corporation (NASDAQ: TLEO) announced today that it has filed a notification with the Securities and Exchange Commission, relating to the late filing of the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2008, which will not be filed by its due date of November 10, 2008.

On November 6, 2008, Deloitte & Touche LLP, the company's independent registered public accounting firm, requested that the company re-evaluate whether the company's historical and current practices with respect to the timing for recognition of application and consulting revenues were appropriate under generally accepted accounting principles in the United States, or GAAP. As a result, Taleo is reviewing the issues raised by its auditors to determine if an alternative accounting treatment should be adopted. Taleo has delayed the filing of its quarterly report on Form 10-Q pending the outcome of its review.

"Our auditors have asked us to re-evaluate the timing of certain elements of our revenue recognition," said Mike Gregoire, Chairman and CEO of Taleo. "This is a timing issue, and does not impact the total amount of revenue that Taleo has under contract. Taleo continues to accelerate along many vectors, as we develop innovative new products, penetrate new markets domestically and internationally, and build a platform and community that will define the future of Talent Management. In addition, our customers will continue to receive the same high level of software, services and support from Taleo that they have in the past."

"Our long standing revenue recognition policies have been in place since at least the time of our initial public offering," said Katy Murray, Taleo Chief Financial Officer. "Our auditors have requested a re-evaluation of these policies. Accordingly, management, under the direction of the Audit Committee, has commenced a review process," she continued. "While this is a complicated area, in summary the questions are (1) whether our policy that delivery of our software solutions has occurred when access to the software is provided to the customer is correct, and (2) whether our policy that our consulting services have standalone value is correct. A change in either policy could impact the timing of our recognition of application and consulting revenue. It is important to note that this process does not in any way question the validity of our customer contracts or the total amount of revenue to be recognized, but only the timing of the periods in which revenue is recognized," stated Ms. Murray. "At this time, it is our view that if any changes are made to our revenue recognition practices, it would generally result in the deferral of revenue from earlier periods to later periods," she continued.

Taleo delivers its software solutions through an on-demand, or software-as-a-service, delivery model, through which Taleo's customers access and use Taleo's software solutions through an internet connection and a web browser. Taleo's customers pay a recurring subscription fee for the right to access and use Taleo's software applications. With respect to its software solutions, Taleo recognizes subscription revenue ratably over the term of its agreements. Taleo has taken the position that delivery of its software solutions occurs on the initial access date to the software solution, which is the point in time that a customer is provided access to the on-demand application suite. Based on that determination, the company generally begins recognizing application revenue from the initial access date to the software solution, a practice which the company believes is common in the industry.

Taleo's software subscription agreements often include contemporaneous sales of consulting services, which may include business process re-engineering, change management, configuration of Taleo's software solutions to reflect customer business processes and integration of Taleo solutions to third party solutions. Taleo has taken the position that its time and materials consulting services have standalone value and fair value and, thus, it is appropriate to recognize revenue for these services as the services are performed.

Taleo has consistently applied the methodology for recognition of application and consulting revenue described above since its initial public offering in September 2005 and before, and has engaged the same independent registered public accounting firm, who have opined on our financial statements, for all relevant periods.

The re-evaluation of Taleo's revenue recognition practices is not related to a change in Taleo's business practices or circumstances, including Taleo's recent acquisition of Vurv Technology, Inc., a change to GAAP, or a change in audit firms or audit partners, but instead arises purely from a re-assessment of the application of certain elements of GAAP to the company's historical and current revenue recognition practices in the course of a quarterly review. Further, if adopted, the proposed changes would impact only the timing of revenue recognition from period to period and, potentially, the timing of recognition of related expenses. The proposed changes would not impact the company's cash or accounts receivable position, but would, if adopted, impact cash flow from operations on a period by period basis given the potential impact to net income / (loss) in each period as well as deferred revenue.

Taleo is currently evaluating the scope of this re-evaluation and does not expect to be able to file its quarterly report on Form 10-Q for the quarter ended September 30, 2008, until this review is complete.

As a result of the delay in filing its Form 10-Q for the third quarter of 2008, Taleo expects to receive notification from the NASDAQ Stock Market that it is not in compliance with the filing requirements for continued listing on NASDAQ.

Conference Call Details

In conjunction with this announcement Taleo will host a conference call 5:30 PM EST today. 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 800-260-8140 (domestic) or 617-614-3672 (international) and referencing passcode: 4581-9223. A replay of the call can also be accessed by dialing 888-286-8010 (domestic) or 617-801-6888 (international), and referencing passcode: 7897-7488.

About Taleo

Taleo (NASDAQ: TLEO) is the leader in on demand unified talent management solutions that empower organizations of all sizes to assess, acquire, develop and align their workforces for improved business performance. More than 3,800 organizations use Taleo, including 47 of the Fortune 100 and 3,000 small and medium sized businesses, 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. 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: the expected timing, effects and implications of Taleo's review of its customer contracts, revenue recognition practices and past and future application of GAAP; the timing of the filing of Taleo's Form 10-Q for the third quarter of fiscal 2008; and the expected notice from the NASDAQ Stock Market. 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 release. 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, including risks related to Taleo's ability to issue timely financial results, the timing and results of Taleo's review of its revenue recognition practices, negative reactions from Taleo's stockholders or customers to the delay in providing financial information, the impact and result of any litigation, investigation or other action by the NASDAQ Stock Market, Securities and Exchange Commission, any other governmental agency or other parties related to Taleo, uncertainties regarding general economic conditions and other factors affecting the operation of Taleo's business. 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 August 11, 2008, and in other reports filed by Taleo with the SEC.

Contact Information

  • Investor Relations Contact
    Nate Swanson
    Taleo Corporation
    925-452-3156
    ir@taleo.com