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Cornerstone OnDemand Announces First Quarter 2018 Financial Results


SANTA MONICA, Calif. – May 8, 2018 – Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its first quarter ended March 31, 2018.

“We had a solid Q1 while demonstrating strong progress against our strategic transformation plan,” said Adam Miller, the Company’s CEO. “We feel our ability to deliver in the midst of this major transformation is a positive indicator that we are moving in the right direction. We believe the changes we are implementing will make us stronger, more focused, and better positioned for growth.”

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

First Quarter 2018 Results - ASC 606 (standard adopted effective January 1, 2018):
• Revenue for the first quarter of 2018 was $133.1 million compared to a guided range of $126.0 million to $128.0 million.
• Subscription revenue for the first quarter of 2018 was $113.1 million compared to a guided range of $111.0 million to $113.0 million.
• The Company’s operating loss for the first quarter of 2018 was $(8.8) million, yielding a margin of (6.6)%.
• Non-GAAP operating income for the first quarter of 2018 was $12.9 million, yielding a margin of 9.7%.1
• The Company’s net loss for the first quarter of 2018 was $(16.2) million, or a $(0.28) diluted net loss per share.
• Non-GAAP net income for the first quarter of 2018 was $9.0 million, or a $0.14 diluted net income per share.1
• Unlevered free cash flow for the first quarter of 2018 was $(10.2) million, yielding a margin of (7.6)%, compared to $(13.8) million, yielding a margin of (12.4)% in 2017.1

First Quarter 2018 Results - ASC 605
• Revenue for the first quarter of 2018 was $132.7 million, representing a 18.9% increase compared to the prior year. Revenue growth on a constant currency basis was 14.8%.1
• Subscription revenue for the first quarter of 2018 was $114.4 million, representing a 23.1% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 19.1%.1
• The Company’s operating loss for the first quarter of 2018 was $(9.6) million, yielding a margin of (7.2)%, compared to $(13.1) million, yielding a margin of (11.8)%, in the prior year.
• Non-GAAP operating income for the first quarter of 2018 was $12.2 million, yielding a margin of 9.2%, compared to $4.9 million, yielding a margin of 4.4%, in the prior year.1
• The Company’s net loss for the first quarter of 2018 was $(17.0) million, or a $(0.30) diluted net loss per share, compared to a net loss of $(16.2) million, or a $(0.29) diluted net loss per share, in the prior year.
• Non-GAAP net income for the first quarter of 2018 was $8.2 million, or a $0.13 diluted net income per share, compared to $4.8 million, or a $0.08 diluted net income per share in the prior year.1
“The first quarter outperformed expectations in all areas, from top line growth to unlevered free cash flow,” said Brian Swartz, the Company’s CFO. “We are pleased with this performance and believe there are opportunities to drive even more improvement as Cornerstone continues to execute on its strategic plan.”

Recent Highlights:
• The Company announced a partnership with Facebook, focused on its integration between Workplace by Facebook and the Cornerstone Learning Suite. The integration is focused on bringing the Company’s recently introduced “learning playlist” functionality into Workplace, further integrating learning and development into the flow of daily work and promoting a collaborative work environment.
• The Company announced a surge of European client demand in the third and fourth quarters of 2017. Growth in new clients nearly doubled in the latter half of 2017, when compared to the first half of the year, reaching a total of approximately 650 clients in Europe.
• The Company hired Jennifer Gianola as its new Vice President of Investor Relations and Chris Wheaton as its new Vice President of Field Operations.
• The Company announced the University of Tennessee System selected its learning and extended enterprise solutions to provide crucial training for its faculty and staff across six campuses and institutes, as well as certification programs for external stakeholders.
• The Company announced that it partnered with Palo Alto-based think tank Institute for the Future to identify the urgent skills people must master today to distinguish themselves and survive the workplace of tomorrow.
• The Company ended the first quarter of 2018 with 3,280 clients and 36 million users.2

Stock Repurchase Program:
The following is a summary of the Company's stock repurchases as of May 4, 2018 (in thousands, except per share information): Period # of Shares Repurchased Average Price per Share Total Expenditures November 8, 2017 - December 31, 2017 635 $ 35.55 $ 22,599 January 1, 2018 - March 31, 2018 423 $ 37.84 16,024 April 1, 2018 - May 4, 2018 100 $ 39.44 3,988 Total 1,158 $ 36.74 $ 42,611 At March 31, 2018, $61.4 million remained available under the share repurchase program.

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) and Euro (EUR) since the Company’s previous full year 2018 guidance was issued on February 13, 2018. For the second quarter ending June 30, 2018, the Company provides the following outlook:
• Revenue between $127.0 million and $129.0 million, representing year-over-year growth at the mid-point of 10%3, or 8%4 on a constant currency basis.
◦ Revenue growth at the mid-point on an ASC 605 basis was 10%3, or 8%4 on a constant currency basis.
• Subscription revenue between $111.0 million and $113.0 million, representing year-over-year growth at the mid-point of 16%3, or 14%4 on a constant currency basis.
◦ Subscription revenue growth at the mid-point on an ASC 605 basis was 17%3, or 15%4 on a constant currency basis.
For the year ending December 31, 2018, the Company provides the following outlook:
• Revenue between $503.0 million and $511.0 million, representing year-over-year growth at the mid-point of 5%5, or 3%6 on a constant currency basis.
◦ Revenue growth at the mid-point on an ASC 605 basis was 5%5, or 3%6 on a constant currency basis.
• Subscription revenue between $453.0 million and $461.0 million, representing year-over-year growth at the mid-point of 15%5, or 13%6 on a constant currency basis.
◦ Subscription revenue growth at the mid-point on an ASC 605 basis was 17%5, or 15%6 on a constant currency basis.
• Annual recurring revenue as of December 31, 2018 between $477.0 million and $495.0 million.5, 7
• Non-GAAP operating income between $54.0 million and $62.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 11%.
• Unlevered free cash flow between $52.0 million and $60.0 million. Assuming the midpoint of the revenue range, this represents an unlevered free cash flow margin of 11%.
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 second quarter ending June 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 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 second quarter of 2018 $1.36 USD per GBP 4 Exchange rate from the second quarter of 2017 applied to calculate revenue growth for the second quarter of 2018 on a constant currency basis $1.28 USD per GBP 5 Exchange rate applied to revenue and annual recurring revenue for fiscal 2018 $1.36 USD per GBP 6 Exchange rate applied to calculate revenue growth for fiscal 2018 on a constant currency basis $1.36 USD per GBP 7 Exchange rate applied to annual recurring revenue for fiscal 2018 $1.20 USD per EUR
Quarterly Conference Call
Cornerstone OnDemand, Inc. will host a conference call to discuss its first 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: 2789279. 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 May 11, 2018 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 2789279.

About Cornerstone

Cornerstone was founded with a passion for empowering people through learning and a conviction that people should be your organisation’s greatest competitive advantage.

Cornerstone is a global human capital management leader with a core belief that companies thrive when they help their employees to realize their potential. Putting this belief into practice, Cornerstone offers solutions to help companies strategically manage and continuously develop their talent throughout the entire employee lifecycle.

Featuring comprehensive recruiting, personalised learning, development-driven performance management, and holistic HR planning, Cornerstone’s human capital management platform is successfully used by more than 3,500 global clients of all sizes, spanning more than 42 million users across 192 countries and 43 languages.

Learn more at cornerstoneondemand.co.uk.

Media Contact

Susan Hilliar

shilliar@csod.com

+44(0)7767884556
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