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Record Application Revenue of $47.9 Million; Closes Multi-Million Dollar Performance Management Contract Supporting 140,000 Users; Adds Over 200 New SMB Customers; 55% Increase Yea...

Wed, 07/28/2010 - 1:05pm
The Associated Press

Taleo Corporation (NASDAQ: TLEO), the leading provider of on-demand talent management solutions, today announced its financial results for the quarter ended June 30, 2010.

"Businesses need insight on their people to power growth, and they are turning to Taleo to provide the software solutions and perspective needed to gain that insight," said Michael Gregoire, Chairman and Chief Executive Officer of Taleo. "Our second quarter results are further validation that our Talent Intelligence framework (http://ir.taleo.com/releasedetail.cfm?ReleaseID488412) is delivering value to nearly 4,700 companies around the world and is helping those customers power their businesses."

Second quarter highlights included:

-- Revenues of $56.3 million, an increase of 14.6% year-over-year. -- Cash flow from operations of $9.9 million; with total cash of $244.9 million at June 30, 2010. -- Signed 226 new customers, including 18 new Taleo Enterprise customers and 208 new Taleo Business Edition customers. -- Closed 8 large enterprise deals with annual contract values in excess of $250,000. -- Significantly, the largest transaction for the quarter was a multi-million dollar sale of Performance Management to support more than 140,000 employees for an existing Recruiting customer that is one of the world's largest professional services firms.

Second quarter customer momentum included the addition of the following new customers:

-- ASRC Federal Holding Company, Brinker International, Carnegie Mellon University, LG Electronics, LLC, Cooper-Standard Holdings Inc., Miami Children's Hospital, Starplex Cinemas, The Reinalt-Thomas Corporation, Samsung Telecommunications America LLC, Savannah River Nuclear Solutions, Skyy Spirits, and Warner Music Group. -- Existing Taleo customers that chose to add Taleo solutions to their Talent Management suites included: Adobe Systems Incorporated, Magellan Health Services Inc., and Swissport USA Inc.

Taleo delivered the following financial results for the second quarter of 2010:

Revenue: Total revenue for the second quarter was $56.3 million, an increase of 14.6% on a year-over-year basis. Application revenue for the second quarter was $47.9 million, an increase of 11.7% on a year-over-year basis.

Net Loss and Net Loss Per Share to Common Stockholders: Net loss was $(1.4) million for the second quarter, compared to a net loss of $(0.1) million for the same period last year. Net loss for the second quarter of 2010 includes $3.2 million in amortization expense related to acquisitions, and $3.7 million in stock-based compensation expense. Net loss per share was $(0.04) for the second quarter, based on 39.4 million weighted average shares outstanding, compared to approximately breakeven for the same period last year, based on 30.4 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share to Common Stockholders: Non-GAAP net income was $6.1 million for the second quarter, compared to non-GAAP net income of $5.5 million for the same period last year. Non-GAAP net income includes amounts excluded from GAAP revenue due to the write down of the deferred revenue associated with purchase accounting for the Worldwide Compensation and Vurv acquisitions, and excludes costs associated with our 2009 restatement-related revenue review, acquisition related transaction costs, stock-based compensation expense, amortization of acquired intangibles, and the gain on re-measurement of a previously held interest in Worldwide Compensation. Non-GAAP net income per fully diluted share was $0.14 for the second quarter based on 42.7 million fully diluted weighted average shares outstanding, compared to non-GAAP net income per fully diluted share of $0.17 for the same period last year based on 32.6 million fully diluted weighted average shares outstanding.

Conference Call Details

The company will issue a pre-recorded webcast regarding the quarter at 1:30 pm PT (4:30 pm ET), which will be available on the Investor Relations section (http://ir.taleo.com/redesign2009/events.cfm) of Taleo.com. The company will then host a live Q&A call at 2:30 pm PT (5:30 pm ET) with Michael Gregoire, Chairman and Chief Executive Officer, and Katy Murray, Chief Financial Officer. This call will also be available via webcast on the Investor Relations section (http://ir.taleo.com/redesign2009/events.cfm) of the company website.

