Press Releases

Taleo Reports 36% Year-over-Year Revenue Growth

Record Application Revenue Growth Drives Record Profits

Dublin, CA - November 1, 2007 - Taleo Corporation (NASDAQ: TLEO), the leading provider of on demand talent management solutions, today announced financial results for the third quarter ended September 30, 2007.

Third Quarter Highlights Include:

• Total revenues of $33.7 million, an increase of 36% year-over-year, and 9% quarter-over-quarter, driven by a record 35% year-over-year increase in application revenue and a 37% year-over-year increase in services revenue.
• GAAP net income of $2.2 million, or $0.08 per fully diluted share, as compared to a GAAP net loss of $(0.8) million or $(0.04) per fully diluted share in the third quarter of 2006.
• Non-GAAP net income of $4.2 million, or $0.15 per fully diluted share, as compared to non-GAAP net income of $0.9 million, or $0.04 per fully diluted share reported in the third quarter of 2006.
• Customer base grew to over 1,380 customers with more than one million application users.

“We are extremely pleased with the company’s performance,” commented Michael Gregoire, president and CEO of Taleo. “Demand for Taleo’s leading talent management solution is robust and initial reaction to our innovative new performance management product has been very positive.  The company continues to experience strong organic growth across a wide range of verticals.  We now serve over 1,000 small and medium-size businesses, 35 of the Fortune 100 and 103 of the Fortune 500, reinforcing our position of strength in this growing talent management market.” 

Additional Third Quarter Business Highlights:

• Signed 208 new customers, including 17 new Taleo Enterprise Edition customers, and 191 new Taleo Business Edition (TBE) customers, bringing Taleo’s customer base to over 1,380 organizations around the world.
• Taleo’s TBE group surpassed the 1000th customer milestone.
• New customers include: Abercrombie and Fitch, AT Kearney, Boston Medical Center, the City of Edmonton, Jefferson Wells, Macy’s Inc., Southern Company and Tesoro Corporation. 
• Strong international customer acquisition including Ericsson and Barco in Europe, and Qantas Airlines and Rio Tinto in the Asia-Pacific region. 
• Hosted its largest annual customer event to date, Taleo WORLD 2007, where over 740 attendees gathered to discuss strategies for winning the war for talent, aligning talent to business goals and driving higher performance. 
• Taleo built and delivered a TBE application on Facebook® Platform to allow TBE customers to source passive candidates through their trusted networks. 
• Strengthened leading position within the retail industry with the acquisition of WetFeet.
• Processed more than 316,000 hires from over 9.4 million applicants.

“Taleo continues to lead the on-demand talent management market by delivering deep functionality along with our enterprise class scalability, availability and high level of service and support,” stated Gregoire.  “Our SMB Business Unit continues to accelerate its growth and reach new milestones, surpassing the 1,000 customer mark during the third quarter. Taleo’s strength and momentum allows us to focus on innovation and execution in the fourth quarter and throughout 2008 as we bring our performance management product, Taleo Performance, to market.”
 
Taleo delivered the following results for the quarter ended September 30, 2007:

Revenue: Total revenue for the third quarter was $33.7 million, representing an increase of 36% on a year-over-year basis.  Application revenue for the third quarter was $27.4 million, an increase of 35% on a year-over-year basis.  Services revenue for the third quarter was $6.3 million, an increase of 37% on a year-over-year basis, driven by milestone-based engagements for which milestones were met in the third quarter.

Net Income / (Loss) and Net Income / (Loss) Per Share to Common Stockholders: Net income in accordance with accounting principles generally accepted in the United States, or GAAP, was $2.2 million for the third quarter of 2007. This compares to a GAAP net loss of $(0.8) million in the same period last year.   Net income per fully diluted share was $0.08 for the third quarter of 2007 based on 28.8 million weighted average shares outstanding compared to net loss per fully diluted share of $(0.04) for the same period in 2006 based on 20.4 million weighted average shares outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share to Common Stockholders: Non-GAAP net income, which excludes restructuring charges, share-based compensation expense pursuant to SFAS 123(R), amortization of acquired intangibles, and non-cash income tax and tax valuation adjustments, was $4.2 million for the third quarter of 2007, compared to non GAAP net income of $0.9 million for the same period last year.  Non-GAAP net income per fully diluted share was $0.15 for the third quarter of 2007 based on 28.8 million weighted average shares outstanding compared to non-GAAP net income per fully diluted share of $0.04 for the same period in 2006 based on 25.7 million weighted average shares outstanding. 

