Taleo Blows Out Quarter – Becoming the Talent Management Vendor to Beat

6 comments

Last night, Taleo announced a stellar quarter exceeding every financial analyst estimate I know of and raising future guidance.  Yours truly was also mentioned on the call….but I digress.  Looking at the stock right now, it is up over 17%, adding over $125 million overnight in market capitalization.  A couple of highlights…

  • Total revenues in the quarter of $33.7 million, a 36% year-over-year growth
  • GAAP net income of $2.2 million (yes…that means they are profitable)
  • 17 new enterprise customers in the quarter and solid growth in SMB

A couple of side observations.  The recruitment market is highly penetrated and somewhat of a ”replacement” market.  What Taleo’s financials would suggest is that they are beating the competition (namely Kenexa), winning replacements (think PeopleSoft and SAP), and beginning to lay their claim to market share leadership in recruitment.

This doesn’t mean other vendors aren’t having success.  Vurv is also winning new business in the market as are a few others.  And by no means are they running away with the market.  Global vendors such as Stepstone, the leader in recruitment outside of North America, are beginning to expand their North American presence.  I simply think, though, Taleo is in great position based on their financial health, broadening product suite, and leadership position in recruitment to become the dominate vendor in “recruitment-centric” talent management.

What does this mean for talent management buyers?  With industry consolidation picking up again, Taleo buyers can feel relatively safe that the company is not going anywhere and in very good health.  They are investing heavily in the existing products and with the new performance management product due to be GA (generally available) in January 2008, Taleo buyers will have a great option to leverage a more unified approach in the talent management strategy.

  • http://www.theotherthomasotter.wordpress.com Thomas Otter

    Indeed, impressive stuff.

  • Gordon Gekko

    Hey Jason, great post. I ran a few numbers for my own interest (I’m not a financial analyst) based on Larry Ellison’s statements on the SaaS business model (probably after Chuck Phillips ran the numbers for him…lol)

    I did a quick comparison of Oracle versus Taleo (just released results) financials

    Oracle –

    Cost of Revenue as % of Revenue – 23%

    Operating Expense as % of Revenue – 43%

    Net Income as % of Revenue – 23%

    R&D as % of Revenue – 12%

    General and Administrative (People Costs) – 25%

    Revenue per Full Time Employee – $240,994

    Taleo –

    Cost of Revenue as % of Revenue – 30%

    Operating Expense as % of Revenue – 65%

    Net Income as % of Revenue – 6 %

    R&D as % of Revenue – 17%

    General and Administrative (People Costs) as % of Revenue – 48%

    Revenue per Full Time Employee – $215,384

    As you can see, Taleo’s net income as a percentage of revenue is 6% compared to Oracle’s 23% – which is low. A number of reasons for that, but it did strike me on the percentage cost on comp (which as mostly sales and marketing expense – including equity and option based compensation) – this is noted in Taleo’s income statement.

    Aside from this, the cost of revenue (to which they split out between software and consulting) is actually quite good on the software side – 80% margins (based on direct cost of sale)

    Looks to me like a business model!

  • Pingback: SuccessFactors IPO part II « Donald H Taylor

  • Frank Williams

    You know, the one thing that all of these companies are missing the mark on are SIMPLE tools for accomplishing simple performance management tasks. Not every company is ready or interested in major HRIS integration projects. Also, just because something is Web based doesn’t necessarily make it easy; we tried SuccessFactors for a few months before cancelling it b/c their configuration team simply wan’t able to get the application to do what their website suggested.

    We recently signed up with EchoSpan, a small but highly capable vendor in this space. Within *2 DAYS* my company of around 200 was up and running performance reviews online. Jason, have you read anything about this company’s prospects?

    Thanks…

  • http://www.reactive360.com Andy

    We too had difficulty with the trial of success factors and instead opted for using the http://wwww.reactive360.com 360 suite as this provided us with easy graphical and intereactive tools which made creating the questionnaire easy and modifying the report just as easy, the cost was incredibly small too!.

  • http://www.reactive360.com 360 feedback

    Hi andy, i think the link you provided for the performance management company reactive360 was wrong it should be http://www.reactive360.com

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