In the SaaS talent management space, Taleo is expanding with its acquisition of Worldwide Compensation. SuccessFactors has yet to make such a move, but I had suggested earlier that it could roll up a smaller company like Salary.com. Let’s take a closer look at these two players’ recent performances.
On October 28, Taleo (NASDAQ:TLEO), a provider of on-demand talent management solutions with annual revenue of $168.4 million, reported third quarter results that beat estimates.
Q3 revenue was up 9% y-o-y and 3% q-o-q to $50.7 million with application revenue up 20% to $44.9 million. Net loss was $1.1 million or ($0.04) per share compared to net income of $234,000, or $0.01 per share last quarter. Non-GAAP net income was $6.7 million, or $0.20 per share versus analyst estimates of profit of $0.16 per share on revenue of $49.88 million. Q2 coverage is available here.
During the quarter, Taleo signed 167 new customers, including 17 new Taleo Enterprise customers and 150 new Taleo Business Edition or SMB customers. It now has 4,200 customers and three million users. The company closed seven large enterprise deals worth more than $250,000 annually. It signed more than 40 new performance management customers increasing its customer base in the space to more than 160. Its enterprise renewal rates were consistent with prior quarters at more than 95%.
During the quarter, Taleo launched Talent Grid, which offers customers and partners online access to a broad collection of talent management domain expertise, and also announced plans to deliver to market a complete Talent Management suite of solutions for enterprise and small-to-medium sized businesses, called Taleo 10.
Taleo’s CEO, Michael Gregoire, said that the company’s broader platform strategy is to be the best-of-breed vendor across the three pillars of strategic talent management: recruiting, performance management, and compensation management. Last year, Taleo acquired Vurv for approximately $128.8 million, and in September of this year, the company announced its plans to acquire Worldwide Compensation for about $16 million. The company ended the quarter with $76.5 million in cash versus $62 million in Q2 and 923 employees, down slightly from 937 last quarter. My interview with the CEO is available here.
For the fourth quarter, Taleo expects application revenue of $44.5 to $45 million and services revenue of about $5.5 million. Non-GAAP EPS is expected to be $0.17 to $0.18.
The stock is currently trading around $23 with market cap of about $730 million. It hit a 52-week high of $25.21 on October 14.
On October 27, SuccessFactors, Inc. (NASDAQ:SFSF), an on-demand performance and talent management solutions provider with annual revenue of $111.9 million, reported a strong third quarter that beat estimates.
Q3 revenue was up 30% y-o-y and 5% q-o-q to $38.7 million. Net loss narrowed to $1.97 million or $0.03 per share compared to loss of $20.4 million or $0.37 per share last year. Non-GAAP net income was $0.01 per share versus analyst estimates of a break-even on revenue of $38.51 million. Q2 coverage is available here and my interview with CEO, Lars Dalgaard here.
The increase in revenue was mainly due to a $10.2 million increase in revenue from existing customers, offset by a $1.2 million decrease in revenue from new customers. At the end of the quarter, it had over 2,800 customers versus 2,362 in Q308. Salary.com, the acquisition prospect I suggested earlier has about 3,500 enterprise customers and annual revenue of $42.45 million. My interview with its CEO Kent Plunkett is available here.
Gross margin improved to 77% from 66% last year. Cash flow generated from operating activities improved 281% q-o-q to $3.6 million and the company ended the quarter with $41.04 million in cash compared with $107.8 million in cash. SuccessFactors ended Q3 with headcount of 616, down from 618 last quarter. The company expects gross margin percentage to decrease modestly in the fourth quarter as it adds to its professional services staff. SuccessFactors appointed Peter Prestele, who was earlier with IBM and HP, to run EMEA sales. Another new appointment was of Vicki Bernholz as chief people officer.
SuccessFactors raised its guidance again for full fiscal 2009 revenue from 32% annual growth to 35% growth or $150.1 to $150.6 million. Non-GAAP loss per share is expected in the range of ($0.04) compared to the previous guidance of ($0.06) to ($0.07). For the fourth quarter, the company expects revenue in the range of $39.3 million to $39.7 million. Non-GAAP EPS is expected to be breakeven.
The stock is currently trading around $16.36 with market cap of about $1.17 billion. It hit a 52-week high of $17.00 on October 21.