mobile menu

Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2018 Financial Results

SANTA MONICA, Calif. – February 12, 2019 – Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its fourth quarter and year ended December 31, 2018. The Company has provided a quarterly shareholder letter and supplemental financial information located on its Investor Relations website at http://investors.cornerstoneondemand.com.

“2018 was a transformational year for Cornerstone, and we are proud of our results,” said Adam Miller, founder and CEO of Cornerstone. “The changes we made to our business in 2018 delivered innovative products, more recurring revenue, more profits and healthy, growing cash flow to benefit our clients, partners, employees and shareholders.”

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 December 31, 2018, which includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year.

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

• Revenue for the fourth quarter of 2018 was $138.2 million compared to a guided range of $128.0 million to $131.0 million.2
• Subscription revenue for the fourth quarter of 2018 was $126.3 million compared to a guided range of $119.0 million to $122.0 million.2
• Operating income for the fourth quarter of 2018 was $2.6 million, yielding a margin of 1.9%.
• Non-GAAP operating income for the fourth quarter of 2018 was $19.4 million, yielding a margin of 14.1%.2
• Net loss for the fourth quarter of 2018 was $(3.2) million, or a $(0.05) diluted net loss per share.
• Non-GAAP net income for the fourth quarter of 2018 was $15.4 million, or a $0.24 diluted net income per share.
• Unlevered free cash flow for the fourth quarter of 2018 was $33.7 million, yielding a margin of 24.4%, compared to $46.4 million, yielding a margin of 35.2%, in the prior year.

Fourth Quarter 2018 Results - ASC 605:

• Revenue for the fourth quarter of 2018 was $137.9 million, representing a 4.5% increase compared to the prior year. Revenue growth on a constant currency basis was 5.8%. • Subscription revenue for the fourth quarter of 2018 was $127.5 million, representing a 20.0% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 21.4%.
• Operating income for the fourth quarter of 2018 was $2.3 million, yielding a margin of 1.6%, compared to $(5.4) million, yielding a margin of (4.1)%, in the prior year.
• Non-GAAP operating income for the fourth quarter of 2018 was $19.1 million, yielding a margin of 13.9%, compared to $13.0 million, yielding a margin of 9.9%, in the prior year.
• Net loss for the fourth quarter of 2018 was $(3.5) million, or a $(0.06) diluted net loss per share, compared to a net loss of $(9.0) million, or a $(0.16) diluted net loss per share, in the prior year.
• Non-GAAP net income for the fourth quarter of 2018 was $15.1 million, or a $0.23 diluted net income per share, compared to $12.1 million, or a $0.19 diluted net income per share, in the prior year.

Fiscal Year 2018 Results - ASC 606 (standard adopted effective January 1, 2018):

• Revenue for the full year of 2018 was $537.9 million compared to a guided range of $528.0 million to $531.0 million.2
• Subscription revenue for the full year of 2018 was $473.1 million compared to a guided range of $466.0 million to $469.0 million.2
• Annual recurring revenue as of December 31, 2018 was $510.0 million, representing a 16.2% increase compared to the prior year. Annual recurring revenue growth on a constant currency basis was 17.9%.2
• Operating income for the full year of 2018 was $(7.8) million, yielding a margin of (1.4)%.
• Non-GAAP operating income for the full year of 2018 was $63.4 million, yielding a margin of 11.8% compared to guided range of $61.0 million and $64.0 million.2
• Net loss for the full year of 2018 was $(33.8) million, or a $(0.58) diluted net loss per share.
• Non-GAAP net income for the full year of 2018 was $47.0 million, or a $0.74 diluted net income per share.
• Unlevered free cash flow for the full year of 2018 was $63.5 million, yielding a margin of 11.8%, compared to guided range of $59.0 million and $63.0 million.

Fiscal Year 2018 Results - ASC 605:

• Revenue for the full year of 2018 was $537.2 million, representing a 11.5% increase compared to the prior year. Revenue growth on a constant currency basis was 10.4%.
• Subscription revenue for the full year of 2018 was $479.4 million, representing a 20.8% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 19.8%.
• Operating income for the full year of 2018 was $(7.5) million, yielding a margin of (1.4)%, compared to $(49.3) million, yielding a margin of (10.2)%, in the prior year.
• Non-GAAP operating income for the full year of 2018 was $63.7 million, yielding a margin of 11.9%, compared to $26.9 million, yielding a margin of 5.6%, in the prior year.
• Net loss for the full year of 2018 was $(33.5) million, or a $(0.58) diluted net loss per share, compared to a net loss of $(61.3) million, or a $(1.07) diluted net loss per share, in the prior year.
• Non-GAAP net income for the full year of 2018 was $47.3 million, or a $0.75 diluted net income per share, compared to $25.2 million, or a $0.41 diluted net income per share, in the prior year.

