Cornerstone OnDemand, Inc. revenue growth decelerated to 11.6% in 2018 vs. 13.9% a year earliner
02/12/2019 • About Cornerstone OnDemand, Inc. (
$CSOD) • By InTwits
Cornerstone OnDemand, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Cornerstone OnDemand, Inc. is a fast growth stock: 2018 revenue growth was 11.6%, 5 year revenue CAGR was 23.8% at 2018 ROIC -1.6%
- EBITDA Margin is expanding: 5.1% in 2018 vs. -2.9% in 2017 vs. -13.2% in 2014
- Cornerstone OnDemand, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 12.9% while average EBITDA Margin was -4.2% for the sames years
- Cornerstone OnDemand, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $15m in 2018, $7m in 2017, $6m in 2016, $16m in 2015, $11m in 2014
- In the last 5 years the company invested considerably less than D&A: $55m vs. $146m. In 2018 this situation was still the same: CAPEX was 15 while D&A was 35
- The company has unprofitable business model: ROIC is -1.6%
- It operates with high leverage: Net Debt/EBITDA is 5.5x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Cornerstone OnDemand, Inc.'s Revenue surged on 11.6%. Revenue growth showed slowdown in 18Q4 - it was 4.8% YoY. Revenue decline was accelerating on average at -7.6 pp per annum in 2014-2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. EBITDA Margin stuck to a growing trend at 4.6 pp per annum in the last 5 years.
Gross Margin increased on 2.8 pp from 70.4% to 73.2% in 2018. During the last 5 years Gross Margin bottomed in 2015 at 67.7% and was growing since that time. SG&A as a % of Revenue decreased on 8.8 pp from 67.4% to 58.6% in 2018. SG&A as a % of Revenue followed a declining trend at -4.6 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.3 pp from 13.7% to 12.4% in 2018.
Net Income margin increased on 6.4 pp from -12.7% to -6.3% in 2018. Net Income margin stuck to a growing trend at 4.9 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.8% in 2018. The company showed small CAPEX/Revenue decline of 1.8 pp from 4.6% in 2015 to 2.8% in 2018. Average CAPEX/Revenue for the last three years was 1.9%. To fuel its fast growth Cornerstone OnDemand, Inc. invested a large share of EBITDA (54.2%) to CAPEX.
Accounts receivable as a % of Revenue decreased on 8.7 pp from 32.0% to 23.3% in 2018. Accounts payable as a % of Revenue decreased on 4.1 pp from 12.3% to 8.3% in 2018.
Cornerstone OnDemand, Inc. has spent
$41m on M&A in 2018 which accounts for 7.6% of revenue.
Return on investment
The company operates at negative ROIC (-1.6%) and ROE (-86.7%). ROIC jumped on 10.2 pp from -11.8% to -1.6% in 2018. ROE jumped on 163 pp from -250% to -86.7% in 2018. During the last 5 years ROIC bottomed in 2015 at -27.3% and was growing since that time. During 2014-2018 ROE bottomed in 2015 at -395% and was growing since that time.
Leverage (Debt)
Debt level is 5.5x Net Debt / EBITDA and 12.2x Debt / EBITDA. Net Debt / EBITDA jumped5.5x from to 5.5x in 2018. Debt dropped on 37.2% while cash dropped on 53.4%.
The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 8.4% in 2018.
Management team
Cornerstone OnDemand, Inc.'s CEO is Adam L Miller. Adam L Miller is a founder and has 14 years tenure with the company. CEO total compensation was
$6,554,601 in 2018 which included
$500,000 salary. Cornerstone OnDemand, Inc.'s CFO Brian L Swartz has spent 3 years with the company.
Insider ownership is 8.0%. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,953 employees. The number of employees increased on 3.3%. Average revenue per employee in 2018 was
$275,418 and it increased on 8.1%.
