Market Overview

Cornerstone OnDemand Announces Third Quarter 2020 Financial Results

Share:

People development solution provider Cornerstone OnDemand, Inc. (NASDAQ:CSOD) today announced results1 for its third quarter ended September 30, 2020. The Company has provided supplemental financial information located on its Investor Relations website. On April 22, 2020, the Company acquired Saba Software, Inc. ("Saba"); the below discussion includes Saba's results for the post-acquisition period.

Third Quarter 2020 Results:

  • Revenue for the third quarter of 2020 was $199.5 million. This represents a 37.6% increase compared to the same period of the prior year.
  • Subscription revenue for the third quarter of 2020 was $185.6 million. This represents a 35.1% increase compared to the same period of the prior year.
  • (Loss) income from operations for the third quarter of 2020 was $(1.6) million, yielding a margin of (0.8)%, compared to (loss) income from operations of $3.7 million and margin of 2.6% in the same period of the prior year.
  • Non-GAAP operating income for the third quarter of 2020 was $46.6 million, yielding a margin of 23.4%, compared to non-GAAP operating income of $24.3 million and margin of 16.7% in the same period of the prior year.
  • Net loss for the third quarter of 2020 was $15.8 million, or $(0.25) diluted net loss per share, compared to net loss of $1.2 million and $(0.02) diluted net loss per share in the same period of the prior year.
  • Non-GAAP net income for the third quarter of 2020 was $35.3 million, or $0.51 diluted net income per share, compared to non-GAAP net income of $20.4 million and $0.31 diluted net income per share in the same period of the prior year.
  • Unlevered free cash flow for the third quarter of 2020 was $55.9 million, yielding a margin of 28.0%, compared to unlevered free cash flow of $21.7 million and a margin of 15.0%, in the same period of the prior year. Unlevered free cash flow for the third quarter of 2020 includes approximately $16.9 million of restructuring and acquisition-related cash outflows.

"I'm pleased with our strong third quarter results which show positive momentum against our goals," said Phil Saunders, chief executive officer. "I'm very proud of our team for successfully managing the initial stages of the integration and for transitioning into operating as one team. We believe our results today show positive proof points that our transformation is off to a good start."

Recent Highlights:

  • The Company was recognized as a Core Leader in the 2020 Fosway 9-Grid™ for Cloud HR.
  • To help combat COVID-19 globally, the Company's Foundation and Project HOPE collaborated to provide free online training for healthcare workers in remote areas.
  • The Company welcomed Ajay Awatramani as Chief Product Officer to lead product strategy, management, and design.
  • The Company announced the availability of the Cornerstone Skills Graph, which helps organizations and their people instantly map skills and effectively respond to rapid change.

"The third quarter financial results show health across the business, which we see as early validation of our new strategy," said Trish Coughlin, interim chief financial officer. "While we have a long journey ahead to execute the plan, we have made significant progress and are excited about the future trajectory of this company."

Financial Outlook:

The following outlook2 is based on information available as of the date of this press release and is subject to change in the future.

For the fourth quarter ending December 31, 2020, the Company provides the following outlook:

  • Revenue between $194.0 million and $197.0 million.
  • Subscription revenue between $188.0 million and $191.0 million.
  • Non-GAAP operating income between $35.0 million and $38.0 million.
  • Unlevered free cash flow4 between $32.0 million and $37.0 million. Included in this is approximately $12.0 million of restructuring and acquisition-related cash outflows.

For the year ending December 31, 2020, the Company provides the following outlook:

  • Revenue between $728.0 million and $731.0 million.
  • Subscription revenue between $695.0 million and $698.0 million.
  • Non-GAAP operating income between $146.0 million and $149.0 million.
  • Unlevered free cash flow4 between $110.0 million and $115.0 million. Included in this is approximately $50.0 million of restructuring and acquisition-related cash outflows.

The revenue, subscription revenue, and non-GAAP operating income numbers above are impacted by a deferred revenue write-down related to purchase accounting. For more information, refer to the Company's investor relations presentation.

The Company has not reconciled the guidance for non-GAAP operating income or unlevered free cash flow to the corresponding GAAP measures because it does not provide guidance for such GAAP measures and would not be able to present the reconciling items between such GAAP and non-GAAP measures without unreasonable efforts. For non-GAAP operating income, the Company excludes stock-based compensation expense, which is impacted by the number of shares issued and the market price, both of which are uncertain. The actual amount of stock-based compensation expense in the fourth quarter and year ending December 31, 2020 will have a significant impact on the Company's GAAP operating margin.

