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Taleo Reports Fourth Quarter and Fiscal 2011 Financial Results

(February 09, 2012)

DUBLIN, CA -- (Marketwire) -- 02/09/12 -- Taleo Corporation (NASDAQ: TLEO), the global leader of SaaS-based Talent Management solutions, today announced results for its fourth quarter and fiscal year 2011.

Taleo delivered the following results for the fourth quarter and fiscal 2011:

Fourth Quarter Revenue: Subscription revenue for the fourth quarter was $70 million, an increase of 26% on a year-over-year basis. Professional services revenue for the fourth quarter was $15 million, an increase of 27% on a year-over-year basis. Total revenue for the fourth quarter was $85 million, an increase of 26% on a year-over-year basis.

Non-GAAP subscription revenue for the fourth quarter was $70.6 million, an increase of 22% on a year-over-year basis. Non-GAAP professional services revenues for the fourth quarter was $15.8 million, an increase of 18% on a year-over-year basis. Total fourth quarter non-GAAP revenue was $86.3 million, an increase of 21% on a year-over-year basis.


2011 Revenue: Total revenue for the full year 2011 was $309 million, an increase of 30% on a year-over-year basis. Subscription revenue for the full year 2011 was $257 million, an increase of 29% on a year-over-year basis. Professional services revenue for the full year 2011 was $59 million, an increase of 55% on a year-over-year basis. Total revenue for 2011 reflects a revenue reduction of $6.5 million recorded in the second quarter of 2011 related to the TSA settlement.

For the full year 2011, the company reported Non-GAAP revenue of $324 million, an increase of 34% from the prior year. Non-GAAP subscription revenue for the full year 2011 was $263 million, an increase of 30% on a year-over-year basis. Non-GAAP professional services revenue for the full year 2011 was $62 million, an increase of 57% on a year-over-year basis.

Fourth Quarter Loss per Share: Fourth quarter net loss per share was $(0.02), compared to a net loss per share of $(0.02) a year ago.

Non-GAAP net income per fully diluted share was $0.26, compared to non-GAAP net income per fully diluted share of $0.23 a year ago.

2011 Earnings per Share: For the full year 2011, net loss per share declined to $(0.35) from net income per fully diluted share of $0.01 a year ago. Non-GAAP net income per fully diluted share for the full year 2011 rose to $1.06 compared to $0.78 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.

Quarterly Conference Call Cancelled
As a result of the earlier announcement, Oracle Buys Taleo, Taleo is cancelling the fourth quarter and fiscal 2011 earnings conference call that was previously scheduled for Tuesday, February 14, 2012.

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
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 November 9, 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, realized foreign exchange gain on intercompany settlement, and income taxes associated with certain non-GAAP adjustments.

Fourth quarter loss per share calculations are based on 41.4 million basic weighted average shares outstanding, while fourth quarter non-GAAP EPS calculations are based on 45.0 million fully diluted weighted average shares outstanding. Full year 2011 loss per share calculations are based on 41.0 million basic weighted average shares outstanding, while full year 2011 non-GAAP EPS calculations are based on 44.0 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.

