Cornerstone OnDemand reported solid fourth quarter results with strong billings and revenue growth. One huge driver for Cornerstone in the cloud talent management market is that it has focus as rivals are gobbled up by larger players.
The company reported a fourth quarter net loss of $7.4 million, or 15 cents a share, on revenue of $36.4 million, up 63 percent from a year ago. The non-GAAP loss for the quarter was 6 cents a share. For 2012, Cornerstone reported revenue of $117.9 million, up 56 percent from a year ago, with a net loss of $31.4 million, or 63 cents a share.
Cornerstone's trajectory is worth noting as we've seen this movie play out before among tech vendors. First, there's a run on acquisitions in a niche market. For instance, Oracle bought Taleo and SAP gobbled up SuccessFactors. At first, Cornerstone looked like the odd talent management play out of the acquisition party. However, Cornerstone had the luxury of staying focused as rivals were digested. As a result, the company has been able to grow and land more customers.
Indeed, Cornerstone ended the year with more than 1,200 customers and deals with Appirio and plans to launch a Salesforce native version of its software will boost that roster. Cornerstone projected first quarter revenue in line with estimates and 2013 sales a bit above expectations.
Adam Miller, CEO of Cornerstone, said his company is benefiting as rivals are acquired. "As most of you know, 2012 was the year that saw a significant wave of consolidation sweep up several of the major names in talent management. SuccessFactors, Taleo, and Kenexa were all acquired, leaving us as the leading independent player in the states," said Miller. "While we were initially unsure how things would play out, we are now convinced that the disruption caused by these acquisitions has significantly improved our competitive positioning."
Miller also noted that best-of-breed can hold its own nicely against "settling for the patchwork solutions offered by the Europeans." He added:
Not only did the disruption speed up the time to maturity of our product with respect to client acquisition, helping us to sell dozens of recruiting deals in 2012, but it also gave us a window of opportunity to get feedback from the market to guide our continued innovation.
So what's next? Miller was asked about "desperation pricing," something analysts have noted in their research reports of late. Mark Murphy, an analyst at Piper Jaffray, noted that SuccessFactors has been using "unnaturally low pricing in certain cases."
We do see high variability. I think it has to do with which teams are working on particular deals. But we have seen some unnatural pricing, as you're describing. I think it's temporary. We've seen it before, it tends to happen towards the end of the year as people are trying to hit numbers. And I do not think it's a widespread change.
Bottom line: Desperation pricing may be a good barometer that Cornerstone is becoming more than just an annoyance to the big guns.