1 Financial measures presented on a constant currency basis, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow, and unlevered free cash flow margin are non-GAAP financial measures.

2 In order to translate the financial outlook for entities reporting in GBP to USD and EUR to USD, the following exchange rates have been applied to revenue for the fourth quarter and year ending December 31, 2020:

$1.30 USD per GBP

$1.18 USD per EUR

Quarterly Conference Call

Cornerstone will host a conference call to discuss its third quarter 2020 results at 2:00 p.m. PT (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company's Investor Relations website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (US) or (484) 653-6763 (outside the US) and referencing passcode: 4175806. A replay of the call will also be available at http://investors.cornerstoneondemand.com/investors/news-and-events/events/default.aspx or via telephone until 5:00 p.m. PT (8:00 p.m. ET) on November 12, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 4175806 and Web PIN: 1726.

Featured Presentation

An accompanying featured presentation will be available at https://investors.cornerstoneondemand.com/investors/overview/default.aspx.

About Cornerstone

Cornerstone is a premier people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise, and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management, and holistic employee data management and insights, Cornerstone's people development solutions are used by over 6,000 customers of all sizes, spanning more than 75 million users across over 180 countries and nearly 50 languages. Learn more at www.cornerstoneondemand.com.

Note: Cornerstone® and Cornerstone OnDemand® are registered trademarks of Cornerstone OnDemand, Inc.

Forward-looking Statements

This press release and the quarterly conference call referenced above contain forward-looking statements, including, but not limited to, statements regarding the expected performance of our business, our future financial and operating performance, including our GAAP and non-GAAP guidance, strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, general business conditions, our ability to execute, the integration of Saba into our business, anticipated synergies from our acquisition of Saba, the recent departure of our chief financial officer and service of our chief accounting officer as interim chief financial officer, and our expectations regarding certain financial measures including subscription revenue, capital expenditures, unlevered free cash flow, recurring revenue growth, and operating margins. Any forward-looking statements contained in this press release or the quarterly conference call are based upon our historical performance and our current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new customers; the extent to which customers renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing customers by our services organization and implementation subcontractors; the complexity of deployments and product implementations, which can impact the timing of when revenue is recognized from new and existing customers; allowing our implementation subcontractors to contract directly with customers for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and people development provider for organizations of all sizes; changes in the proportion of our customer base that is composed of enterprise or mid-sized organizations; our ability to manage our growth, including additional headcount and entry into new geographies; our ability to expand our enterprise and mid-market sales opportunities; our ability to maintain stable and consistent quota attainment rates; continued strong demand for learning and people development in Europe, the Middle East, Africa, Asia-Pacific, and Japan; the timing and success of efforts to increase operational efficiency and cost containment; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; the impact of foreign exchange rates; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; problems caused by security breaches; costs and reputational harm that could result from defects in our solutions; the success of our strategic relationships with third parties; the loss of any of our key employees and our ability to locate qualified replacements; failure to protect our intellectual property; acts of terrorism or other vandalism, war, natural disasters, or the ongoing COVID-19 pandemic; changes in current tax or accounting rules; legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products; the failure to achieve expected synergies and efficiencies of operations between the Company and Saba; the ability of the Company and Saba to successfully integrate their respective market opportunities, technology, products, personnel, and operations; and unanticipated costs or liabilities related to businesses that we acquire. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Non-GAAP Financial Measures and Other Key Metrics

To supplement its consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures and other key metrics. These non-GAAP financial measures include:

 

(i)

non-GAAP cost of revenue, which is defined as cost of revenue less amortization of intangible assets and stock-based compensation;

 

(ii)

annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period;

 

(iii)

unlevered free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest;

 

(iv)

unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue;

 

(v)

non-GAAP net income and non-GAAP diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, accretion of debt discount and amortization of debt issuance costs, unrealized fair value adjustment on strategic investments, restructuring costs, acquisition-related costs, discrete tax items, and excludes the impacts of unamortized stock-based compensation expense in applying the treasury method for determining the non-GAAP weighted average number of dilutive shares outstanding;

 

(vi)

non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue;

 

(vii)

non-GAAP operating income and non-GAAP operating income margin, which are defined as income or loss from operations excluding stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs;

 

(viii)

non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs; and

 

(ix)

non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and amortization of intangible assets attributable to the corresponding GAAP financial measures.