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, -------------------- -------------------- 2011 2010 2011 2010 --------- --------- --------- --------- Revenues: Subscription and support $ 69,541 $ 55,179 $ 256,526 $ 199,302 Professional services 15,233 12,037 58,869 37,973 TSA settlement - subscription and support - - (6,500) - --------- --------- --------- --------- Net revenues 84,774 67,216 308,895 237,275 --------- --------- --------- --------- Cost of revenues (Note 1): Subscription and support 14,241 12,305 53,878 44,532 Amortization of acquisition- related intangibles 899 1,499 4,502 4,233 --------- --------- --------- --------- Total cost of subscription and support revenues 15,140 13,804 58,380 48,765 Professional services 12,301 9,204 44,992 29,671 --------- --------- --------- --------- Total cost of revenues 27,441 23,008 103,372 78,436 --------- --------- --------- --------- Gross profit 57,333 44,208 205,523 158,839 --------- --------- --------- --------- Operating expenses (Note 1): Sales and marketing 28,022 20,478 96,626 67,445 Sales - amortization of acquisition-related intangibles 4,147 3,803 15,457 10,276 Research and development 13,839 12,257 54,591 43,431 General and administrative 12,726 13,168 55,529 42,761 --------- --------- --------- --------- Total operating expenses 58,734 49,706 222,203 163,913 --------- --------- --------- --------- Loss from operations (1,401) (5,498) (16,680) (5,074) --------- --------- --------- --------- Interest and other income (expense), net: Interest income 89 84 348 482 Interest expense (139) (29) (364) (106) Other income (expense), net 761 (343) 581 (1,073) Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - - 885 Gain on Worldwide Compensation, Inc. escrow settlement - - 350 - --------- --------- --------- --------- Total interest and other income (expense), net 711 (288) 915 188 --------- --------- --------- --------- Loss before provision for (benefit from) income taxes (690) (5,786) (15,765) (4,886) Provision for (benefit from) income taxes 221 (5,166) (1,302) (5,306) --------- --------- --------- --------- Net income (loss) attributable to Class A common stockholders $ (911) $ (620) $ (14,463) $ 420 ========= ========= ========= ========= Net income (loss) per share attributable to Class A common stockholders - basic $ (0.02) $ (0.02) $ (0.35) $ 0.01 ========= ========= ========= ========= Net income (loss) per share attributable to Class A common stockholders - diluted $ (0.02) $ (0.02) $ (0.35) $ 0.01 ========= ========= ========= ========= Weighted average Class A common shares - basic 41,422 40,339 41,043 39,685 ========= ========= ========= ========= Weighted average Class A common shares - diluted 41,422 40,339 41,043 40,915 ========= ========= ========= ========= NOTES 1. Includes stock-based compensation expense Subscription and support cost of revenue $ 379 $ 226 $ 1,354 $ 929 Professional services cost of revenue 778 437 2,679 1,703 --------- --------- --------- --------- Cost of revenue subtotal 1,157 663 4,033 2,632 Sales and marketing operating expense 1,757 1,060 6,225 4,066 Research and development operating expense 1,419 784 4,705 2,643 General and administrative operating expense 1,928 1,425 6,933 5,598 --------- --------- --------- --------- Operating expense subtotal 5,104 3,269 17,863 12,307 --------- --------- --------- --------- Total stock-based compensation expense $ 6,261 $ 3,932 $ 21,896 $ 14,939 ========= ========= ========= ========= Taleo Corporation Reconciliation of GAAP measures to Non-GAAP measures (All amounts in thousands except per share data) (Unaudited) Reconciliation of GAAP measures to Non-GAAP measures: Three Months Ended Twelve Months Ended December 31, December 31, --------------------- --------------------- 2011 2010 2011 2010 --------- --------- --------- --------- Net Revenues: GAAP Net revenues $ 84,774 $ 67,216 $ 308,895 $ 237,275 Plus: Non-GAAP subscription and support revenue 1,021 2,594 6,076 3,142 Non-GAAP professional services revenue 545 1,343 3,018 1,343 TSA settlement - subscription and support revenue - - 6,500 - --------- --------- --------- --------- Non-GAAP net revenues $ 86,340 $ 