According to a Market Research Future report published earlier this year, the global talent management software market is estimated to grow 16% annually over the next few years to become a $16 billion industry by 2023. Billion Dollar Unicorn  Cornerstone OnDemand (Nasdaq: CSOD) is among the leading players in the sector. I had met with its founder and CEO Adam Miller a few years ago. A lot has happened since then.

Cornerstone OnDemand’s Offerings

Cornerstone OnDemand was founded in 1999 and was earlier named CyberU. Initially, the company was set up as a metamediary between the buyers and sellers of education. It was going to offer solutions for individuals, S&B, and large enterprises. But the timing did not work out for the initiative. By 2000, the dot-com bubble burst, and the company pivoted to focus on large enterprises and the online training segment. It started aggregating online training courses and when it had collated a thousand training titles, its leadership approached acquaintances in large enterprises to offer their organizations access to quality content at discounted prices.

Cornerstone relied heavily on customer feedback and demand. Its customers were asking for performance management, succession planning, and talent management training sessions. It listened to their needs and built content and capabilities around them. By 2001, the company was servicing its enterprise clients.

Today, Cornerstone’s offerings help companies like Walgreens, Starwood Hotels & Resorts, and Xerox to address critical talent requirements. It manages the end-to-end cycle of helping organizations identify, hire, integrate, manage, and help grow its talent. It helps to connect employees and identify expertise so that people can do their jobs better at any given moment.

Cornerstone OnDemand’s Financials

Cornerstone operates on a SaaS model and charges its customers a subscription for access to its services. For the recently reported quarter, its revenues were up 19% to $132.7 million. During the quarter, it adopted a new revenue recognition accounting standard Accounting Standards Codification 606 under which revenues would have come in at $133.1 million. It ended the quarter with a non-GAAP net income of $9 million, or a $0.14 diluted net income per share. It ended the quarter with 3,280 clients and 36 million users globally.

For the current quarter, Cornerstone forecast revenues of $127-$129 million. It expects to end the year with revenues of $503-$511 million and non-GAAP operating income of $54-$62 million. The market was looking for revenues of $128.4 million for the quarter and $510 million for the year.

Cornerstone OnDemand’s Growing Partnerships

During the quarter, Cornerstone announced several partnerships to drive growth. It entered into an agreement with Facebook, which will focus on the integration between Workplace by Facebook and the Cornerstone Learning Suite. The integration will help organizations integrate learning and development into the daily work flow while promoting a collaborative work environment.

It also entered into an agreement with Palo Alto-based think tank Institute for the Future. As part of the agreement, the two organizations will work together to identify the urgent skills that people need to master in the current environment. Cornerstone will leverage the partnership to create more relevant content for organizations.

More recently, the company entered into an agreement with a leading Micro-learning solution called Grovo, which will enable access to Grovo’s Create as an add-on to the Cornerstone OnDemand platform. Organizations will be able to use Grovo’s customizable content library while benefiting from Cornerstone’s content service.

Cornerstrone also entered into an agreement with IBM that will allow Cornerstone’s clients to have access to IBM’s comprehensive talent management consulting services.

Questions for Cornerstone OnDemand’s Board

Cornerstone has always kept its customers’ feedback and demands in mind while expanding its offerings. Its recent partnerships also suggest that it has its ears close to the ground to identify potential growth opportunities. But I would like to know how Cornerstone is planning to address its rising competition? Besides smaller players like Infor Learning Management and Saba, it is seeing increasing pressure from the likes of Oracle, SAP and Workday. Cornerstone may have been a pioneer in the space a few decades ago, but Oracle has entered the space with the acquisition of Taleo in 2012 and SAP with its acquisition of SuccessFactors.

Its stock is trading at 52-week-high levels of $51.83 with a market capitalization of $3 billion. It had fallen to a 52-week low of $33.24 in August last year. It had listed on the Nasdaq in 2010 when it raised $136.5 million by selling 10.5 million shares at $13 apiece. Prior to that the company had received an estimated $45 million in funding from investors including Bessemer Ventures, Bay Partners, Meritech Capital, and ff Venture Capital.

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