Taleo Reports Strong Second Quarter 2008 Results

DUBLIN, CA, Jul 31 (MARKET WIRE) --
Taleo (NASDAQ: TLEO), the leading provider of on demand talent management
solutions, today announced financial results for the second quarter ended
June 30, 2008.

Quarterly Highlights Include:

-- Record revenues of $38.8 million for the second quarter of 2008, an
increase of 25% year-over-year.
-- Signed over 225 new customers, an all-time high.
-- Signed definitive agreement to acquire Vurv.
-- GAAP net income of $1.1 million, or $0.04 per fully diluted share.
-- Non-GAAP net income of $4.2 million, or $0.15 per fully diluted share.
-- Customer base grew to over 1,900 customers with more than 1.5 million
users.

"Taleo achieved record performance across the organization, posted
record revenues, and set a record for the number of new customers. Our
results highlight both the growing demand for talent management solutions
in large and small companies regardless of the economic environment,"
stated Michael Gregoire, Chairman and CEO of Taleo. "I am also proud that
we were able to perform at this level, while simultaneously working on
closing our acquisition of Vurv. Taleo's ability to innovate and execute
has helped enhance our leadership position."

Other significant achievements during the second quarter 2008 include:

-- Acquired 25 New Taleo Enterprise Edition(TM) Customers. Demand for
Taleo's talent management solutions continued with the Company signing 25
new enterprise customers bringing Taleo's customer base to over 350
organizations around the world. New Taleo Enterprise Edition(TM) customers
in North America included AT&T, Adobe, Allergan, Avanade, Blue Cross Blue
Shield of Michigan, CSX Transportation, Cymer, Enterprise Product Partners,
Harris Teeter, Herbalife, Manpower, Plantronics, The Nielsen Company and US
Foodservice.
-- Achieved Significant International Growth. Revenues from outside of
North America grew by 83% over the same period last year and represented
13% of total revenues. New international customers included Cargotec,
Veolia, AirFrance, Baloise, Eiffage, Manpower and Vic Roads.
-- Momentum in Performance Management. Just one quarter after the general
availability of Taleo Performance(TM), the Company closed enterprise deals
in North America and Europe, including InterContinental Hotels Group,
Children's Healthcare of Atlanta, and North Shore Long Island Jewish Health
System.
-- Signed Record Number of New SMB Customers. Taleo Business Edition(TM),
a recruiting solution targeted at companies with less than 3,000 employees,
welcomed over 200 new customers further establishing Taleo as the leader
for SMB Recruiting. New TBE customers include Eclipse Aviation Corp, RAND
Worldwide, RightNow Technologies, Pearl Izumi, Masimo Corporation, Verified
Person, Conklin Cars, Yelp, Inc., First Guaranty Bank, Taco Johns, Wolfgang
Puck Express, Red Bull Australia, SABMiller (makers of MillerCoors), and
the Abu Dhabi Audit Authority.
-- Launched Taleo Edge. Taleo Edge is a tailored offering of Taleo
Enterprise for mid-market companies with between 2,500 and 10,000
employees. During the quarter, Taleo closed its first Taleo Edge deal with
NetJets.
-- Expanded User Community. Taleo grew its global presence by adding more
than 116,000 new users to bring the total number of users to over 1.5
million worldwide, working with candidates in 25 languages and more than
190 countries and territories.
-- Recognized as Breakaway Leader. Taleo was positioned by Gartner, Inc.
as the clear leader within the Leaders' Quadrant in Gartner's "Magic
Quadrant for E-Recruitment Software, 2008" report.
-- Demonstrated Industry Leading Scale and Stability. Taleo processed
more than 394,000 hires, from over 9.3 million applicants through its
unified on demand platform.

"Subsequent to the close of the second quarter, we completed the
acquisition of Vurv, bolstering Taleo's leadership position in talent
management. Vurv brings additional scale, resources and expertise to meet
the growing demand for Taleo's solutions. Together we look forward to
bringing innovative new offerings to market and defining the future of
talent management," concluded Michael Gregoire, Chairman and CEO of Taleo.