The Company's management uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Company's ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures and key metrics to help investors understand the operational performance of their businesses. In addition, the Company believes that the following non-GAAP adjustments are useful to management and investors for the following reasons:

  • Stock-based compensation. The Company excludes stock-based compensation expense because it is non-cash in nature, and management believes that its exclusion provides additional insight into the Company's operational performance and also provides a useful comparison of the Company's operating results to prior periods and its peer companies. Additionally, determining the fair value of certain stock-based awards involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of such awards.
  • Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because the expense is a non-cash item and management believes that its exclusion provides meaningful supplemental information regarding the Company's operational performance and allows for a useful comparison of its operating results to prior periods and its peer companies.
  • Accretion of debt discount and amortization of debt issuance costs. The Company recognizes the effective interest expense on its debt and amortizes the issuance costs over the applicable term of such debt. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are excluded from management's assessment of the Company's operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. In addition, the exclusion of these items provides a useful comparison of the Company's operating results to prior periods and its peer companies.
  • Fair value adjustment on strategic investments. The Company views the increase or decrease in the fair value of its strategic investments as not indicative of operational performance during any particular period and believes that the exclusion of these gains or losses provides investors with a supplemental view of the Company's operational performance.
  • Acquisition-related costs. The Company excludes costs related to acquisitions because the expenses are discrete to specific acquisitions and are not necessarily indicative of its continuing operations. The Company believes that the exclusion of these costs provides investors with a supplemental view of the Company's operational performance.
  • Restructuring. The Company excludes costs related to restructuring because the expense is not indicative of its continuing operations. The Company believes that the exclusion of these costs provides investors with a supplemental view of the Company's operational performance.
  • Discrete tax items. The Company excludes discrete income tax charges or benefits that are not expected to recur because the items are not indicative of continuing operations. The Company believes that the exclusion of these items provides investors with a supplemental view of the Company's operational performance.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For the periods presented, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the tables included as part of this press release.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

September 30, 2020

 

December 31, 2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

170,937

 

 

 

$

215,907

 

 

Short-term investments

 

 

 

201,579

 

 

Accounts receivable, net

156,738

 

 

 

131,105

 

 

Deferred commissions, current portion

38,874

 

 

 

33,215

 

 

Prepaid expenses and other current assets

30,577

 

 

 

30,512

 

 

Total current assets

397,126

 

 

 

612,318

 

 

Capitalized software development costs, net

51,683

 

 

 

50,023

 

 

Property and equipment, net

33,892

 

 

 

36,526

 

 

Operating right-of-use assets

78,874

 

 

 

72,944

 

 

Deferred commissions, net of current portion

76,621

 

 

 

74,563

 

 

Long-term investments

9,043

 

 

 

60,192

 

 

Intangible assets, net

458,006

 

 

 

9,440

 

 

Goodwill

960,420

 

 

 

47,453

 

 

Deferred tax assets

2,928

 

 

 

1,045

 

 

Other assets

10,843

 

 

 

1,597

 

 

Total assets

$

2,079,436

 

 

 

$

966,101

 

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

9,165

 

 

 

$

3,803

 

 

Accrued expenses

90,665

 

 

 

78,075

 

 

Deferred revenue, current portion

370,494

 

 

 

339,522

 

 

Operating lease liabilities, current portion

17,230

 

 

 

7,235

 

 

Debt, current portion

10,047

 

 

 

 

 

Other liabilities

15,696

 

 

 

11,015

 

 

Total current liabilities

513,297

 

 

 

439,650

 

 

Debt, net of current portion

1,224,646

 

 

 

293,174

 

 

Deferred revenue, net of current portion

4,150

 

 

 

6,945

 

 

Operating lease liabilities, net of current portion

68,929

 

 

 

67,195

 

 

Deferred tax liabilities

17,396

 

 

 

 

 

Other liabilities, non-current

6,267

 

 

 

655

 

 

Total liabilities

1,834,685

 

 

 

807,619

 

 

Stockholders' equity:

 

 

 

Common stock, $0.0001 par value

6

 

 

 

6

 

 

Additional paid-in capital

808,592

 

 

 

682,717

 