Financial and operational results
FY ended 12/31/2018
Cornerstone OnDemand, Inc. ($CSOD) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 263.6 | 339.7 | 423.1 | 482.0 | 537.9 | 11.6% |
| Gross Profit | 185.9 | 229.8 | 287.4 | 339.1 | 393.5 | 16.0% |
| SG&A | 204.4 | 256.9 | 296.6 | 324.9 | 315.4 | -2.9% |
| EBITDA | -34.8 | -41.2 | -24.0 | -13.9 | 27.5 | |
| EBIT | -49.9 | -68.7 | -56.3 | -49.3 | -7.8 | |
| Interest expence | | 12.5 | 12.9 | 14.8 | 28.2 | 90.9% |
| Tax | | 1.2 | 1.2 | 1.7 | 2.6 | 48.6% |
| Net Income | -64.9 | -85.5 | -66.8 | -61.3 | -33.8 | |
| Stock Based Compensation | 33.7 | 43.1 | 54.7 | 65.9 | 66.6 | 1.0% |
Balance Sheet
|
|---|
| Cash | 166.6 | 107.7 | 83.3 | 393.6 | 183.6 | -53.4% |
| Accounts Receivable | | 104.7 | 136.7 | 154.4 | 125.3 | -18.9% |
| Accounts Payable | | 19.0 | 24.4 | 17.6 | 11.9 | -32.4% |
| Short Term Debt | 0.6 | 0.0 | 0.0 | 248.0 | 0.0 | -100.0% |
| Long Term Debt | 225.1 | 229.3 | 238.4 | 285.2 | 335.1 | 17.5% |
Cash flow
|
|---|
| Capex | 11.0 | 15.6 | 6.2 | 7.1 | 14.9 | 109.8% |
| Acquisitions | 43.3 | | | | 41.1 | |
Ratios
|
|---|
| Revenue growth | 42.4% | 28.9% | 24.6% | 13.9% | 11.6% | |
| EBITDA growth | 43.4% | 18.3% | -41.9% | -42.1% | -298.1% | |
|
|---|
| Gross Margin | 70.5% | 67.7% | 67.9% | 70.4% | 73.2% | 2.8% |
| EBITDA Margin | -13.2% | -12.1% | -5.7% | -2.9% | 5.1% | 8.0% |
| EBIT Margin | -18.9% | -20.2% | -13.3% | -10.2% | -1.4% | 8.8% |
| SG&A, % of revenue | 77.5% | 75.6% | 70.1% | 67.4% | 58.6% | -8.8% |
| SBC, % of revenue | 12.8% | 12.7% | 12.9% | 13.7% | 12.4% | -1.3% |
| Net Income Margin | -24.6% | -25.2% | -15.8% | -12.7% | -6.3% | 6.4% |
| CAPEX, % of revenue | 4.2% | 4.6% | 1.5% | 1.5% | 2.8% | 1.3% |
|
|---|
| ROIC | -18.6% | -27.3% | -22.2% | -11.8% | -1.6% | 10.2% |
| ROE | -146.8% | -394.8% | -384.3% | -249.9% | -86.7% | 163.2% |
| Net Debt/EBITDA | | | | | 5.5x |
| Interest expence / Average debt | | 5.5% | 5.5% | 3.8% | 8.4% | 4.6% |
People
|
|---|
| Insider ownership | 8.0% | 8.0% | 8.0% | 8.0% | 8.0% | 0.0% |
| Employees | 1,361 | 1,645 | 1,823 | 1,891 | 1,953 | 3.3% |
| Revenue/Employee, th. $ | 194 | 206 | 232 | 255 | 275 | 8.1% |
Cornerstone OnDemand, Inc. ($CSOD) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 133 | 133 | 134 | 138 | | 19.3% | 13.6% | 10.0% | 4.8% |
| EBITDA | -1 | 5 | 11 | 13 | | | | | 329.4% |
| Net Income | -16 | -12 | -2 | -3 | | | | | |
Balance Sheet
|
|---|
| Cash | 413 | 451 | 137 | 184 | | 590.5% | 321.4% | 78.7% | -53.4% |
| Short Term Debt | 250 | 253 | 0 | 0 | | | 4.0% | -100.0% | -100.0% |
| Long Term Debt | 286 | 287 | 288 | 335 | | 18.9% | | | 17.5% |
Ratios
|
|---|
| Gross Margin | 72.2% | 72.6% | 73.0% | 74.8% | | 2.6% | 2.8% | 2.3% | 3.5% |
| EBITDA Margin | -0.8% | 4.0% | 8.0% | 9.0% | | 2.7% | 12.5% | 10.5% | 6.8% |
| Net Income Margin | -12.2% | -9.1% | -1.8% | -2.3% | | 2.3% | 9.2% | 10.4% | 4.5% |
Peers in Application Software
Below we provide Cornerstone OnDemand, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 15.7% | 15.2% |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | | 28.9% | 24.6% | 13.9% | 11.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | 70.5% | 67.7% | 67.9% | 70.4% | 73.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -9.4% | -4.7% | -4.2% | -3.3% |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | -13.2% | -12.1% | -5.7% | -2.9% | 5.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | 4.2% | 4.6% | 1.5% | 1.5% | 2.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.2% | -10.2% | -10.4% |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | -18.6% | -27.3% | -22.2% | -11.8% | -1.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
| Cornerstone OnDemand, Inc. ($CSOD) | | | | | 5.5x |