Taleo delivered the following results for the second quarter ended June
30, 2008:

Revenue: Total revenue for the second quarter was $38.8 million,
representing an increase of 25% on a year-over-year basis. Application
revenue for the second quarter was $30.9 million, an increase of 21% on a
year-over-year basis.

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 $1.1 million for the second quarter,
compared to a net loss of ($1.8) million for the same period last year,
driven primarily from the recording of a net, non-cash income tax reserve
of $2.9 million. Net income for the second quarter of 2008 and 2007
includes share-based compensation expense of $2.8 million and $1.6
million, respectively, pursuant to the adoption on January 1, 2006 of
Financial Accounting Standards Board (FASB) Statement No. 123(R),
"Share-Based Payment" (SFAS 123(R)), which requires companies to expense
the fair value of employee stock options and similar stock based
compensation awards. Net income per fully diluted share was $0.04 for the
second quarter of 2008 based on 29.1 million weighted average shares
outstanding compared to net loss per fully diluted share of ($0.07) for
the same period in 2007 based on 23.9 million weighted average shares
outstanding.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net
income, which excludes share-based compensation expense pursuant to SFAS
123(R), amortization of acquired intangibles, restructuring charges,
non-cash income tax reserve, and non-cash tax valuation adjustments was
$4.2 million for the second quarter of 2008, compared to a non-GAAP net
income of $2.8 million in the same period last year. Non-GAAP net income
per fully diluted share was $0.15 for the second quarter of 2008 based on
29.1 million weighted average shares outstanding compared to non-GAAP net
income per fully diluted share of $0.10 for the same period in 2007 based
on 28.2 million weighted average shares outstanding.

Conference Call Details

In conjunction with this announcement, Taleo will host a conference call
today at 5:00 p.m. EDT to discuss the Company's second quarter 2008
financial results. A live and replay Webcast of the call will be available
at the Investor Relations section of Taleo's website at www.taleo.com. The
live call may be accessed by dialing 800-901-5213 (domestic) or
617-786-2962 (international) and referencing passcode: 2831-3733. A replay
of the call can also be accessed by dialing 888-286-8010 (domestic) or
617-801-6888 (international), and referencing passcode: 5357-4949.

About Taleo

Taleo (NASDAQ: TLEO) is the leader in on demand unified talent management
solutions that empower organizations of all sizes, around the world to
assess, acquire, develop and align their workforce for improved business
performance. Following its acquisition of Vurv, more than 3,600
organizations use Taleo, including 47 of the Fortune 100 and over 150 of
the Fortune 500, for talent acquisition and performance management, in 200
countries and territories. Known for its strong configurability and
usability, Taleo's talent management platform runs on a world-class
infrastructure and offers 99.9% availability.

Forward-looking Statements

This release contains forward-looking statements, including statements
regarding Taleo's future financial performance, new product development,
market growth, the demand for Taleo's solutions, the impact of Taleo's
acquisition of Vurv, 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 I, Item 1A of Taleo's Annual Report on Form 10-K, as
filed with the SEC on March 14, 2008, in part II, Item 1A of Taleo's
Quarterly Report on Form 10-Q, as filed with the SEC on May 12, 2008, 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 share-based compensation expense pursuant to SFAS
123(R), amortization of acquired intangibles, restructuring charges,
non-cash income tax reserve and non-cash 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)

June 30, December 31,
2008 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 104,735 $ 86,135
Restricted cash 289 288
Accounts receivable, net 29,558 30,255
Prepaid expenses and other current assets 6,152 5,912
Investment credit receivable 5,985 4,734
------------ ------------
Total current assets 146,719 127,324

Property and equipment, net 21,131 23,178
Restricted Cash 628 838
Other assets 5,721 2,147
Goodwill 9,707 9,785
Other Intangibles, net 1,186 1,404
------------ ------------
Total assets $ 185,092 $ 164,676
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 24,558 $ 20,623
Deferred revenue and customer deposits 42,498 36,752
Capital lease obligation, short-term 18 38
------------ ------------
Total current liabilities 67,074 57,413