 

Accumulated deficit

(566,223

)

 

 

(524,680

)

 

Accumulated other comprehensive income

2,376

 

 

 

439

 

 

Total stockholders' equity

244,751

 

 

 

158,482

 

 

Total liabilities and stockholders' equity

$

2,079,436

 

 

 

$

966,101

 

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

$

199,498

 

 

 

$

144,952

 

 

 

$

533,992

 

 

 

$

426,929

 

 

Cost of revenue 1,2

64,503

 

 

 

37,167

 

 

 

164,427

 

 

 

111,049

 

 

Gross profit

134,995

 

 

 

107,785

 

 

 

369,565

 

 

 

315,880

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing 1,2

71,850

 

 

 

57,815

 

 

 

192,122

 

 

 

171,011

 

 

Research and development 1

29,665

 

 

 

25,695

 

 

 

82,088

 

 

 

77,778

 

 

General and administrative 1,2

28,884

 

 

 

20,562

 

 

 

79,229

 

 

 

65,741

 

 

Acquisition-related costs

4,852

 

 

 

 

 

 

31,756

 

 

 

 

 

Restructuring1

1,362

 

 

 

 

 

 

11,095

 

 

 

 

 

Total operating expenses

136,613

 

 

 

104,072

 

 

 

396,290

 

 

 

314,530

 

 

(Loss) income from operations

(1,618

)

 

 

3,713

 

 

 

(26,725

)

 

 

1,350

 

 

Other expense:

 

 

 

 

 

 

 

Interest expense

(19,609

)

 

 

(3,321

)

 

 

(43,329

)

 

 

(9,889

)

 

Other, net

5,817

 

 

 

(1,018

)

 

 

(61

)

 

 

(2,720

)

 

Other expense, net

(13,792

)

 

 

(4,339

)

 

 

(43,390

)

 

 

(12,609

)

 

Loss before income tax provision

(15,410

)

 

 

(626

)

 

 

(70,115

)

 

 

(11,259

)

 

Income tax (provision) benefit3

(371

)

 

 

(591

)

 

 

28,572

 

 

 

(2,227

)

 

Net loss

$

(15,781

)

 

 

$

(1,217

)

 

 

$

(41,543

)

 

 

$

(13,486

)

 

Net loss per share, basic and diluted

$

(0.25

)

 

 

$

(0.02

)

 

 

$

(0.66

)

 

 

$

(0.23

)

 

Weighted average common shares outstanding, basic and diluted

64,375

 

 

 

60,652

 

 

 

63,204

 

 

 

59,841

 

 

1 Includes stock-based compensation as follows:

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Cost of revenue

$

2,205

 

 

$

1,748

 

 

$

7,028

 

 

$

4,670

 

Sales and marketing

7,197

 

 

7,915

 

 

21,409

 

 

20,771

 

Research and development

4,283

 

 

4,285

 

 

11,807

 

 

12,800

 

General and administrative

4,047

 

 

5,570

 

 

14,553

 

 

17,473

 

Restructuring

192

 

 

 

 

400

 

 

 

Total

$

17,924

 

 

$

19,518

 

 

$

55,197

 

 

$

55,714

 

2 Includes amortization of intangible assets as follows:

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Cost of revenue

$

9,400

 

 

$

1,047

 

 

$

18,459

 

 

$

3,380

 

Sales and marketing

14,277

 

 

 

 

25,039

 

 

 

General and administrative

607

 

 

 

 

1,060

 

 

 

Total

$

24,284

 

 

$

1,047

 

 

$

44,558

 

 

$

3,380

 

3 Includes a discrete income tax benefit of approximately $26.7 million during the nine months ended September 30, 2020 related to release of valuation allowance against previously reserved deferred tax assets.

