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Cornerstone OnDemand Announces Third Quarter 2018 Financial Results


SANTA MONICA, Calif. – November 7, 2018Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its third quarter ended September 30, 2018

“We are extremely pleased with our execution at the one year mark of our strategic plan to transform Cornerstone into an industry-leading, high-margin growth company,” said Adam Miller, founder and CEO, Cornerstone, “We are now a stronger, fitter Cornerstone and believe we are on track to achieve our long-term financial and operational goals.”

Adoption of the New Revenue Recognition Standard - ASC 606

The Company adopted the new revenue recognition accounting standard Accounting Standards Codification (“ASC”) 606 effective January 1, 2018 on a modified retrospective basis. Financial results for reporting periods during 2018 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to 2018 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard ASC 605. This press release includes additional information to reconcile the impacts of the adoption of the new revenue recognition standard on the Company’s financial results for the quarter ended September 30, 2018, which includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year.

Third Quarter 2018 Results - ASC 606 (standard adopted effective January 1, 2018):

  • Revenue for the third quarter of 2018 was $134.0 million compared to a guided range of $129.0 million to $131.0 million.

  • Subscription revenue for the third quarter of 2018 was $118.8 million compared to a guided range of $115.0 million to $117.0 million.

  • Operating income for the third quarter of 2018 was $1.6 million, yielding a margin of 1.2%.

  • Non-GAAP operating income for the third quarter of 2018 was $17.8 million, yielding a margin of 13.3%.

  • Net loss for the third quarter of 2018 was $(2.4) million, or a $(0.04) diluted net loss per share.

  • Non-GAAP net income for the third quarter of 2018 was $14.8 million, or a $0.23 diluted net income per share.

  • Unlevered free cash flow for the third quarter of 2018 was $32.1 million, yielding a margin of 23.9%, compared to $16.1 million, yielding a margin of 13.2% in 2017.

Third Quarter 2018 Results - ASC 605

  • Revenue for the third quarter of 2018 was $133.7 million, representing a 9.7% increase compared to the prior year. Revenue growth on a constant currency basis was 9.9%.

  • Subscription revenue for the third quarter of 2018 was $120.7 million, representing a 19.4% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 19.5%.

  • Operating income for the third quarter of 2018 was $2.3 million, yielding a margin of 1.7%, compared to $(12.1) million, yielding a margin of (9.9)%, in the prior year.

  • Non-GAAP operating income for the third quarter of 2018 was $18.5 million, yielding a margin of 13.9%, compared to $7.7 million, yielding a margin of 6.3%, in the prior year.

  • Net loss for the third quarter of 2018 was $(1.7) million, or a $(0.03) diluted net loss per share, compared to a net loss of $(14.9) million, or a $(0.26) diluted net loss per share, in the prior year.

  • Non-GAAP net income for the third quarter of 2018 was $15.5 million, or a $0.24 diluted net income per share, compared to $7.3 million, or a $0.12 diluted net income per share in the prior year.

“Cornerstone achieved a significant milestone in the third quarter realizing GAAP operating profitability for the first time in the company’s history,” said Brian Swartz, CFO, Cornerstone. “In addition, we continued to grow recurring revenue while nearly doubling non-GAAP EPS.”

Recent Highlights:

  • The Company was recognized as a Strategic Leader in the October 2018 Fosway 9-GridTM for Integrated Management systems for the fourth consecutive year, while also improving its position as a Core Challenger with a stronger trajectory in the October 2018 Fosway 9-GridTM for Cloud HCM.

  • The Company was recognized as a Leader in the 2018 Gartner Magic Quadrant for Talent Management Suites for the fifth consecutive year.

  • The Company announced it will expand its operations to Salt Lake City.

  • The Company acquired Workpop Inc. and unveiled a web and mobile recruiting solution built to meet the needs of companies seeking to hire local, entry-level and frontline employees.

  • The Company ended the third quarter of 2018 with 3,428 clients and 38.5 million users.2

Acquisition of Grovo Learning, Inc.

Today, Cornerstone announced that the Company entered into a definitive agreement to acquire Grovo Learning, Inc., the global leader in microlearning content, for $24.0 million in an all-cash transaction. The determination of the final purchase price is subject to customary closing adjustments.

