Shares of Cornerstone OnDemand Inc. plunged around 5 percent in after-hours trading Monday after the tech firm reported its earnings and announced it was on the process of buying Saba to the tune of $1.4 billion.
The acquisition, through cash and stock, has been approved by a majority of the boards of directors of the two companies. The merger will equate to more than 75 million in users and serve about 7,000 private and business organizations around the world.
Cornerstone posted fourth-quarter sales of $9.5 million, which is 15 cents per share, against a loss of $3.3 million or 5 cents per share in the year-ago quarter. Adjusted for stock-based payments, among other things, earnings were pegged at 43 cents per share. The company's profits climbed to $149.7 million from $138.3 million a year ago.
With the addition of Saba to its portfolio, Cornerstone will have a more solid reach and capability to help a bigger, diverse group of customers realize the potential of their personnel with the right knowledge and development opportunities.
Analysts surveyed by FactSet had projected adjusted earnings of 34 cents per share on $146.2 million revenue. For the first quarter, analysts charted adjusted earnings of 35 cents per share and $157.5 million in profits. Cornerstone disclosed that it projects a first-quarter revenue of $147 million and $150 million.
Adam Miller, chief executive officer and founder of Cornerstone, said "Today is an exciting day for our company, our customers and our industry." The two firms, Miller added, have always shared "a passion for people development, and together we can accomplish great things."
Saba is a world leader in talent experience solutions and a portfolio affiliate of Vector Capital. The company has more than two decades of industry experience developing, delivering and recruiting product solutions. "I'm excited about this consolidation because of the value it will bring to us," Phil Saunders, chief executive officer and Saba board member, said. Saunders added that the two companies are "a natural fit."
Over the course of 2020, Cornerstone pointed out that it will consolidate the companies' product portfolios. The acquisition is especially interesting because of the company's recent focus on content and data. In November's third-quarter earnings call, senior executives said that emphasis would set Cornerstone apart from its rivals and ensure its consistent growth.
In January, Cornerstone acquired Clustree, a French company with a broad Artificial Intelligence-based skills engine and ontology. The engine uses machine language to help companies match their personnel's skills with specific job functions. The system is based on the merger of over 1 billion job skills into a library of 53,000 verified skills.
Centerview Partners and Morgan Stanley acted as financial advisors to Cornerstone in its deal with Saba, and Cooley LLP acted as Cornerstone's legal advisor.
