Cornerstone OnDemand (CSOD -7.3%) missed Q2 estimates and guided on its CC (transcript) for Q3 revenue of $67M-$69M, below a $69.7M consensus. However, full-year guidance for revenue of $267.5M-$270.5M is reiterated (consensus is at $269.5M).
CFO Perry Wallack suggested the timing of services delivery for enterprise and government clients is responsible for near-term weakness. He added Q2 sales were "unusually back-weighted, leading to less-than-anticipated software and services revenue recognized from new client sales in that quarter."
Bookings rose 44% Y/Y in Q2 to $70.1M, exceeding revenue of $61.5M (+39%). The cloud talent management software vendor's client base rose by 123 Q/Q and 415 Y/Y to 1,411. Users grew by 1M Q/Q and 3.2M Y/Y to 15.5M.
Cautious overall on small caps (NYSEARCA:IWM) due to valuation concerns, Goldman's David Kostin nevertheless has a list of 25 names with market caps less than $4B which could offer at least 25% upside to his firm's price target over the next year.
Ultimate Software (ULTI +7.4%) beat Q2 estimates on the back of a 26% Y/Y increase in recurring revenue (84% of total revenue). The cloud HR software vendor also disclosed on its CC (transcript) it added three new enterprise clients with 10K or more employees; the largest has 40K.
Full-year guidance for 23% revenue growth (25% recurring growth) has been reiterated. Q3 guidance for revenue of $127M is roughly in-line with a $127.3M consensus.
A number of cloud software peers have also rallied. Cloud HR/talent management peers Workday (WDAY +6.5%) and Cornerstone OnDemand (CSOD +5.1%) are among the biggest gainers, but others are also doing quite well. CRM +2.7%. NOW +4.7%. LPSN +5.3%. MKTO +4.1%. CNQR +4.8%. JIVE +3.6%. N +4.2%.
In an SA Pro article now out of embargo, Antonio Carradinha notes Cornerstone OnDemand (CSOD) has posted a 50%+ revenue CAGR since 2009, and has seen its average revenue per new client rise to $56.3K in 2013 from $29.6K in 2011.
Carradinha also likes how Cornerstone's ratio between the average lifetime value of a client to customer acquisition costs has grown to 5.5x, and that the cloud talent management software vendor now has over two dozen clients with 100K+ employees.
He sees plenty of room for additional growth - Cornerstone's software is used by ~15M workers, Carradinha thinks the broader market could eventually total 400M - and assigns a fair value of $54/share (5.5x 2016E revenue).
Previous: FBR launches coverage on CSOD, sees possible buyout target
Citing the company's talent management software share gains and M&A potential, FBR has launched coverage on Cornerstone OnDemand (CSOD) with a Buy and $48 PT after the close.
Cloud HR software peers Taleo, Kenexa, and SuccessFactors have been respectively acquired by Oracle, IBM, and SAP, but M&A activity in the space has cooled down as of late. CSOD currently has a $2.23B market cap.
Shares might get a Thursday boost from the report. Thanks to a broader momentum stock selloff, they're down 32% from a February high of $61.85.
Meanwhile, Pac Crest is reiterating an Outperform for Workday (WDAY +8.8% - competes to an extent with NetSuite) and Splunk (SPLK +5.6%), and thinks the companies, along with Neutral-rated Salesforce (CRM +3.6%), can attract growth investors at current levels. The firm adds the companies are trading below their average price/sales multiples for the last 3 years.
Workday is down 38%, and Splunk 47%, from their respective 52-week highs. But the companies still both go for ~12x FY16E (ends Jan. '16) sales. Price/billings multiples are a bit lower, but still steep.
Several other enterprise cloud software vendors are joining NetSuite, Workday, and Salesforce in rallying on an up day for the Nasdaq. NOW +7.7%. CSOD +5.6%. ULTI +4%. DWRE (a NetSuite rival) +3.2%.
The firm declares Cornerstone "continues to have leading mindshare with HR buyers as a pure-play [SaaS] talent management vendor," and thinks its recent selloff has yielded an attractive valuation for a company expected to grow sales by 45% or more in 2014.
Much as consumer Web plays are rising in sympathy with Facebook, enterprise cloud software names are sharply higher after cloud IT service desk software leader ServiceNow (NOW +14.3%) beat Q4 revenue estimates, provided very strong guidance, and reported its deferred revenue/backlog balance rose 59% Y/Y.
Salesforce (CRM +5.5%), Workday (WDAY +5.4%), NetSuite (N +6.2%), Textura (TXTR +9.8%), Cornerstone OnDemand (CSOD +3.6%), Jive Software (JIVE +3.4%), Ultimate Software (ULTI +3.4%), InContact (SAAS +3.9%), Tangoe (TNGO +3.7%), and LivePerson (LPSN +5.4%) are among the winners.
Baird has upgraded ServiceNow to Outperform, and several other firms have upped their PTs. Raymond James (Strong Buy) praises ServiceNow's efforts to expand into complementary markets such as HR automation, grow both its packaged and custom app sales, and to keep taking share from on-premise IT service desk vendors such as CA, BMC Software, H-P, and IBM.
On the CC (transcript), CEO Frank Slootman mentioned ServiceNow's installed base has grown to 2,060 accounts and 400 global 2000 customers. That's up from 1,900 and 360 three months earlier.
He added 80% of customers are now deploying custom apps, and that 20% of the annual contract value recorded in Q4 involved products other than tradition IT service desk licensing.