Stock Repurchase Program:

The following is a summary of the Company’s stock repurchases as of November 2, 2018 under its $100.0 million share repurchase program (in thousands, except per share information):



Financial Outlook:

The following outlook is based on information available as of the date of this press release and is subject to change in the future. The outlook excludes any financial impact as a result of the acquisition of Grovo Learning, Inc as it is not expected to have a material impact, with the exception of annual recurring revenue which has been included. The Company has provided a supplemental financial presentation summarizing the adoption of ASC 606 (and on an ASC 605 basis) located on its Investor Relations website at http://investors.cornerstoneondemand.com. All numbers below are presented on an ASC 606 basis unless otherwise stated. For the fourth quarter ending December 31, 2018, the Company provides the following outlook:

  • Revenue between $128.0 million and $131.0 million, representing year-over-year growth at the mid-point of (2)%4, or 0%5 on a constant currency basis.
    • Revenue growth at the mid-point on an ASC 605 basis of (2)%4, or 0%5 on a constant currency basis.

  • Subscription revenue between $119.0 million and $122.0 million, representing year-over-year growth at the mid-point of 13%4, or 15%5 on a constant currency basis.
    • Subscription revenue growth at the mid-point on an ASC 605 basis of 14%4, or 16%5 on a constant currency basis


For the year ending December 31, 2018, the Company provides the following outlook:

  • Revenue between $528.0 million and $531.0 million, representing year-over-year growth at the mid-point of 10%6, or 9%7 on a constant currency basis.
    • Revenue growth at the mid-point on an ASC 605 basis of 10%6, or 9%7 on a constant currency basis.

  • Subscription revenue between $466.0 million and $469.0 million, representing year-over-year growth at the mid-point of 18%6, or 17%7 on a constant currency basis.
    • Subscription revenue growth at the mid-point on an ASC 605 basis of 20%6, or 19%7 on a constant currency basis.

  • Annual recurring revenue as of December 31, 2018 between $503.0 million and $513.0 million.3, 6, 8

  • Non-GAAP operating income between $61.0 million and $64.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 12%.

  • Unlevered free cash flow between $59.0 million and $63.0 million. Assuming the midpoint of the revenue range, this represents an unlevered free cash flow margin of 12%.


The Company has not reconciled the guidance for non-GAAP operating income or non-GAAP operating margin to the corresponding GAAP measures because it does not provide guidance for such GAAP measures and would not be able to present the reconciling items between such GAAP and non-GAAP measures without unreasonable efforts. For non-GAAP operating income and non-GAAP operating margin, the Company excludes stock-based compensation expense, which is impacted by factors that are outside of the Company’s control and can be difficult to predict. The actual amount of stock-based compensation expense in the fourth quarter ending December 31, 2018 and the year ending December 31, 2018 will have a significant impact on the Company’s GAAP operating margin.
1 Financial measures presented under ASC 605, financial measures presented on a constant currency basis, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow and unlevered free cash flow margin are non-GAAP financial measures. Please see the discussion in the section titled “Non-GAAP Financial Measures” and the reconciliations at the end of this press release. 2 Includes contracted clients and active users of our enterprise human capital management platform and excludes clients and users of our Cornerstone for Salesforce, PiiQ and Workpop Inc. As discussed on the Company's second quarter 2018 earnings call, the Company reported that user count is no longer relevant in the assessment of its performance and beginning in the first quarter 2019, the Company will no longer report user count on a quarterly basis. 3 Includes $9.0 million of annual recurring revenue as a result of the acquisition of Grovo Learning, inc. In order to translate the financial outlook for entities reporting in British pounds (GBP) to United States dollars (USD) and Euro (EUR) to United States dollars (USD), the following exchange rates have been applied: 4 Exchange rate applied to revenue for the fourth quarter of 2018 $1.27 USD per GBP 5 Exchange rate from the fourth quarter of 2017 applied to calculate revenue growth for the fourth quarter of 2018 on a constant currency basis $1.34 USD per GBP 6 Exchange rate applied to revenue and annual recurring revenue for fiscal 2018 $1.27 USD per GBP 7 Exchange rate applied to calculate revenue growth for fiscal 2018 on a constant currency basis $1.29 USD per GBP 8 Exchange rate applied to annual recurring revenue for fiscal 2018 $1.13 USD per EUR
Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its third quarter 2018 results at 2:00 p.m. PT (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Investor Relations website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 1984286. A replay of the call will also be available at http://investors.cornerstoneondemand.com/investors/news-and-events/events/default.aspx or via telephone until 11:59 p.m. PT on November 10, 2018 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 1984286.

About Cornerstone

Cornerstone is a leading global people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise and specialized focus to help them realize their people potential. Featuring comprehensive recruiting, personalized learning, modern content delivered in the flow of work, development-driven performance management and holistic workforce data management and insights, Cornerstone’s people development solutions are used by more than 3,600 global clients of all sizes, spanning more than 40 million users across 180+ countries and 40+ languages.

Learn more at www.cornerstoneondemand.com.au

Investor Relations Contact

Jason Gold

jgold@csod.com

+1 (310) 526-2531

Media Contact

Deaira Irons

dirons@csod.com

310-752-0164
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