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Taleo Announces Record Quarterly Revenues of $83 Million, up 41% Year-Over-Year; Subscription Revenue Growth up 38% to $67 Million

Record Quarterly Non-GAAP Revenue of $85 Million, up 44% Year-Over-Year; Non-GAAP Subscription Revenue of $68 Million, up 40% Year-Over-Year; Current Deferred Revenue Rose to a Record $111 Million, up 41% Year-Over-Year; Added 270 New Customers With 7 Tra (November 01, 2011)

DUBLIN, CA -- (Marketwire) -- 11/01/11 -- Taleo Corporation (NASDAQ: TLEO), the global leader of SaaS-based Talent Management solutions, today announced strong results for its third quarter 2011.

"Taleo continued to drive change and build business momentum in Q3 with global expansion and solid execution against our growth initiatives resulting in strong top-line metrics," said Michael Gregoire, Taleo's Chairman and CEO. "Our customers tell us they view the talent intelligence they gain from Taleo as a competitive differentiator and are making it a part of their corporate strategy to recruit, grow and retain the talent they need to drive long-term growth."

Taleo delivered the following results for the third quarter 2011:

Third Quarter Revenue: Subscription revenue for the third quarter was $67 million, an increase of 38% on a year-over-year basis. Professional services revenue for the third quarter was $16 million, an increase of 59% on a year-over-year basis. Total revenue for the third quarter was $83 million, an increase of 41% on a year-over-year basis.


Non-GAAP subscription revenue for the third quarter was $68 million, an increase of 40% on a year-over-year basis. Non-GAAP professional services revenues for the third quarter was $17 million, an increase of 66% on a year-over-year basis. Total third quarter non-GAAP revenue was $85 million, an increase of 44% on a year-over-year basis.

Third Quarter Loss per Share: Third quarter net loss per share was $(0.08), compared to net income per fully diluted share of $0.04 a year ago.

Non-GAAP net income per fully diluted share was $0.30, compared to non-GAAP net income per fully diluted share of $0.25 a year ago.

An explanation of the non-GAAP measures used in this press release is included in the section below titled "Non-GAAP Financial Measures" and a reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release.

Cash: Year-to-date cash flow from operations totaled $25 million down from $37 million generated in the comparable period a year ago. Cash flow year-to-date was negatively impacted by litigation settlements aggregating nearly $10 million and the payment of acquisition related costs of an additional $10 million. Cash generated from operations for the third quarter of 2011 totaled $6 million as compared to $15 million in the third quarter of 2010. Cash flow for the third quarter was negatively impacted by the payment of $6.5 million in connection with the TSA settlement disclosed in August 2011, and acquisition related spending and working capital requirements totaling an additional $6 million. Total cash and cash equivalents finished the quarter at $111 million, a decrease of $31 million year-to-date due primarily to the acquisitions of Cytiva and Jobpartners.

Customers: In the third quarter, 270 new customers chose Taleo's Talent Management solutions for recruiting, performance, learning and/or compensation management, including: Abbott Laboratories, Cliffs Natural Resources, Inc., Credit Suisse Securities, LLC., John Muir Health Systems and Petco. In the third quarter we were awarded 7 new contracts of $250,000 or larger in first year subscription revenue, underscoring the market interest in larger, global deployments and in multiple component suite solutions.

Billings: Billings, defined as the change in short-term deferred subscription revenue plus non-GAAP subscription revenue, was $71 million in the third quarter, up 50% year-over-year.

Quarterly Conference Call
Taleo will host a conference call to discuss its third quarter 2011 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 November 10, 2011 at http://ir.taleo.com/events.cfm, or via dial-in at 800-642-1687 or 706-645-9291. The pass code for the replay is 14831950.

About Taleo

Taleo (NASDAQ: TLEO) helps organizations improve the performance of their business by unlocking the power of their people. Taleo is the only company to provide industry-leading solutions in every category of Talent Management. Through its cloud-based platform, Taleo optimizes recruiting, performance management, learning and compensation -- and integrates them all so managers have the insights they need to achieve talent intelligence. Customers also plug into Taleo's unique Talent Grid community to harness the power of proven best practices, millions of users, and Taleo-ready partner solutions. From small and medium sized businesses to large enterprises, more than 5,000 organizations rely on Taleo every day to pursue growth, innovation and customer success.

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 10-Q, as filed with the SEC on August 8, 2011, 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 accounting principles generally accepted in the United States of America, or 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. The non-GAAP measures include amounts excluded from GAAP revenue due to the write down of deferred revenue associated with purchase accounting for the Worldwide Compensation, Learn.com, Cytiva, and Jobpartner acquisitions, and the reduction in GAAP revenue from the TSA settlement, and exclude costs associated with stock-based compensation expense, amortization of acquisition-related intangibles, acquisition-related transaction costs, and TSA settlement expenses, the refundable tax credits related to 2009 and 2010, the gain on re-measurement of a previously held interest in Worldwide Compensation, the gain on settlement of the Worldwide Compensation escrow account, and income taxes associated with certain non-GAAP adjustments.