Customer deposits and long term deferred
revenue 1,254 273
Other liabilities 3,684 4,535
Capital lease obligation, long-term 11 16
Class B redeemable common stock - -
------------ ------------
Total liabilities 72,023 62,237
------------ ------------

------------ ------------
Exchangeable share obligation 226 331
------------ ------------

Stockholders' equity:
Capital stock - -
Additional paid-in capital 159,765 151,593
Accumulated deficit (48,712) (51,387)
Treasury stock (66) (195)
Accumulated other comprehensive income 1,856 2,097
------------ ------------
Total stockholders' equity 112,843 102,108
------------ ------------
Total liabilities and stockholders' equity $ 185,092 $ 164,676
============ ============

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,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenue:
Application $ 30,875 $ 25,596 $ 61,076 $ 49,251
Consulting 7,929 5,358 14,967 10,420
-------- -------- -------- --------
Total revenue 38,804 30,954 76,043 59,671
-------- -------- -------- --------

Cost of revenue (note 1):
Application 6,320 5,304 12,574 10,368
Amortization of acquired
intangibles 36 36 72 72
-------- -------- -------- --------
Total cost of application
revenue 6,356 5,340 12,646 10,440
Consulting 5,559 4,670 11,283 8,459
-------- -------- -------- --------
Total cost of revenue 11,915 10,010 23,929 18,899
-------- -------- -------- --------

-------- -------- -------- --------
Gross profit 26,889 20,944 52,114 40,772
-------- -------- -------- --------
Operating expenses (note 1):
Sales and marketing 11,832 8,471 22,502 16,988
Research and development 7,366 5,492 14,399 10,895
General and administrative 7,196 6,482 13,763 11,876
Restructuring 281 - 281 -
-------- -------- -------- --------
Total operating expenses 26,675 20,445 50,945 39,759
-------- -------- -------- --------

-------- -------- -------- --------
Income from operations 214 499 1,169 1,013
-------- -------- -------- --------
Other income / (expense):
Interest income 518 676 1,296 1,349
Interest expense (41) (10) (86) (29)
-------- -------- -------- --------
Total other income 477 666 1,210 1,320
-------- -------- -------- --------

Income before provision / (benefit)
for income tax 691 1,165 2,379 2,333
Provision / (benefit) for
income taxes (383) 2,918 (296) 3,178
-------- -------- -------- --------

Net income / (loss) attributable to
Class A common stockholders $ 1,074 $ (1,753) $ 2,675 $ (845)
======== ======== ======== ========
Net income / (loss) per share
attributable to Class A common
stockholders - basic $ 0.04 $ (0.07) $ 0.10 $ (0.04)
======== ======== ======== ========

Net income / (loss) per share
attributable to Class A common
stockholders - diluted $ 0.04 $ (0.07) $ 0.09 $ (0.04)
======== ======== ======== ========

Weighted average Class A common
shares - basic 25,708 23,908 25,538 23,359
======== ======== ======== ========

Weighted average Class A common
shares - diluted 29,070 23,908 28,994 23,359
======== ======== ======== ========
NOTES

1. Includes share-based
compensation expense pursuant to
SFAS 123(R)
Application cost of revenue $ 134 $ 79 $ 260 $ 142
Consulting cost of revenue 192 121 374 211
-------- -------- -------- --------
Cost of revenue subtotal 326 200 634 353

Sales and marketing
operating expense 886 403 1,522 763
Research and development
operating expense 287 285 586 528
General and administrative
operating expense 1,256 692 2,490 1,321
-------- -------- -------- --------
Operating expense subtotal 2,429 1,380 4,598 2,612

-------- -------- -------- --------
Total share-based compensation
expense $ 2,755 $ 1,580 $ 5,232 $ 2,965
======== ======== ======== ========