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(15,781

)

 

 

$

(1,217

)

 

 

$

(41,543

)

 

 

$

(13,486

)

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

37,031

 

 

 

10,814

 

 

 

80,190

 

 

 

30,848

 

 

Accretion of debt discount and amortization of debt issuance costs

2,815

 

 

 

1,060

 

 

 

7,502

 

 

 

3,130

 

 

Amortization (accretion) of purchased investment premium or discount, net

 

 

 

(175

)

 

 

41

 

 

 

(900

)

 

Net foreign currency and other (gain) loss

(3,927

)

 

 

1,250

 

 

 

4,063

 

 

 

2,504

 

 

Stock-based compensation expense

17,924

 

 

 

19,518

 

 

 

55,197

 

 

 

55,714

 

 

Deferred income taxes

(1,445

)

 

 

 

 

 

(32,081

)

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

10,909

 

 

 

2,026

 

 

 

32,243

 

 

 

23,900

 

 

Deferred commissions

(5,511

)

 

 

(5,400

)

 

 

(8,715

)

 

 

(14,130

)

 

Prepaid expenses and other assets

4,982

 

 

 

5,635

 

 

 

14,302

 

 

 

12,589

 

 

Accounts payable

(10,650

)

 

 

(7,646

)

 

 

(6,852

)

 

 

(6,040

)

 

Accrued expenses

(7,038

)

 

 

4,156

 

 

 

(4,545

)

 

 

(5,563

)

 

Deferred revenue

(438

)

 

 

(6,474

)

 

 

(43,349

)

 

 

(39,048

)

 

Other liabilities

4,276

 

 

 

931

 

 

 

5,456

 

 

 

3,437

 

 

Net cash provided by operating activities

33,147

 

 

 

24,478

 

 

 

61,909

 

 

 

52,955

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of marketable investments

 

 

 

(201,899

)

 

 

(20,419

)

 

 

(201,981

)

 

Maturities and sales of investments

 

 

 

8,266

 

 

 

272,173

 

 

 

206,040

 

 

Capital expenditures

(635

)

 

 

(6,713

)

 

 

(2,910

)

 

 

(15,987

)

 

Capitalized software costs

(6,772

)

 

 

(4,708

)

 

 

(20,296

)

 

 

(18,835

)

 

Cash paid for acquisitions, net of cash acquired

2,664

 

 

 

 

 

 

(1,295,508

)

 

 

 

 

Net cash used in investing activities

(4,743

)

 

 

(205,054

)

 

 

(1,066,960

)

 

 

(30,763

)

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from term loan debt, net of discount

 

 

 

 

 

 

979,582

 

 

 

 

 

Payments of debt issuance and modification costs

(161

)

 

 

 

 

 

(30,429

)

 

 

 

 

Proceeds from employee stock plans

3,326

 

 

 

18,861

 

 

 

15,953

 

 

 

33,072

 

 

Repurchases of common stock

 

 

 

(13,530

)

 

 

 

 

 

(13,530

)

 

Payment of tax withholdings for employee stock plans

 

 

 

 

 

 

 

 

 

(5,469

)

 

Net cash provided by financing activities

3,165

 

 

 

5,331

 

 

 

965,106

 

 

 

14,073

 

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

2,791

 

 

 

(1,123

)

 

 

3

 

 

 

(1,123

)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

34,360

 

 

 

(176,368

)

 

 

(39,942

)

 

 

35,142

 

 

Cash, cash equivalents, and restricted cash at beginning of period

141,605

 

 

 

395,106

 

 

 

215,907

 

 

 

183,596

 

 

Cash, cash equivalents, and restricted cash at end of period1

$

175,965

 

 

 

$

218,738

 

 

 

$

175,965

 

 

 

$

218,738

 

 

Supplemental cash flow data

 

 

 

 

 

 

 

Cash paid for interest

$

30,189

 

 

 

$

8,625

 

 

 

$

38,873

 

 

 

$

17,356

 

 

Cash paid for income taxes

1,182

 

 

 

518

 

 

 

3,725

 

 

 

1,488

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Assets acquired under capital leases and other financing arrangements

$

 

 

 

$

 

 

 

$

 

 

 

$

1,276

 

 

Capitalized assets financed by accounts payable and accrued expenses

56

 

 

 

1,205

 

 

 

56

 

 

 

1,205

 

 

Capitalized stock-based compensation

1,352

 

 

 

1,314

 

 

 

5,467

 

 

 

3,427

 

 

Issuance of common stock for partial consideration for acquisition

 

 

 

 

 

 

32,889

 

 

 

 

 

Increase in debt discount as a result of modification of Convertible Notes

 

 

 

 

 

 

18,598

 

 

 

 

 

1 Below is a reconciliation of cash, cash equivalents, and restricted cash.

 

As of September 30,

 

2020

 

2019

Cash and cash equivalents

$

170,937

 

 

$

218,738

 

Restricted cash included in prepaid expenses and other current assets

3,752

 