Third quarter loss per share calculations are based on 41.2 million basic weighted average shares outstanding, while third quarter non-GAAP EPS calculations are based on 43.7 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.

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 Nine Months Ended September 30, September 30, -------------------- -------------------- 2011 2010 2011 2010 --------- --------- --------- --------- Revenues: Subscription and support $ 66,881 $ 48,631 $ 186,985 $ 144,123 Professional services 16,034 10,106 43,636 25,936 TSA settlement - subscription and support - - (6,500) - --------- --------- --------- --------- Net revenues 82,915 58,737 224,121 170,059 --------- --------- --------- --------- Cost of revenues (Note 1): Subscription and support 14,664 10,575 39,637 32,227 Amortization of acquisition- related intangibles 842 860 3,603 2,734 --------- --------- --------- --------- Total cost of subscription and support revenues 15,506 11,435 43,240 34,961 Professional services 12,440 7,102 32,691 20,467 --------- --------- --------- --------- Total cost of revenues 27,946 18,537 75,931 55,428 --------- --------- --------- --------- Gross profit 54,969 40,200 148,190 114,631 --------- --------- --------- --------- Operating expenses (Note 1): Sales and marketing 25,612 16,151 68,604 46,967 Sales - amortization of acquisition-related intangibles 4,374 2,096 11,310 6,473 Research and development 14,071 10,247 40,752 31,174 General and administrative 15,720 10,234 43,002 30,323 --------- --------- --------- --------- Total operating expenses 59,777 38,728 163,668 114,937 --------- --------- --------- --------- Income (loss) from operations (4,808) 1,472 (15,478) (306) --------- --------- --------- --------- Other income (expense), net: Interest and other income 114 147 278 398 Interest expense (142) (13) (225) (77) Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - - 885 Gain on Worldwide Compensation, Inc. escrow settlement - - 350 - --------- --------- --------- --------- Total other income (expense), net (28) 134 403 1,206 --------- --------- --------- --------- Income (loss) before benefit from income taxes (4,836) 1,606 (15,075) 900 Benefit from income taxes (1,542) (26) (1,523) (140) --------- --------- --------- --------- Net income (loss) attributable to Class A common stockholders $ (3,294) $ 1,632 $ (13,552) $ 1,040 ========= ========= ========= ========= Net income (loss) per share attributable to Class A common stockholders - basic $ (0.08) $ 0.04 $ (0.33) $ 0.03 ========= ========= ========= ========= Net income (loss) per share attributable to Class A common stockholders - diluted $ (0.08) $ 0.04 $ (0.33) $ 0.03 ========= ========= ========= ========= Weighted average Class A common shares - basic 41,187 39,815 40,915 39,474 ========= ========= ========= ========= Weighted average Class A common shares - diluted 41,187 40,963 40,915 40,655 ========= ========= ========= ========= NOTES 1. Includes stock-based compensation expense Subscription and support cost of revenue $ 455 $ 285 $ 975 $ 703 Professional services cost of revenue $ 801 488 1,901 1,266 --------- --------- --------- --------- Cost of revenue subtotal 1,256 773 2,876 1,969 Sales and marketing operating expense 1,766 1,123 4,468 3,006 Research and development operating expense 1,465 883 3,286 1,859 General and administrative operating expense 1,955 1,381 5,005 4,173 --------- --------- --------- --------- Operating expense subtotal 5,186 3,387 12,759 9,038 --------- --------- --------- --------- Total stock-based compensation expense $ 6,442 $ 4,160 $ 15,635 $ 11,007 ========= ========= ========= ========= 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 Nine Months Ended September 30, September 30, -------------------- -------------------- 2011 2010 2011 2010 --------- --------- --------- --------- GAAP net income (loss) reported above $ (3,294) $ 1,632 $ (13,552) $ 1,040 Add back: Revenues Non-GAAP subscription and support revenue 1,533 200 5,055 548 Non-GAAP professional services revenue 708 - 2,473 - TSA settlement - subscription and support - - 6,500 - --------- --------- --------- --------- Total Non-GAAP revenues 2,241 200 14,028 548 Expenses Acquisition-related transaction costs 3,483 2,051 7,001 3,073 TSA settlement related expenses - - 300 - Refundable tax credits related to 2009 and 2010 - - (1,296) - Stock-based compensation expense 6,442 4,160 15,635 11,007 Amortization of acquisition- related intangibles 5,216 2,956 14,913 9,207 --------- --------- --------- --------- 15,141 9,167 36,553 23,287 Other income Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - - (885) Gain on settlement of Worldwide Compensation, Inc. escrow - - (350) - --------- --------- --------- --------- - - (350) (885) Income taxes Income taxes associated with certain non-GAAP adjustments (911) - (1,781) - --------- --------- --------- --------- Non-GAAP net income $ 13,177 $ 10,999 $ 34,898 $ 23,990 ========= ========= ========= ========= Non-GAAP net income per share Basic $ 0.32 $ 0.28 $ 0.85 $ 0.61 ========= ========= ========= ========= Diluted $ 0.30 $ 0.25 $ 0.79 $ 0.56 ========= ========= ========= ========= Reconciliation of basic and fully diluted share count: --------- --------- --------- --------- Basic 41,187 39,815 40,915 39,474 --------- --------- --------- --------- Add: Weighted Average options and unreleased restricted stock, without consideration for the treasury stock method 2,484 3,406 2,996 3,172 --------- --------- --------- --------- Diluted 43,671 43,221 43,911 42,646 --------- --------- --------- ---------

