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Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2017 Financial Results


SANTA MONICA, Calif. – February 13, 2018 – Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its fourth quarter and year ended December 31, 2017. The Company has provided supplemental financial information on its Investor Relations website at http://investors.cornerstoneondemand.com.

“In the last three months, we have made strong progress against our strategic transformation plan,” said Adam Miller, the Company’s CEO. “We believe our solid performance in Q4 2017 is a positive indicator that we are making the right changes to drive recurring revenue growth and operating margins.”

Fourth Quarter 2017 Results:

• Revenue for the fourth quarter of 2017 was $132.0 million, representing a 21.0% increase compared to the same period in 2016. Revenue growth on a constant currency basis represented an 18.3% increase compared to the prior year.1
• Subscription revenue for fourth quarter of 2017 was $106.3 million, representing an 18.8% increase compared to the same period in 2016.
• Billings were $184.9 million for the fourth quarter of 2017, representing an 18.3% increase compared to the same period in 2016.1 Billings growth on a constant currency basis represented a 12.1% increase compared to the prior year.1
• The Company’s operating loss for the fourth quarter of 2017 was $(5.4) million, yielding an operating loss margin of (4.1)%, compared to an operating loss of $(14.5) million, yielding an operating loss margin of (13.3)%, for the fourth quarter of 2016.
• Non-GAAP operating income for the fourth quarter of 2017 was $13.0 million, yielding a non-GAAP operating income margin of 9.9%, compared to a non-GAAP operating income of $1.6 million, yielding a non-GAAP operating income margin of 1.5%, for the fourth quarter of 2016.1
• The Company’s net loss for the fourth quarter of 2017 was $(9.0) million, or a $(0.16) diluted net loss per share, compared to a net loss of $(18.6) million, or a $(0.33) diluted net loss per share, for the fourth quarter of 2016.
• Non-GAAP net income for the fourth quarter of 2017 was $12.1 million, or a $0.19 non-GAAP diluted net income per share, compared to a non-GAAP net income of $(0.1) million, or a $0.00 non-GAAP diluted net income per share, for the fourth quarter of 2016.1
• Free cash flow for the fourth quarter of 2017 was $46.4 million, yielding a free cash flow margin of 35.2%, compared to free cash flow of $27.5 million, yielding a free cash flow margin of 25.2% for the fourth quarter of 2016.1
• Unlevered free cash flow for the fourth quarter of 2017 was $46.4 million, yielding an unlevered free cash flow margin of 35.2%, compared to unlevered free cash flow of $27.5 million, yielding an unlevered free cash flow margin of 25.2% for the fourth quarter of 2016.1
• The Company repurchased 0.6 million shares of its common stock during the fourth quarter of 2017 at an average cost of $35.55 per share for a total expenditure of $22.6 million. Subsequent to December 31, 2017, the Company repurchased 0.3 million shares of its common stock at an average cost of $37.12 per share for a total expenditure of $11.5 million.

Fiscal Year 2017 Results:

• Revenue for the full year of 2017 was $482.0 million, representing a 13.9% increase compared to the same period in 2016. Revenue growth on a constant currency basis represented a 15.3% increase compared to the prior year.1
• Subscription revenue for the full year of 2017 was $396.8 million, representing a 16.8% increase compared to the same period in 2016.
• Billings were $525.8 million for the full year of 2017, representing a 16.0% increase compared to the same period in 2016.1 Billings growth on a constant currency basis represented an 11.5% increase compared to the prior year.1
• Annual recurring revenue as of December 31, 2017 was $439.0 million.
• The Company’s operating loss for the full year of 2017 was $(49.3) million, yielding an operating loss margin of (10.2)%, compared to an operating loss of $(56.3) million, yielding an operating loss margin of (13.3)%, for the full year of 2016.
• Non-GAAP operating income for the full year of 2017 was $26.9 million, yielding a non-GAAP operating income margin of 5.6%, compared to a non-GAAP operating income of $7.6 million, yielding a non-GAAP operating income margin of 1.8% for the full year of 2016.1
• The Company’s net loss for the full year of 2017 was $(61.3) million, or a $(1.07) diluted net loss per share, compared to a net loss of $(66.8) million, or a $(1.20) diluted net loss per share, for the full year of 2016.
• Non-GAAP net income for the full year of 2017 was $25.2 million, or a $0.41 non-GAAP diluted net income per share, compared to a non-GAAP net loss of $6.4 million, or a $0.11 non-GAAP diluted net loss per share, for the full year of 2016.1
• Free cash flow for the full year of 2017 was $39.8 million, yielding a free cash flow margin of 8.3%, compared to free cash flow of $12.6 million, yielding a free cash flow margin of 3.0% for the full year of 2016.1
• Unlevered free cash flow for the full year of 2017 was $43.7 million, yielding an unlevered free cash flow margin of 9.1%, compared to unlevered free cash flow of $16.4 million, yielding an unlevered free cash flow margin of 3.9% for the full year of 2016.1
“2017 saw continued improvement in profitability with Cornerstone achieving its second consecutive year of non-GAAP net income,” said Brian Swartz, the Company’s CFO. “This was driven by Cornerstone executing on its strategic plan and we believe there are opportunities to drive even more margin improvement into the future.”