71,153 $ 324,489 $ 241,760 ========= ========= ========= ========= Gross profit: GAAP gross profit $ 57,333 $ 44,208 $ 205,523 $ 158,839 Percentage of GAAP gross profit to GAAP net revenues 68% 66% 67% 67% Plus: Non-GAAP subscription and support revenue 1,021 2,594 6,076 3,142 Non-GAAP professional services revenue 545 1,343 3,018 1,343 TSA Settlement - subscription and support revenue - - 6,500 - Qualified wage credits related to 2009 and 2010 (527) - (1,969) - Stock-based compensation expense 1,157 663 4,033 2,632 Amortization of acquisition-related intangibles 899 1,499 4,502 4,233 --------- --------- --------- --------- Non-GAAP gross profit $ 60,428 $ 50,307 $ 227,683 $ 170,189 ========= ========= ========= ========= Percentage of Non-GAAP gross profit to Non-GAAP revenues 70% 71% 70% 70% Income (loss) from operations: GAAP operating loss $ (1,401) $ (5,498) $ (16,680) $ (5,074) Percentage of GAAP operating % loss to net revenues (1.7%) (8.2%) (5.4%) (2.1) Plus: Non-GAAP subscription and support revenue 1,021 2,594 6,076 3,142 Non-GAAP professional services revenue 545 1,343 3,018 1,343 TSA Settlement - subscription and support revenue - - 6,500 - Acquisition-related transaction costs 1,176 3,753 8,177 6,826 TSA settlement related expenses - - 300 - Qualified wage credits related to 2009 and 2010 (475) - (1,771) - Stock-based compensation expense 6,261 3,932 21,896 14,939 Amortization of acquisition-related intangibles 5,046 5,302 19,959 14,509 --------- --------- --------- --------- Non-GAAP operating income $ 12,173 $ 11,426 $ 47,475 $ 35,685 ========= ========= ========= ========= Percentage of Non-GAAP operating income to Non-GAAP net revenues 14% 16% 15% 15% Net income (loss): GAAP net income (loss) $ (911) $ (620) $ (14,463) $ 420 Plus: Non-GAAP subscription and support revenue 1,021 2,594 6,076 3,142 Non-GAAP professional services revenue 545 1,343 3,018 1,343 TSA Settlement - subscription and support revenue - - 6,500 - Acquisition-related transaction costs 1,176 3,753 8,177 6,826 TSA Settlement expenses - - 300 - Qualified wage credits related to 2009 and 2010 (475) - (1,771) - Stock-based compensation expense 6,261 3,932 21,896 14,939 Amortization of acquisition-related intangibles 5,046 5,302 19,959 14,509 Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - - (885) Gain on settlement of Worldwide Compensation, Inc. escrow - - (350) - Realized foreign exchange gain from intercompany settlement (1,032) - (1,032) - Income taxes associated with certain non-GAAP adjustments (26) (6,546) (1,807) (6,546) --------- --------- --------- --------- Non-GAAP net income $ 11,605 $ 9,758 $ 46,503 $ 33,748 ========= ========= ========= ========= Diluted net income (loss) per share: GAAP diluted net income (loss) per share (a) $ (0.02) $ (0.01) $ (0.33) 0.01 Plus: Non-GAAP subscription and support revenue 0.02 0.06 0.14 0.07 Non-GAAP professional services revenue 0.01 0.03 0.07 0.03 TSA Settlement - subscription and support revenue - - 0.15 - Acquisition-related transaction costs 0.03 0.09 0.18 0.16 TSA Settlement expenses - - 0.01 - Qualified wage credits related to 2009 and 2010 (0.01) - (0.04) - Stock-based compensation expense 0.14 0.09 0.50 0.34 Amortization of acquisition-related intangibles 0.11 0.12 0.45 0.34 Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - - - (0.02) Gain on settlement of Worldwide Compensation, Inc. escrow - - (0.01) - Realized foreign exchange gain from intercompany settlement (0.02) - (0.02) - Income taxes associated with certain non-GAAP adjustments - (0.15) (0.04) (0.15) --------- --------- --------- --------- Non-GAAP diluted net income per share $ 0.26 $ 0.23 $ 1.06 $ 0.78 ========= ========= ========= ========= Shares used in computing diluted Non-GAAP net income per share 44,993 43,354 43,964 43,015 ========= ========= ========= ========= Reconciliation of basic and fully diluted share count: --------- --------- --------- --------- Basic 41,422 40,339 41,043 39,685 --------- --------- --------- --------- Add: Weighted Average options and unreleased restricted stock, without consideration for the treasury stock method 3,571 3,015 2,921 3,330 --------- --------- --------- --------- Diluted 