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Taleo Corporation: Taleo Delivers Strong Second Quarter Results

^{Published on 2009-07-30 13:11:52, Last Modified on 2009-07-30 13:12:04 - Market Wire}
 

DUBLIN, CA--(Marketwire - July 30, 2009) - Taleo (NASDAQ: [ TLEO ]), the leading provider of on demand talent management solutions, today announced its financial results for the quarter ended June 30, 2009.

Quarterly highlights include:

 -- GAAP revenues of $49.2 million for the second quarter of 2009, an increase of 30% year-over-year. Non-GAAP revenues increased to $49.5 million, which includes amounts excluded from GAAP revenue due to the write down of deferred revenue required under purchase accounting associated with the acquisition of Vurv Technology, Inc. ("Vurv") on July 1, 2008. -- Signed 146 new customers, including 12 new enterprise customers and 134 new Business Edition customers. -- Closed 8 large enterprise deals with annual contract values in excess of $250,000, including one international deal in excess of $1 million in annual contract value. -- Increased demand for enterprise Talent Management suite sales, including Recruiting and Performance or Compensation management offerings. -- Record number of new Performance Management customers and three Compensation Management deals with strategic partner Worldwide Compensation. -- GAAP net income of $234,000, or $0.01 per fully diluted share. -- Non-GAAP net income of $5.6 million, or $0.17 per fully diluted share. 

"Businesses of all sizes are taking a new look at priorities and ROI, and are recognizing the value of Talent Management products and practices to their success," said Michael Gregoire, Taleo Chairman and CEO. "We are seeing this in the growing adoption of our unified set of Talent Management software solutions, as Taleo transforms and leads the industry."

Other significant achievements included:

 -- Acquired 12 new enterprise customers and closed 8 large enterprise deals with annual contract values in excess of $250,000, bringing Taleo's enterprise customer base to over 700 organizations around the world. New enterprise customers include: New South Wales Government, Nordstrom, SunTrust Bank, Meijer, NCR Corporation, L-3 Communications, Corrections Corporation of America and PricewaterhouseCoopers (Belgium). -- Increased momentum in enterprise Talent Management suite sales. New customers buying Taleo's Talent Management suite offering include Vermeer Corporation, Stream Global Services and Oakley, which purchased Taleo's Recruiting, Performance and Compensation Management solutions. -- Record quarter in total Performance Management deals in both enterprise and Business Edition segments, including Veolia Group, CPS Energy, Phoebe Putney Memorial Hospital, Dow Jones and Company and Books-A- Million, and closed three Compensation Management deals with strategic partner Worldwide Compensation. -- Signed 134 new Small and Medium-sized Customers. Taleo Business Edition, a recruiting solution targeted at companies with less than 5,000 employees, now has more than 3,400 customers. New Taleo Business Edition customers include: MTV Networks, Public Policy of California, City of Artesia, Imperial Toy Company and Emprise Bank. -- Vurv conversions and commitments to convert to Taleo continues to track to expectations. Recent Vurv customers committing to Taleo include: American Family Insurance Group, Barclay's Global Investors NA, Direct Supply, Wegman's Food Markets, Hasbro, the City of College Station and Austin Industrial. 

Taleo delivered the following financial results:

Revenue: Total revenue, in accordance with accounting principles generally accepted in the United States, or GAAP, for the second quarter was $49.2 million, representing an increase of 30% on a year-over-year basis. Application revenue for the second quarter was $43.0 million, an increase of 40% on a year-over-year basis. Total non-GAAP revenue for the second quarter of 2009 was $49.5 million, an increase of 31% year-over-year. Total non-GAAP application revenue for the second quarter was $43.3 million. The difference between GAAP and non-GAAP revenue reflects the amounts excluded from the GAAP revenue due to purchase accounting adjustments, which require the write down of deferred revenue associated with the Vurv acquisition in order to reflect fair value.

Net Income (Loss) and Net Income (Loss) Per Share to Common Stockholders: Net income was $234,000 for the second quarter, compared to a net loss of $(45,000) for the same period last year. Net income includes $3.6 million in amortization expense related to the acquisition of Vurv, as well as increased third party costs related to the Company's restatement-related revenue review. Net income for the second quarter of 2009 also includes share-based compensation expense of $2.6 million. Net income per fully diluted share was $0.01 for the second quarter of 2009 based on 32.6 million weighted average shares outstanding compared to a net loss per fully diluted share of $(0.00) for the same period in 2008 based on 25.7 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net income, which 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 costs associated with the restatement-related revenue review, share-based compensation expense, amortization of acquired intangibles, restructuring and severance expense, non-cash tax valuation adjustment and non-cash income tax audit settlement, was $5.6 million for the second quarter of 2009, compared to a non-GAAP net income of $3.1 million in the same period last year. Non-GAAP net income per fully diluted share was $0.17 for the second quarter of 2009 based on 32.6 million weighted average shares outstanding compared to non-GAAP net income per fully diluted share of $0.11 for the same period in 2008 based on 29.1 million weighted average shares outstanding.