About Taleo

Taleo's (NASDAQ: TLEO) cloud-based talent management platform unites products and an ecosystem to drive business performance through talent intelligence. Nearly 4,700 customers use Taleo for talent acquisition, performance and compensation management, including 48 of the Fortune 100. Further, Taleo's Talent Grid cloud community harnesses the expertise of Taleo customers, more than 200 million candidates, and 100 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 May 7, 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 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. 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 and Vurv acquisitions, and exclude costs associated with our 2009 restatement-related revenue review, acquisition related transaction costs, stock-based compensation expense, amortization of acquired intangibles, and the gain on re-measurement of a previously held interest in Worldwide Compensation. 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 (http://www.taleo.com) .

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, -------- -------- -------- -------- 2010 2009 2010 2009 -------- -------- -------- -------- Revenue: Application $ 47,928 $ 42,914 $ 95,492 $ 84,118 Consulting 8,348 6,179 15,830 13,058 -------- -------- -------- -------- Total revenue 56,276 49,093 111,322 97,176 -------- -------- -------- -------- Cost of revenue (Note 1): Application 11,290 9,857 21,652 18,782 Amortization of acquired intangibles 923 760 1,874 1,520 -------- -------- -------- -------- Total cost of application revenue 12,213 10,617 23,526 20,302 Consulting 6,880 6,281 13,365 12,555 -------- -------- -------- -------- Total cost of revenue 19,093 16,898 36,891 32,857 -------- -------- -------- -------- -------- -------- -------- -------- Gross profit 37,183 32,195 74,431 64,319 -------- -------- -------- -------- Operating expenses (Note 1): Sales and marketing 15,879 14,337 30,816 27,432 Sales - amortization of acquired intangibles 2,254 2,810 4,377 5,623 Research and development 10,873 8,936 20,927 17,472 General and administrative 9,791 7,628 20,089 17,256 -------- -------- -------- -------- Total operating expenses 38,797 33,711 76,209 67,783 -------- -------- -------- -------- -------- -------- -------- -------- Loss from operations (1,614) (1,516) (1,778) (3,464) -------- -------- -------- -------- Other income / (expense): Interest and other income 124 54 251 194 Interest expense (30) (47) (64) (88) Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - 885 - -------- -------- -------- -------- Total other income 94 7 1,072 106 -------- -------- -------- -------- Loss before benefit from income taxes (1,520) (1,509) (706) (3,358) Benefit from income taxes (110) (1,396) (114) (1,160) -------- -------- -------- -------- Loss attributable to Class A common stockholders $ (1,410) $ (113) $ (592) $ (2,198) Loss per share attributable to Class A common stockholders - basic $ (0.04) $ (0.00) $ (0.02) $ (0.07) Loss per share attributable to Class A common stockholders - diluted $ (0.04) $ (0.00) $ (0.02) $ (0.07) Weighted average Class A common shares - basic 39,444 30,417 39,301 30,341 Weighted average Class A common shares - diluted 39,444 30,417 39,301 30,341 NOTES 1. Includes stock-based compensation expense Application cost of revenue $ 242 $ 169 $ 418 $ 290 Consulting cost of revenue 416 307 778 529 -------- -------- -------- -------- Cost of revenue subtotal 658 476 1,196 819 Sales and marketing operating expense 999 818 1,883 1,332 Research and development operating expense 512 409 976 673 General and administrative operating expense 1,501 1,130 2,792 2,278 -------- -------- -------- -------- Operating expense subtotal 3,012 2,357 5,651 4,283 -------- -------- -------- -------- Total stock-based compensation expense $ 3,670 $ 2,833 $ 6,847 $ 5,102 Taleo Corporation Condensed Consolidated Statements of Operations (continued) (All amounts in thousands except per share data) (Unaudited) Reconciliation of GAAP net loss to non-GAAP net income: Three Months Ended Six Months Ended June 30, June 30, -------- -------- -------- -------- 2010 2009 2010 2009 -------- -------- -------- -------- GAAP net loss reported above $ (1,410) $ (113) $ (592) $ (2,198) Add back: Revenue Non-GAAP application revenue 195 260 348 773 Non-GAAP service revenue - - - 13 -------- -------- -------- -------- Total Non-GAAP revenue 195 260 348 786 Expenses Revenue review - 277 - 1,631 Acquisition related transaction costs 483 - 1,022 - Stock-based compensation expense 3,670 2,833 6,847 5,102 Amortization of acquired intangibles 3,177 3,570 6,251 7,143 -------- -------- -------- -------- 7,330 6,680 14,120 13,876 Other income Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - (885) - Benefit