Taleo Corporation
Condensed Consolidated Statements of Operations (Continued)
(All amounts in thousands except per share data)
(Unaudited)

Reconciliation of GAAP net income /
(loss) and non-GAAP net income:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2008 2007 2008 2007
--------- -------- -------- --------
GAAP net income / (loss) reported
above $ 1,074 $ (1,753) $ 2,675 $ (845)
Add back:
Share-based compensation
expense (SFAS 123(R)) 2,755 1,580 5,232 2,965
Amortization of acquired
intangibles 109 97 218 149
Restructuring expense 281 - 281 -
Non-cash income tax reserve - 2,899 - 2,899
Non-cash tax valuation
Adjustment - - (262) -
--------- -------- -------- --------
3,145 4,576 5,469 6,013

--------- -------- -------- --------
Non-GAAP net income $ 4,219 $ 2,823 $ 8,144 $ 5,168
========= ======== ======== ========

Non-GAAP net income per share
Basic $ 0.16 $ 0.12 $ 0.32 $ 0.22
========= ======== ======== ========
Diluted $ 0.15 $ 0.10 $ 0.28 $ 0.20
========= ======== ======== ========

Reconciliation of basic and fully
diluted share count:
Basic 25,708 23,908 25,538 23,359
Add: Weighted Average - Series B
common stock 462 1,274 512 1,476
Weighted Average - warrants &
options 2,900 3,057 2,944 1,545
--------- -------- -------- --------
Diluted 29,070 28,239 28,994 26,380
--------- -------- -------- --------

Taleo Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)

Six Months Ended
June 30,
--------------------
2008 2007
--------- ---------
Cash flows from operating activities:
Net income / (loss) $ 2,675 $ (845)
Adjustments to reconcile net income / (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,726 2,827
Amortization of tenant inducements (76) (93)
Stock-based compensation expense 5,232 2,965
Director fees settled with stock 119 112
Bad debt expense 100 310
Interest earned on restricted cash - 1
Changes in working capital accounts:
Accounts receivable 544 (5,986)
Prepaid expenses and other assets (3,824) (1,272)
Investment credit receivable (1,393) 1,115
Accounts payable and accrued liabilities 4,355 (218)
Deferred revenue and customer deposits 6,818 10,747
--------- ---------
Net cash provided by operating activities 19,276 9,663
--------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (3,625) (4,082)
Restricted cash - decrease 210 2,704
Acquisition of business - (3,071)
--------- ---------
Net cash used in investing activities (3,415) (4,449)
--------- ---------
Cash flows from financing activities:
Principal payments on capital lease obligations (24) (308)
Proceeds from stock options and warrants exercised 2,725 5,083
--------- ---------
Net cash provided by financing activities 2,701 4,775
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 38 246
--------- ---------
Increase in cash and cash equivalents 18,600 10,235
Cash and cash equivalents:
Beginning of period 86,135 58,785
--------- ---------
End of period $ 104,735 $ 69,020
========= =========
Supplemental cash flow disclosures:
Cash paid for interest $ 1 $ 7
--------- ---------
Cash paid for income taxes $ 44 $ 124
--------- ---------
Supplemental disclosure of non-cash financing and
investing activities:
Property and equipment purchases included in
accounts payable and accrued liabilities $ 2,487 $ 3,686
Class B common stock exchanged for Class A common
stock $ 96 $ 393*
Treasury stock issued under ESPP $ 701 $ 450
Treasury stock acquired to settle employee
withholding liability $ 573 $ 292

* The amount previously reported in noncash activity disclosure of the
condensed consolidated statements of cash flows for the quarter ended June
30, 2007 was erroneously based on the fair value (rather than the book
value) of such shares exchanged of $16,101, and such error in disclosure
has been corrected to reflect the exchange at book value of $393.

Media Contact:
Jaime Spuhler
Taleo Corporation
(904) 493-8851
jspuhler@taleo.com

Investor Relations Contact:
Carolyn Bass
Market Street Partners
(415) 445-3234
ir@taleo.com

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