Conference Call Details

In conjunction with this announcement, Taleo will host a conference call 5:00pm EDT today to discuss the Company's second quarter 2009 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 ].

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. Approximately 4,100 organizations use Taleo for talent acquisition and performance management, including 46 of the Fortune 100 and approximately 3,400 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 achieves 99.9% availability. Taleo's Talent Grid will harness 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, market growth, the demand for Taleo's solutions, the impact of Taleo's acquisition of Vurv, and general business conditions. Any forward-looking statements contained in this press release are based upon Taleo's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Taleo's expectations as of the date of this press announcement. Subsequent events may cause these expectations to change, and Taleo disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Further information on potential factors that could affect actual results is included in Part II, Item 1A of Taleo's Quarterly Report on Form 10-Q, as filed with the SEC on May 11, 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, share-based compensation expense, amortization of acquired intangibles, restructuring and severance expense, non-cash tax valuation adjustment and non-cash income tax audit settlement. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure as detailed above. As previously mentioned, a reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release.

 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, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- As As restated restated -------- -------- Revenue: Application $ 43,011 $ 30,730 $ 84,215 $ 60,893 Consulting 6,179 7,172 13,058 12,839 -------- -------- -------- -------- Total revenue 49,190 37,902 97,273 73,732 -------- -------- -------- -------- Cost of revenue (note 1): Application 9,830 6,320 18,759 12,574 Amortization of acquired intangibles 760 36 1,520 72 -------- -------- -------- -------- Total cost of application revenue 10,590 6,356 20,279 12,646 Consulting 6,238 5,559 12,508 11,283 -------- -------- -------- -------- Total cost of revenue 16,828 11,915 32,787 23,929 -------- -------- -------- -------- -------- -------- -------- -------- Gross profit 32,362 25,987 64,486 49,803 -------- -------- -------- -------- Operating expenses (note 1): Sales and marketing 14,229 11,759 27,269 22,356 Sales - amortization of acquired intangibles 2,810 73 5,623 146 Research and development 8,865 7,365 17,417 14,398 General and administrative 7,627 7,200 17,393 13,788 Restructuring and severance - 281 - 281 -------- -------- -------- -------- Total operating expenses 33,531 26,678 67,702 50,969 -------- -------- -------- -------- -------- -------- -------- -------- Loss from operations (1,169) (691) (3,216) (1,166) -------- -------- -------- -------- Other income / (expense): Interest income 54 518 194 1,296 Interest expense (47) (41) (88) (86) -------- -------- -------- -------- Total other income 7 477 106 1,210 -------- -------- -------- -------- Income / (loss) before benefit from income tax (1,162) (214) (3,110) 44 Benefit from income taxes (1,396) (169) (1,160) (472) -------- -------- -------- -------- Net income / (loss) attributable to Class A common stockholders $ 234 $ (45) $ (1,950) $ 516 ======== ======== ======== ======== Net income / (loss) per share attributable to Class A common stockholders - basic $ 0.01 $ (0.00) $ (0.06) $ 0.02 ======== ======== ======== ======== Net income / (loss) per share attributable to Class A common stockholders - diluted $ 0.01 $ (0.00) $ (0.06) $ 0.02 ======== ======== ======== ======== Weighted average Class A common shares - basic 30,417 25,708 30,341 25,538 ======== ======== ======== ======== Weighted average Class A common shares - diluted 32,611 25,708 30,341 28,994 ======== ======== ======== ======== NOTES 1. Includes share-based compensation expense pursuant to (SFAS 123(R)) Application cost of revenue $ 141 $ 134 $ 267 $ 260 Consulting cost of revenue 264 192 483 373 -------- -------- -------- -------- Cost of revenue subtotal 405 326 750 633 Sales and marketing operating expense 711 887 1,169 1,522 Research and development operating expense 339 287 618 586 General and administrative operating expense 1,128 1,255 2,414 2,510 -------- -------- -------- -------- Operating expense subtotal 2,178 2,429 4,201 4,618 -------- -------- -------- -------- Total share-based compensation expense $ 2,583 $ 2,755 $ 4,951 $ 5,251 ======== ======== ======== ======== 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 Six Months Ended June 30, June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- As As restated restated -------- -------- GAAP net income / (loss) reported above $ 234 $ (45) $ (1,950) $ 516 Add