from income taxes Non-cash income tax audit settlement - (1,335) - (1,335) -------- -------- -------- -------- Non-GAAP net income $ 6,115 $ 5,492 $ 12,991 $ 11,129 Non-GAAP net income per share Basic $ 0.16 $ 0.18 $ 0.33 $ 0.37 Diluted $ 0.14 $ 0.17 $ 0.31 $ 0.36 Reconciliation of basic and fully diluted share count: -------- -------- -------- -------- Basic 39,444 30,417 39,301 30,341 -------- -------- -------- -------- Add: Weighted Average - options and unreleased restricted stock, without consideration for the treasury stock method 3,252 1,716 3,272 497 Weighted Average - Vurv escrow shares - 478 - 478 -------- -------- -------- -------- Diluted 42,696 32,611 42,573 31,316 -------- -------- -------- -------- Taleo Corporation Condensed Consolidated Balance Sheets (All amounts in thousands) (Unaudited) June 30, December 31, 2010 2009 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 244,943 $ 244,229 Restricted cash 198 409 Accounts receivable, net 41,993 43,928 Prepaid expenses and other current assets 11,990 10,126 Investment credits receivable 6,952 5,499 ----------- ------------ Total current assets 306,076 304,191 Property and equipment, net 25,909 23,510 Restricted cash 210 210 Goodwill 102,650 91,027 Other intangibles, net 29,093 30,544 Other assets 5,812 6,895 ----------- ------------ Total assets $ 469,750 $ 456,377 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 23,705 $ 23,592 Deferred revenue - application services and customer deposits 63,734 60,140 Deferred revenue - consulting services 17,116 17,523 Capital lease obligation, short-term 159 412 ----------- ------------ Total current liabilities 104,714 101,667 Long-term deferred revenue - application services and customer deposits 400 201 Long-term deferred revenue - consulting services 12,932 13,220 Other liabilities 3,264 3,973 Capital lease obligation, long-term 73 107 ----------- ------------ Total liabilities 121,383 119,168 ----------- ------------ Stockholders' equity: Capital stock 1 1 Additional paid-in capital 425,357 414,106 Accumulated deficit (77,621) (77,029) Treasury stock (1,627) (2,471) Accumulated other comprehensive income 2,257 2,602 ----------- ------------ Total stockholders' equity 348,367 337,209 ----------- ------------ Total liabilities and stockholders' equity $ 469,750 $ 456,377 Taleo Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited) Six Months Ended June 30, -------------------- 2010 2009 --------- --------- Cash flows from operating activities: Net loss $ (592) $ (2,198) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 13,361 13,589 Loss disposal of fixed assets 58 16 Amortization of tenant inducements (88) (76) Tenant inducements from landlord 111 - Stock-based compensation expense 6,847 5,102 Excess tax benefit from stock options (16) - Director fees settled with stock 111 126 Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. (885) - Bad debt expense 7 528 Changes in working capital accounts, net of effect of acquisition: Accounts receivable 2,249 2,994 Prepaid expenses and other assets (2,270) (1,795) Investment credit receivable (1,460) 509 Accounts payable and accrued liabilities 1,612 (3,549) Deferred revenue and customer deposits 2,251 1,206 --------- --------- Net cash provided by operating activities 21,296 16,452 --------- --------- Cash flows from investing activities: Purchases of property and equipment (10,805) (5,340) Change in restricted cash 210 210 Acquisition of business, net of cash acquired (13,381) - --------- --------- Net cash used in investing activities (23,976) (5,130) --------- --------- Cash flows from financing activities: Principal payments on loan and capital lease obligations (783) (630) Payments for expenses associated with 2009 equity offering (681) - Excess tax benefit from stock options 16 - Treasury stock acquired to settle employee withholding liability (937) (339) Treasury stock issued to employees for ESPP 1,781 - Proceeds from stock options exercised and ESPP shares 4,298 1,711 --------- --------- Net cash provided by financing activities 3,694 742 --------- --------- Effect of exchange rate changes on cash and cash equivalents (300) 443 --------- --------- Increase in cash and cash equivalents 714 12,507 Cash and cash equivalents: Beginning of period 244,229 49,462 --------- --------- End of period $ 244,943 $ 61,969 Supplemental cash flow disclosures: Cash paid for interest $ 12 $ 40 --------- --------- Cash paid for income taxes $ 1,230 $ 271 --------- --------- Supplemental disclosure of non-cash financing and investing activities: Property and equipment purchases included in accounts payable and accrued liabilities $ 995 $ 3,467

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