A Different and More Optimistic View - Execs Confirm Many Prior Assumptions
Last week, Taleo’s Katy Murray, CFO, and Nate Swanson, Investor Relations, were kind enough to spend a few minutes with me to discuss my recent post on Taleo. The overall tone was positive and not the least bit defensive or confrontational. It was business-like, professional and informative.
Here’s what was learned:
- The Revenue Recognition issue is not tied to the Vurv acquisition. The matter apparently dates back to the formation of the company as Taleo has not changed their accounting methods since then. To date, the company has not received much insight into the issue from their auditors, Deloitte & Touche, LLP. Taleo speculates that it might be tied to a GAAP interpretation issue but has no insight at this time.
- The insider trading allegations may be tough to prove. Beyond the points I made in my earlier post, Katy indicated that all Taleo executives have been bound by 10 B 5-1 plans (see this Wikipedia entry with particular attention to the affirmative defense section ). Essentially, these executives have a narrow window to put together a stock sales program. Once developed, the executives have no control over the price or other aspects of the program. There are no discretionary trades in these arrangements. Katy added that this situation is “nothing similar to the Mark Cuban situation” recently in the papers.
We also discussed the financial numbers from the third quarter.
- The increase in Sales and Marketing expense in the last quarter included $5.2 million in amortization costs related to the Vurv acquisition and to impairment of certain assets. These are one-time costs.
- New customer growth increased in the quarter with 22 new enterprise customers and 210 SMB customers.
- The new Taleo Performance Management product is doing well against plan. Revenues for this product are at a level one quarter ahead of plan.
- EPS guidance for 2009 was lowered from $0.87-0.89 a share to $0.80-0.85 a share due to recognition of the current economy.
- The drop in free cash flow appears to be related to the Vurv acquisition. The company spent approximately $45-50 million on Vurv ($36 million purchase price, $9 million to retire Vurv debt and $5-6 million in restructuring costs).
Both executives were confident but not cocky. They realize competitors will try to make the most of these recent events but for now, there really isn’t much to these concerns. Until (or unless) the Deloitte & Touche review uncovers anything, these events may be a major distraction to the company.
To rip-off Shakespeare, this may be "much ado about nothing".