“Last year we saw significant improvement in our profitability, unlevered free cash flow and a near doubling of our non-GAAP earnings per share,” said Brian Swartz, CFO, Cornerstone. “Looking ahead to 2019, we believe there are more opportunities to drive further improvements in our operating model while investing for sustainable growth.”

Recent Highlights:

• The Company acquired Grovo Learning, Inc., the global leader in Microlearning® content, and expanded its Content Anytime subscription offerings.2
• The Company was recognized as a Leader in the 2018 Nucleus Research Talent Management Technology Value Matrix following the evaluation of its product usability and functionality, and the overall value it brings to its clients.
• The Company announced that the EMEA region gained a near record-breaking number of new clients during the third quarter of 2018.
• The Company is helping train the next generation of leaders at ArcBest, a leading logistics company for supply chain solutions.
European CEO magazine named Adam Miller the Best CEO in the HR Technology Industry.
• The Company ended the fourth quarter of 2018 with 3,535 clients and 40.2 million users.3

Stock Repurchase Program:

The following is a summary of the Company’s stock repurchases under its $100.0 million share repurchase program, which was completed as of December 31, 2018 (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.

For the first quarter ending March 31, 2019, the Company provides the following outlook:
• Revenue between $134.5 million and $136.5 million, representing year-over-year growth at the mid-point of 1.8%4, or 4.2%5 on a constant currency basis.
• Subscription revenue between $127.5 million and $129.5 million, representing year-over-year growth at the mid-point of 13.6%4, or 16.0%5 on a constant currency basis.

For the year ending December 31, 2019, the Company provides the following outlook:
• Revenue between $558 million and $568 million, representing year-over-year growth at the mid-point of 4.7%6, or 5.7%7 on a constant currency basis.
• Subscription revenue between $533 million and $543 million, representing year-over-year growth at the mid-point of 13.7%6, or 14.7%7 on a constant currency basis.
• Annual recurring revenue as of December 31, 2019 between $575 million and $590 million.6, 8
• Non-GAAP operating income between $74 million and $84 million. Assuming the midpoint of the revenue range, this represents an operating margin of 14%.
• Unlevered free cash flow between $82 million and $92 million. Assuming the midpoint of the revenue range, this represents an unlevered free cash flow margin of 15.5%.

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, 2019 and the year ending December 31, 2019 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

The acquisition of Grovo Learning, Inc during the fourth quarter had the following impacts:

- $1.0 million adverse impact on non-GAAP operating income for the quarter and full year-ended December 31, 2018.

- $8.4 million of annual recurring revenue is included in the reported amount as of December 31, 2018. As a result of purchase price accounting rules, $5.0 million of deferred revenue related to the acquisition has been written off and will not be recognized as revenue in future periods. Prior to the write off, the deferred revenue would have been substantially recognized between the closing of the acquisition and the full year-ended December 31, 2019.

- $46.1 million of property & equipment and a corresponding facility financing obligation for build-to-suit lease agreements were recorded on the consolidated balance sheets.

3

Includes contracted clients and active users of our enterprise human capital management platform and excludes clients and users of Cornerstone for Salesforce, PiiQ, Workpop Inc. and Grovo Learning, 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.



In order to translate the financial outlook for entities reporting in GBP to USD and EUR to USD, the following exchange rates have been applied:

4

Exchange rate applied to revenue for the first quarter of 2019

$1.29 USD per GBP

5

Exchange rate from the first quarter of 2018 applied to calculate revenue growth for the first quarter of 2019 on a constant currency basis

$1.39 USD per GBP

6

Exchange rate applied to revenue and annual recurring revenue for fiscal 2019

$1.29 USD per GBP

7

Average exchange rate from fiscal 2018 applied to calculate revenue growth for fiscal 2019 on a constant currency basis

$1.33 USD per GBP

8

Exchange rate applied to annual recurring revenue for fiscal 2019

$1.14 USD per EUR

Quarterly Conference Call

Cornerstone will host a conference call to discuss its fourth quarter and fiscal year 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: 6486058. 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 (2:59 p.m. ET) on February 15, 2019 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 6486058.

Investor Relations Contact

Jason Gold

jgold@csod.com

+1 (310) 526-2531

Media Contact

Deaira Irons

dirons@csod.com

310-752-0164
image

Take us for a spin

get started

Products

Recruiting SuiteLearning SuitePerformance SuiteHR SuiteContent Anytime

Get awesome HR content in your inbox weekly