According to a  Zion report, the global talent management software market is estimated to grow at 10% CAGR to reach $10.9 billion by 2025. The recent virus-driven pandemic would have changed those estimates. Cornerstone OnDemand (Nasdaq: CSOD) is one of the leading players in the sector which is witnessing the economic turbulence. Its latest quarterly results failed to impress the market.

Cornerstone OnDemand’s Financials

Revenues for the first quarter grew 7% to $150.1 million with subscription revenues growing 10% to $144.4 million. The company had earlier forecast revenues of $147-$150 million. The market was looking for revenues of $147.1 million. EPS of $0.23 missed the market’s estimates of $0.24 for the quarter and was lower than the previous year’s earnings of $0.25 per share.

The company did not provide an outlook for the second quarter or the year. The market was looking for Q2 revenues of $148.95 million and an EPS of $0.29. The Street expects the company to end the current year with revenues of $614.28 million and an EPS of $1.33.

Cornerstone OnDemand’s Acquisition

In February this year, Cornerstone OnDemand announced the acquisition of Saba Software, a leader in talent experience solutions, for an estimated $1.3 billion. The acquisition was completed in April.

Prior to the acquisition, Saba was part of Vector Capital’s portfolio. Saba Software comes with more than 20 years of industry experience in developing, delivering, and supporting learning, performance, and recruiting product solutions. Saba Software ended 2019 with revenues growing 2% to $243 million. It generated $85 million in free cash flow for the year.

Cornerstone OnDemand believes that the addition of Saba will help it expand its reach to a larger, diverse group of clients. The combined organization will have over 75 million users and cater to more than 7,000 organizations globally. It will be able to deliver a differentiated portfolio of people development and talent experience software solutions by leveraging the existing product portfolio, and a combined R&D team.

While Saba’s cloud functionality is very similar to Cornerstone Learning, it does come with additional functionalities such as TalentLink and TalentSpace. TalentLink is a recruiting product that is already launched in Europe and is planned for release in the US this year. It is an applicant tracking system with candidate relationship management capabilities. Cornerstone onDemand plans to sell it on a standalone basis for recruiting deals. TalentSpace is an SMB performance product that Cornerstone sees as a cross-sell opportunity.

Given the current remote working conditions, Cornerstone OnDemand also plans to leverage Saba Meeting and Saba classroom offerings by integrating them into its solutions. These two solutions will help it provide virtual instructor-led training experience to complement its online training solution. Cornerstone Content Anytime will now be available to all Saba Cloud clients.

Recently, Cornerstone OnDemand announced a leadership change. Its founder and CEO, Adam Miller, whom I had met a few years ago, has decided to step away from the role. He will now be the co-chair of the Cornerstone Board of Directors. Adam wants to pursue his social entrepreneurship and public service passion. Phil Saunders replaces Adam in his role as the CEO. Prior to this role, Phil was the CEO of Saba Software. He had joined Saba as President in 2015. Before that, he had worked for over twenty years at Gemalto, formerly known as SafeNet, where he was the Chief Revenue Officer and a board member.

Cornerstone’s stock is trading at $38.99 with a market capitalization of $2.4 billion. It hit a 52-week low level of $22.22 in March this year. The stock was trading at a 52-week high of $39.89 at the start of the year. The company had listed in 2010 by raising $136.5 million at $13 apiece. Prior to the listing, it had raised $45 million in funding from investors including Bessemer Ventures, Bay Partners, Meritech Capital, and ff Venture Capital.