44,993 43,354 43,964 43,015 --------- --------- --------- --------- (a) GAAP diluted net income(loss) per share was calculated by dividing the GAAP net income (loss) by the Non-GAAP diluted weighted average shares Taleo Corporation Condensed Consolidated Balance Sheets (All amounts in thousands) (Unaudited) December 31, December 31, 2011 2010 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 115,974 $ 141,588 Accounts receivable, net 85,810 58,120 Prepaid expenses and other current assets 22,689 18,065 Qualified wage credits receivable 11,526 6,034 ------------ ------------ Total current assets 235,999 223,807 Property and equipment, net 28,391 26,552 Restricted cash 13 218 Goodwill 243,304 206,418 Intangible assets, net 59,233 59,478 Other assets 10,786 7,363 ------------ ------------ Total assets $ 577,726 $ 523,836 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 47,907 $ 36,377 Deferred revenue - subscription and support and customer deposits 111,707 79,704 Deferred revenue - professional services 16,530 19,692 Capital lease obligations, short-term 40 105 ------------ ------------ Total current liabilities 176,184 135,878 Long-term deferred revenue - subscription and support and customer deposits 1,233 150 Long-term deferred revenue - professional services 4,595 10,006 Other liabilities 13,476 9,241 Capital lease obligations, long-term 7 46 ------------ ------------ Total liabilities 195,495 155,321 ------------ ------------ Stockholders' equity: Capital stock 1 1 Additional paid-in capital 473,596 442,514 Accumulated deficit (91,072) (76,609) Treasury stock (801) (776) Accumulated other comprehensive income 507 3,385 ------------ ------------ Total stockholders' equity 382,231 368,515 ------------ ------------ Total liabilities and stockholders' equity $ 577,726 $ 523,836 ============ ============ Taleo Corporation Condensed Consolidated Statements of Cash Flows (All amounts in thousands) (Unaudited) Twelve Months Ended December 31, ------------------------ 2011 2010 ----------- ----------- Cash flows from operating activities: Net income (loss) $ (14,463) $ 420 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 35,160 28,720 Loss on disposal of fixed assets 49 98 Amortization of debt issuance costs 109 - Amortization of tenant inducements (226) (176) Stock-based compensation expense 21,896 14,939 Excess tax benefits on the exercise of stock options 133 (293) Tax benefit recorded upon business acquisition (1,053) (6,546) Director fees paid with stock in lieu of cash 269 240 Gain on remeasurement of previously held interest in Worldwide Compensation, Inc. - (885) Bad debt provision (recovery) 528 (83) Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable (25,977) (11,046) Prepaid expenses and other assets (3,273) (8,436) Qualified wage credits receivable (5,826) (275) Accounts payable and accrued liabilities 4,125 8,371 Deferred revenues and customer deposits 19,952 10,744 ----------- ----------- Net cash provided by operating activities 31,403 35,792 ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (15,871) (14,517) Change in restricted cash 204 401 Acquisitions, net of cash acquired (46,590) (137,504) Purchase of intangible assets (1,150) - ----------- ----------- Net cash used in investing activities (63,407) (151,620) ----------- ----------- Cash flows from financing activities: Principal payments on capital lease obligations (355) (1,652) Payments for expenses associated with 2009 equity offering - (659) Payments for debt issuance costs (816) - Excess tax benefits on the exercise of stock options (133) 293 Treasury stock acquired to settle employees withholding liability (5,535) (2,824) Proceeds from stock options exercised and ESPP shares 14,560 17,455 ----------- ----------- Net cash provided by financing activities 7,721 12,613 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (1,331) 574 ----------- ----------- Decrease in cash and cash equivalents (25,614) (102,641) Cash and cash equivalents: Beginning of period 141,588 244,229 ----------- ----------- End of period $ 115,974 $ 141,588 =========== ===========


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