Conference Call Details
In conjunction with this announcement, Taleo will host a conference call today at 4:30 p.m. EDT to discuss the company's third quarter 2007 financial results.  To access this call, dial 866-825-1692 using passcode 82408371. A replay of this conference call will be available through November 8, 2007 at 888-286-8010.  The replay passcode is 27992920. A live webcast of this conference call will be available on the "Investor Relations" page of the company's Web site, (www.taleo.com) and a replay will be archived on the Web site as well.

About Taleo
Taleo (NASDAQ: TLEO) is the leader in on demand, web-based talent management solutions that empower organizations of all sizes, around the world to assess, acquire, develop and align their workforce for improved business performance. More than 1,380 organizations use Taleo, including 35 of the Fortune 100, for talent acquisition and performance management, with over 1 million users processing 71 million candidates from over 100 countries. Requiring no capital investment, Taleo’s software as a service and on demand delivery offers 99.9% availability.

Forward-looking Statements
This release contains forward-looking statements, including statements regarding Taleo’s future performance, new product development and market growth.  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, including the long sales cycle for our software; failure to develop new software products or enhance existing products; failure to retain key staff; and the failure to properly protect our proprietary rights and intellectual property.  Further information on potential factors that could affect actual results is included in Part I, Item 1A of Taleo’s Annual Report on Form 10-K, as filed with the SEC on March 16, 2007, in Part II, Item 1A of Taleo Quarterly Report on Form 10-Q, as filed with the SEC on August 9, 2007, 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. As noted, the non-GAAP financial measures discussed above exclude restructuring charges, share-based compensation expense pursuant to SFAS 123(R), amortization of acquired intangibles, and non-cash income tax and tax valuation adjustments.

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 Balance Sheets
(All amounts in thousands)
(Unaudited)
			September 30			December 31
			2007			2006
ASSETS
	Current assets:
		Cash and cash equivalents	$78,667			$58,785
		Restricted cash	288			2,722
		"Accounts receivable net"	31,167			25,952
		Prepaid expenses and other current assets	4,850			3,657
		Investment credit receivable	4,511			4,395
		Total current assets	119,483			95,511
	"Property and equipment net"		18,947			12,928
	Restricted Cash		838			1,048
	Other assets		2,643			1,448
	Goodwill		9,749			6,028
	"Other Intangibles net"		1,515			457
	Total assets		$153,175			$117,420
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
		Accounts payable and accrued liabilities	$22,362			$18,708
		Customer deposits	824			80
		Deferred revenue	29,871			18,547
		"Capital lease obligation short-term"	69			381
		Total current liabilities	53,126			37,716
	Customer deposits and long term deferred revenue		-			360
	Other liabilities		5,502			1,101
	"Capital lease obligation long-term"		21			17
	Class B Redeemable Common Stock		-			-
	Total liabilities		58,649			39,194
	Exchangeable share obligation		367			796
	Stockholders' equity:
		Capital stock	-			-
		Additional paid-in capital	146,358			133,610
		Accumulated deficit	(53,882)			(56,329)
		Treasury stock	(158)			(158)
		Accumulated other comprehensive income	1,841			307
		Total stockholders' equity	94,159			77,430
	Total liability and stockholders' equity		$153,175			$117,420