back: Revenue Non-GAAP application revenue 260 - 773 - Non-GAAP service revenue - - 13 - -------- -------- -------- -------- Total Non-GAAP revenue 260 - 786 - Expenses Revenue review expense 277 - 1,631 - Share-based compensation expense (SFAS 123(R)) 2,583 2,755 4,951 5,251 Amortization of acquired intangibles 3,570 109 7,143 218 Restructuring and severance expense - 281 - 281 Non-cash tax valuation adjustment - - - (332) Non-cash income tax audit settlement (1,335) - (1,335) - -------- -------- -------- -------- 5,095 3,145 12,390 5,418 -------- -------- -------- -------- Non-GAAP net income $ 5,589 $ 3,100 $ 11,226 $ 5,934 ======== ======== ======== ======== Non-GAAP net income per share Basic $ 0.18 $ 0.12 $ 0.37 $ 0.23 ======== ======== ======== ======== Diluted $ 0.17 $ 0.11 $ 0.36 $ 0.20 ======== ======== ======== ======== Reconciliation of basic and fully diluted share count: -------- -------- -------- -------- Basic 30,417 25,708 30,341 25,538 -------- -------- -------- -------- Add: Weighted Average - Series B common stock - 462 - 512 Weighted Average - options and unreleased restricted stock 1,716 2,900 497 2,944 Weighted Average - Vurv escrow shares 478 - 478 - -------- -------- -------- -------- Diluted 32,611 29,070 31,316 28,994 -------- -------- -------- -------- Taleo Corporation Condensed Consolidated Balance Sheets (All amounts in thousands) (Unaudited) June 30, December 31, 2009 2008 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 61,969 $ 49,462 Restricted cash 521 521 Accounts receivable, net 45,539 49,167 Prepaid expenses and other current assets 11,337 10,977 Investment credits receivable 5,909 6,087 --------- --------- Total current assets 125,275 116,214 Property and equipment, net 26,394 25,250 Restricted cash 305 515 Goodwill 91,025 91,626 Other intangibles, net 37,671 44,802 Other assets 6,504 4,782 --------- --------- Total assets $ 287,174 $ 283,189 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 21,784 $ 24,877 Deferred revenue - application services and customer deposits 54,682 54,421 Deferred revenue - consulting services 15,044 16,221 Capital lease obligation, short-term 758 1,101 --------- --------- Total current liabilities 92,268 96,620 Long-term deferred revenue - application services and customer deposits 547 777 Long-term deferred revenue - consulting services 12,168 9,594 Other liabilities 4,347 3,258 Capital lease obligation, long-term 232 519 --------- --------- Total liabilities 109,562 110,768 --------- --------- Stockholders' equity: Capital stock - - Additional paid-in capital 254,434 247,764 Accumulated deficit (77,868) (75,918) Treasury stock (221) - Accumulated other comprehensive income 1,267 575 --------- --------- Total stockholders' equity 177,612 172,421 --------- --------- Total liabilities and stockholders' equity $ 287,174 $ 283,189 ========= ========= Taleo Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited) Six Months Ended June 30, 2009 2008 ----------- ----------- As restated ----------- Cash flows from operating activities: Net income / (loss) $ (1,950) $ 516 Adjustments to reconcile net income / (loss) to net cash provided by operating activities: Depreciation and amortization 13,589 4,726 Loss disposal of fixed assets 16 - Amortization of tenant inducements (76) (76) Share-based compensation expense 4,951 5,251 Director fees settled with stock 126 119 Bad debt expense 528 100 Changes in working capital accounts: Accounts receivable 2,897 631 Prepaid expenses and other assets (1,795) (3,648) Investment credit receivable 509 (1,393) Accounts payable and accrued liabilities (3,549) 3,877 Deferred revenue & customer deposits 1,206 9,039 ----------- ----------- Net cash provided by operating activities 16,452 19,142 ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (5,340) (3,625) Restricted cash - decrease 210 210 ----------- ----------- Net cash used in investing activities (5,130) (3,415) ----------- ----------- Cash flows from financing activities: Principal payments on capital lease obligations (630) (24) Treasury stock acquired to settle employee withholding liability (339) (572) Proceeds from stock options exercised and ESPP shares 1,711 3,426 ----------- ----------- Net cash provided by financing activities 742 2,830 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 443 43 ----------- ----------- Increase in cash and cash equivalents 12,507 18,600 Cash and cash equivalents: Beginning of period 49,462 86,135 ----------- ----------- End of period $ 61,969 $ 104,735 =========== =========== Supplemental cash flow disclosures: Cash paid for interest $ 40 $ 1 ----------- ----------- Cash paid for income taxes $ 271 $ - ----------- ----------- Supplemental disclosure of non-cash financing and investing activities: Property and equipment purchases included in accounts payable and accrued liabilities $ 3,467 $ 2,487 Class B common stock exchanged for Class A common stock $ - $ 96