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

^{Published on 2011-02-09 13:30:34 - Market Wire}
 

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 ========= =========