Taleo Corporation
Condensed Consolidated Statements of Operations
(All amounts in thousands except per share data)
(Unaudited)
				Three Months Year Ended				Nine Months Year Ended
				September 30				September 30
				2007		2006		2007		2006
	Revenue:
		Application		$27,429		$20,274		$76,680		$57,521
		Consulting		6,315		4,609		16,735		12,998
		Total revenue		33,744		24,883		93,415		70,519
	Cost of revenue (note 1):
		Application		5,476		4,754		15,845		13,563
		Amortization of acquired intangibles		36		250		107		748
		Total cost of application revenue		5,512		5,004		15,952		14,311
		Consulting		4,799		3,084		13,258		9,617
		Total cost of revenue		10,311		8,088		29,210		23,928
	Gross profit			23,433		16,795		64,205		46,591
	Operating expenses (note 1):
		Sales and marketing		9,949		7,391		26,937		21,663
		Research and development		5,620		4,844		16,515		14,444
		General and administrative		6,267		5,792		18,143		15,566
		Restructuring cost and other charges		-		426		-		426
		Total operating expenses		21,836		18,453		61,595		52,099
	Income / (loss) from operations			1,597		(1,658)		2,610		(5,508)
	Other income / (expense):
		Interest income		757		746		2,106		2,232
		Interest expense		(42)		(24)		(71)		(67)
		Total other income		715		722		2,035		2,165
	Income / (loss) before provision / (benefit) for income tax			2,312		(936)		4,645		(3,343)
		Provision / (benefit) for income taxes		79		(179)		3,257		(164)
	Net income / (loss) attributable to Class A common stockholders			$2,233		$(757)		$1,388		$(3,179)
	Net income / (loss) per share attributable to Class A common stockholders - basic			$0.09		$(0.04)		$0.06		$(0.16)
	Net income / (loss) per share attributable to Class A common stockholders - diluted			$0.08		$(0.04)		$0.05		$(0.16)
	Weighted average Class A common shares - basic			24,638		20,384		23,790		19,477
	Weighted average Class A common shares - diluted			28,771		20,384		28,225		19,477
	NOTES
	1.	Includes share-based compensation expense pursuant to SFAS 123(R)
		Application COS		$95		$55		$237		$143
		Service COS		126		68		337		159
		COS Subtotal		221		123		574		302
		Sales & Marketing Operating Cost		470		287		1,233		750
		R&D Operating Cost		308		217		836		494
		G&A Operating Cost		832		555		2,153		1,848
		SG&A Subtotal		1,610		1,059		4,222		3,092
		Total share-based compensation expense		$1,831		$1,182		$4,796		$3,394
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 Year Ended				Nine Months Year Ended
				September 30				September 30
				2007		2006		2007		2006
	GAAP net income / (loss) reported above			$2,233		$(757)		$1,388		$(3,179)
	Add back:
		Restructuring Cost and other charges				426				426
		Loss on disposal of fixed assets		-		-		-		181
		Share-based compensation expense (SFAS 123(R))		1,831		1,182		4,796		3,394
		Amortization of acquired intangibles		108		250		257		748
		Non-cash income tax reserve		-		(183)		2,899		(183)
				1,939		1,675		7,952		4,566
	Non-GAAP net income			$4,172		$918		$9,340		$1,387
	Non-GAAP net income per share
		Basic		$0.17		$0.05		$0.39		$0.07
		Diluted		$0.15		$0.04		$0.33		$0.05
	Reconciliation of basic and fully diluted share count:
	Basic			24,638		20,384		23,790		19,477
	Add:	Weighted Average - Series B common stock		804		2,919		1,249		3,567
		Weighted Average - warrants & options		3,329		2,381		3,186		2,534
	Diluted			28,771		25,684		28,225		25,578

Taleo Corporation
Consolidated Statement of Cash Flows
(all amounts in thousands)
(Unaudited)
	Nine Months Ended September 30
	2007		2006
Cash flows from operating activities:
Net income / (loss)	$1,388		$(3,179)
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
Depreciation and amortization	4,683		3,505
Loss on disposal of fixed assets	-		398
Amortization of tenant inducements	(167)		(170)
Stock-based compensation expense	4,796		3,394
Director fees settled with stock	177		-
Bad debt expense	512		85
Interest earned on restricted cash	1		-
Changes in working capital accounts:
Accounts receivable	(5,287)		(9,197)
Prepaid expenses and other assets	(969)		(971)
Investment credit receivable	587		1,145
Accounts payable and accrued liabilities	3,806		314
Deferred revenues and customer deposits	11,139		6,193
Net cash provided by operating activities	20,666		1,517
Cash flows from investing activities:
Acquisition of property and equipment	(7,645)		(8,777)
Restricted cash - decrease	2,657		31
Acquisition of business	(3,301)		-
Net cash used in investing activities	(8,289)		(8,746)
Cash flows from financing activities:
Principal payments on capital lease obligations	(319)		(444)
Proceeds from stock options and warrants exercised	7,268		1,255
Net cash provided by financing activities	6,949		811
Effect of exchange rate changes on cash and cash equivalents	556		61
Increase in cash and cash equivalents	19,882		(6,357)
Cash and cash equivalents:
Beginning of period	58,785		59,346
End of period	$78,667		$52,989
Supplemental cash flow disclosures:
Cash paid for interest	$9		$34
Cash paid for income taxes	$124		$-
Supplemental disclosure of non-cash financing and investing activities:
Property and equipment purchases included in accounts payable and accrued liabilities	$2,637		$615
Contingent shares issuable	$-		$80
Contingent shares issued	$-		$81
Class B common stock exchanged for Class A common stock	$21,508		$22,752
Treasury stock issued to employees under ESPP	$450		$-
Treasury stock acquired to settle payroll taxes	$451		$86

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Media Contact: Krista Canfield 415.905.4011 e-mail: kcanfield@horngroup.com	Investor Relations Contact: Carolyn Bass Market Street Partners415.445.3240 e-mail: ir@taleo.com