Taleo Corporation Condensed Consolidated Balance Sheets (All amounts in thousands) (Unaudited) September 30, December 31, 2011 2010 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 110,999 $ 141,588 Accounts receivable, net 63,927 58,120 Prepaid expenses and other current assets 21,134 18,065 Investment credits receivable 9,720 6,034 ------------- ------------- Total current assets 205,780 223,807 Property and equipment, net 26,490 26,552 Restricted cash 224 218 Goodwill 244,081 206,418 Intangible assets, net 64,438 59,478 Other assets 8,097 7,363 ------------- ------------- Total assets $ 549,110 $ 523,836 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 48,499 $ 36,377 Deferred revenue - subscription and support and customer deposits 94,787 79,704 Deferred revenue - professional services 16,325 19,692 Capital lease obligations, short-term 60 105 ------------- ------------- Total current liabilities 159,671 135,878 Long-term deferred revenue - subscription and support and customer deposits 1,369 150 Long-term deferred revenue - professional services 5,285 10,006 Other liabilities 9,601 9,241 Capital lease obligations, long-term 12 46 ------------- ------------- Total liabilities 175,938 155,321 ------------- ------------- Stockholders' equity: Capital stock 1 1 Additional paid-in capital 464,143 442,514 Accumulated deficit (90,161) (76,609) Treasury stock (2,622) (776) Accumulated other comprehensive income 1,811 3,385 ------------- ------------- Total stockholders' equity 373,172 368,515 ------------- ------------- Total liabilities and stockholders' equity $ 549,110 $ 523,836 ============= ============= Taleo Corporation Condensed Consolidated Statements of Cash Flows (All amounts in thousands) (Unaudited) Nine Months Ended September 30, ------------------------ 2011 2010 ----------- ----------- Cash flows from operating activities: Net income (loss) $ (13,552) $ 1,040 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 26,034 19,680 Loss on disposal of fixed assets - 98 Amortization of debt issuance costs 68 - Amortization of tenant inducements (148) (56) Tenant inducements from landlord - 211 Stock-based compensation expense 15,635 11,007 Excess tax benefits on the exercise of stock options (133) (16) Tax benefit recorded upon business acquisition (1,403) - Director fees paid with stock in lieu of cash 200 171 Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - (885) Bad debt provision 758 (133) Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable (4,156) 5,398 Prepaid expenses and other assets (2,576) (2,975) Investment credits receivable (4,140) 492 Accounts payable and accrued liabilities 4,881 3,811 Deferred revenues and customer deposits 3,543 (1,128) ----------- ----------- Net cash provided by operating activities 25,011 36,715 ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (10,418) (12,231) Change in restricted cash (6) 210 Acquisitions, net of cash acquired (46,590) (13,381) Purchase of intangible assets (1,150) - ----------- ----------- Net cash used in investing activities (58,164) (25,402) ----------- ----------- Cash flows from financing activities: Principal payments on capital lease obligations (330) (1,349) Payments for expenses associated with 2009 equity offering - (681) Payments for debt issuance costs (815) - Excess tax benefits on the exercise of stock options 133 16 Treasury stock acquired to settle employees withholding liability (4,576) (2,153) Proceeds from stock options exercised and ESPP shares 8,395 12,321 ----------- ----------- Net cash provided by financing activities 2,807 8,154 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (243) 286 ----------- ----------- Increase (decrease) in cash and cash equivalents (30,589) 19,753 Cash and cash equivalents: Beginning of period 141,588 244,229 ----------- ----------- End of period $ 110,999 $ 263,982 =========== ===========

Media Contact
Caroline Japic
925-452-3833
cjapic@taleo.com

Investor Relations Contact
Mike Magaro
925-452-3120
mmagaro@taleo.com


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