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Cornerstone OnDemand Announces Second Quarter 2018 Financial Results


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

“We are pleased with the progress we have made through the first half of the year against all aspects of our strategic plan and the corresponding indicators of success,” said Adam Miller, the Company’s CEO. “We believe these changes are laying the foundation to transform Cornerstone into an industry-leading, high margin growth company.”

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 June 30, 2018, which includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year.

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

• Revenue for the second quarter of 2018 was $132.5 million compared to a guided range of $127.0 million to $129.0 million.
• Subscription revenue for the second quarter of 2018 was $114.8 million compared to a guided range of $111.0 million to $113.0 million.
• Operating loss for the second quarter of 2018 was $(3.1) million, yielding a margin of (2.3)%.
• Non-GAAP operating income for the second quarter of 2018 was $13.2 million, yielding a margin of 10.0%.
• Net loss for the second quarter of 2018 was $(12.0) million, or a $(0.21) diluted net loss per share.
• Non-GAAP net income for the second quarter of 2018 was $7.8 million, or a $0.12 diluted net income per share.
• Unlevered free cash flow for the second quarter of 2018 was $7.9 million, yielding a margin of 6.0%, compared to $(5.0) million, yielding a margin of (4.3)% in 2017.

Second Quarter 2018 Results - ASC 605

• Revenue for the second quarter of 2018 was $133.0 million, representing a 14.0% increase compared to the prior year. Revenue growth on a constant currency basis was 11.9%.
• Subscription revenue for the second quarter of 2018 was $116.7 million, representing a 21.1% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 18.9%.
• Operating loss for the second quarter of 2018 was $(2.4) million, yielding a margin of (1.8)%, compared to $(18.6) million, yielding a margin of (15.9)%, in the prior year.
• Non-GAAP operating income for the second quarter of 2018 was $13.9 million, yielding a margin of 10.4%, compared to $1.2 million, yielding a margin of 1.1%, in the prior year.
• Net loss for the second quarter of 2018 was $(11.3) million, or a $(0.20) diluted net loss per share, compared to a net loss of $(21.3) million, or a $(0.37) diluted net loss per share, in the prior year.
• Non-GAAP net income for the second quarter of 2018 was $8.4 million, or a $0.13 diluted net income per share, compared to $0.9 million, or a $0.02 diluted net income per share in the prior year.
“We had strong results in Q2 with another quarter of outperformance across all metrics,” said Brian Swartz, the Company’s CFO. “We have made significant progress growing recurring revenue and improving profitability.”

Recent Highlights:

• The Company was recognized as a leader in four recent 2018 IDC MarketScape vendor assessment reports published on July 17, 2018 on the worldwide integrated talent management market, including the major talent management functions of learning management, performance management and compensation management.
• The Company was positioned as a leader in the Aragon Research 2018 Globe for Corporate Learning Report.
• The Company expanded its strategic relationship with Grovo to provide an integrated learning platform and content for businesses.
• The Company expanded its strategic relationship with IBM to deliver unparalleled talent management technology.
• The Company expanded its content offerings as well as the availability of integrations with LinkedIn Learning and Workplace by Facebook to help organizations prepare their workforces for the future.
• The Company raised the bar on candidate and recruiting experience with enhancements such as a new “one-minute” mobile application for job candidates and an efficient, streamlined candidate management experience for talent acquisition professionals.
• The Company was named as a leader in the 2018 NelsonHall NEAT Next Generation HCM tech vendor evaluation.
• At the Company’s 2018 Annual Meeting of Stockholders held on June 14, 2018, the Company announced the election of three accomplished software industry CEOs to its Board of Directors, appointed a new Chair and moved to declassify its Board of Directors.
• The Company ended the second quarter of 2018 with 3,363 clients and 36.7 million users.2

Stock Repurchase Program:

The following is a summary of the Company’s stock repurchases as of August 3, 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. 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. Note that the United States dollar (USD) strengthened against the British pound (GBP) by 4.4% and the Euro (EUR) by 3.3% since the Company’s previous full year 2018 guidance was issued on May 8, 2018. For the third quarter ending September 30, 2018, the Company provides the following outlook:
• Revenue between $129.0 million and $131.0 million, representing year-over-year growth at the mid-point of 7%3, or 7%4 on a constant currency basis.
◦ Revenue growth at the mid-point on an ASC 605 basis of 7%3, or 7%4 on a constant currency basis.
• Subscription revenue between $115.0 million and $117.0 million, representing year-over-year growth at the mid-point of 15%3, or 15%4 on a constant currency basis.
◦ Subscription revenue growth at the mid-point on an ASC 605 basis of 17%3, or 17%4 on a constant currency basis.

For the year ending December 31, 2018, the Company provides the following outlook:
• Revenue between $520.0 million and $526.0 million, representing year-over-year growth at the mid-point of 9%5, or 7%6 on a constant currency basis.
◦ Revenue growth at the mid-point on an ASC 605 basis of 9%5, or 7%6 on a constant currency basis.
• Subscription revenue between $460.0 million and $466.0 million, representing year-over-year growth at the mid-point of 17%5, or 16%6 on a constant currency basis.
◦ Subscription revenue growth at the mid-point on an ASC 605 basis of 18%5, or 17%6 on a constant currency basis.
• Annual recurring revenue as of December 31, 2018 between $484.0 million and $500.0 million.5, 7
• Non-GAAP operating income between $58.0 million and $64.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 12%.
• Unlevered free cash flow between $56.0 million and $62.0 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 third quarter ending September 30, 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 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 third quarter of 2018 $1.30 USD per GBP 4 Exchange rate from the third quarter of 2017 applied to calculate revenue growth for the third quarter of 2018 on a constant currency basis $1.31 USD per GBP 5 Exchange rate applied to revenue and annual recurring revenue for fiscal 2018 $1.30 USD per GBP 6 Exchange rate 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 $1.16 USD per EUR
Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its second 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: 3765838. 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 August 10, 2018 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 3765838.

About Cornerstone

Cornerstone is a premier 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 the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management and holistic employee data management and insights, Cornerstone’s people development solutions are used by approximately 6,300 clients of all sizes, spanning more than 75 million users across over 180 countries and nearly 50 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

+1 (310) 752-0164
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