Recent Highlights:

• The Company announced it has expanded its strategic global relationship with LinkedIn to offer organizations expanded corporate learning technology and content options that meet the needs both of those organizations and their employees.
• The Company announced its plan to make several changes to its corporate governance structure as part of its broader strategic transformation plan outlined in November 2017. The Company will separate the chairman of the board and CEO roles and move to declassify its board of directors. Additionally, long-tenured directors Mark Baker, Hal Burlingame and Joe Payne announced their plans to retire from the board.
• The Company announced that it has significantly expanded its market footprint in Europe, with high adoption of its Cornerstone HR suite and continued organic growth and uptake of the full Cornerstone human capital management platform within its current client base.
• The Company appointed Jeff Lautenbach as its new president of global field operations, effective January 2, 2018, and made changes to its sales and services organizations, as part of the Company’s strategic plan to accelerate revenue growth and increase operating margins.
• The Company ended the fourth quarter of 2017 with 3,250 clients and more than 35.3 million users.2

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. For the first quarter ending March 31, 2018, the Company provides the following outlook:
• Revenue based on the adoption of ASC 606 between $126.0 million and $128.0 million, representing year-over-year growth at the mid-point of 14%3, or 10%4 on a constant currency basis.
◦ Revenue unadjusted for ASC 606 (on an ASC 605 basis) between $126.0 million and $128.0 million, representing year-over-year growth at the mid-point of 14%3, or 10%4 on a constant currency basis.
• Subscription revenue based on the adoption of ASC 606 between $111.0 million and $113.0 million, representing year-over-year growth at the mid-point of 21%3, or 17%4 on a constant currency basis.
◦ Subscription revenue unadjusted for ASC 606 (on an ASC 605 basis) between $111.0 million and $113.0 million, representing year-over-year growth at the mid-point of 21%3, or 17%4 on a constant currency basis.
For the year ending December 31, 2018, the Company provides the following outlook:
• Revenue based on the adoption of ASC 606 between $497.0 million and $507.0 million, representing year-over-year growth at the mid-point of 4%5, or 2%6 on a constant currency basis.
◦ Revenue unadjusted for ASC 606 (on an ASC 605 basis) between $500.0 million and $510.0 million, representing year-over-year growth at the mid-point of 5%5, or 2%6 on a constant currency basis.
• Subscription revenue based on the adoption of ASC 606 between $453.0 million and $463.0 million, representing year-over-year growth at the mid-point of 15%5, or 13%6 on a constant currency basis.
◦ Subscription revenue unadjusted for ASC 606 (on an ASC 605 basis) between $458.0 million and $468.0 million, representing year-over-year growth at the mid-point of 17%5, or 14%6 on a constant currency basis.
• Annual recurring revenue as of December 31, 2018 between $475.0 million and $495.0 million5, 7.
• Non-GAAP operating income based on the adoption of ASC 606 of approximately $52.0 million and $62.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 11%.
◦ Non-GAAP operating income unadjusted for ASC 606 (on an ASC 605 basis) of approximately $55.0 million and $65.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 12%.
• Unlevered free cash flow between $50.0 million and $60.0 million. Assuming the midpoint of the revenue range on an ASC 606 basis, this represents an unlevered free cash flow margin of 11%. This does not take into account cash interest expense of $14.0 million.
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 first quarter ending March 31, 2018 and the year ending December 31, 2018 will have a significant impact on the Company’s GAAP operating margin.
1 Billings, 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, free cash flow, free cash flow margin, 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 and PiiQ, formerly known as Cornerstone Growth Edition, products. 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: 3 Exchange rate applied to revenue for the first quarter of 2018 $1.40 USD per GBP 4 Exchange rate from the first quarter of 2017 applied to calculate revenue growth for the first quarter of 2018 on a constant currency basis $1.24 USD per GBP 5 Exchange rate applied to revenue and annual recurring revenue for fiscal 2018 $1.40 USD per GBP 6 Exchange rate from fiscal 2017 applied to calculate revenue growth for fiscal 2018 on a constant currency basis $1.29 USD per GBP 7 Exchange rate applied to annual recurring revenue for fiscal 2018 $1.24 USD per EUR

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its fourth quarter and fiscal year 2017 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: 8867338. 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 February 16, 2018 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 8867338.

About Cornerstone

Cornerstone is the world’s leading 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 3,640 global clients of all sizes, spanning more than 40 million users across 187 countries and 43 languages.

Learn more at www.cornerstoneondemand.com.

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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