 

 

Restricted cash included in other assets

1,276

 

 

 

Total cash, cash equivalents, and restricted cash

$

175,965

 

 

$

218,738

 

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF COST OF REVENUE TO NON-GAAP COST OF REVENUE, GROSS PROFIT AND GROSS MARGIN TO NON-GAAP GROSS PROFIT AND NON-GAAP GROSS MARGIN, (LOSS) INCOME FROM OPERATIONS TO NON-GAAP OPERATING INCOME, AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME MARGIN

(in thousands)

(unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of cost of revenue, gross profit, and gross margin:

 

 

 

 

 

 

 

Revenue

$

199,498

 

 

$

144,952

 

 

$

533,992

 

 

$

426,929

 

Cost of revenue

64,503

 

 

37,167

 

 

164,427

 

 

111,049

 

Gross profit

$

134,995

 

 

$

107,785

 

 

$

369,565

 

 

$

315,880

 

Gross margin

67.7

%

 

74.4

%

 

69.2

%

 

74.0

%

 

 

 

 

 

 

 

 

Cost of revenue

$

64,503

 

 

$

37,167

 

 

$

164,427

 

 

$

111,049

 

Adjustments to cost of revenue:

 

 

 

 

 

 

 

Stock-based compensation1

(2,205

)

 

(1,748

)

 

(6,465

)

 

(4,670

)

Amortization of intangible assets

(9,400

)

 

(1,047

)

 

(18,459

)

 

(3,380

)

Total adjustments to cost of revenue

(11,605

)

 

(2,795

)

 

(24,924

)

 

(8,050

)

Non-GAAP cost of revenue

52,898

 

 

34,372

 

 

139,503

 

 

102,999

 

Non-GAAP gross profit

$

146,600

 

 

$

110,580

 

 

$

394,489

 

 

$

323,930

 

Non-GAAP gross margin

73.5

%

 

76.3

%

 

73.9

%

 

75.9

%

 

 

 

 

 

 

 

 

Reconciliation of (loss) income from operations and operating margin:

 

 

 

 

 

 

 

(Loss) income from operations

$

(1,618

)

 

$

3,713

 

 

$

(26,725

)

 

$

1,350

 

Operating margin

(0.8

)%

 

2.6

%

 

(5.0

)%

 

0.3

%

Adjustments to (loss) income from operations:

 

 

 

 

 

 

 

Stock-based compensation1, 3

17,732

 

 

19,518

 

 

50,736

 

 

55,714

 

Amortization of intangible assets

24,284

 

 

1,047

 

 

44,558

 

 

3,380

 

Acquisition-related costs2

4,852

 

 

 

 

31,756

 

 

 

Restructuring3

1,362

 

 

 

 

11,095

 

 

 

Total adjustments to (loss) income from operations

48,230

 

 

20,565

 

 

138,145

 

 

59,094

 

Non-GAAP operating income

$

46,612

 

 

$

24,278

 

 

$

111,420

 

 

$

60,444

 

Non-GAAP operating income margin

23.4

%

 

16.7

%

 

20.9

%

 

14.2

%

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the nine months ended September 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

 

Nine Months Ended

 

September 30,

 

2020

Cost of revenue

$

6,465

 

Sales and marketing

20,499

 

Research and development

10,393

 

General and administrative

13,379

 

Total

$

50,736

 

2 Costs related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, due diligence, and integration costs.

3 Stock-based compensation related to restructuring is presented in the restructuring line item.

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF NET LOSS TO NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER SHARE

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

$

(15,781

)

 

 

$

(1,217

)

 

 

$

(41,543

)

 

 

$

(13,486

)

 

Adjustments to net loss

 

 

 

 

 

 

 

Stock-based compensation1, 3

17,732

 

 

 

19,518

 

 

 

50,736

 

 

 

55,714

 

 

Amortization of intangible assets

24,284

 

 

 

1,047

 

 

 

44,558

 

 

 

3,380

 

 

Acquisition-related costs2

4,852

 

 

 

 

 

 

31,756

 

 

 

 

 

Restructuring3

1,362

 

 

 

 

 

 

11,095

 

 

 

 

 

Accretion of debt discount and amortization of debt issuance costs4

2,815

 

 

 

1,060

 

 

 

7,502

 

 

 

3,130

 

 

Income tax benefit5

 

 

 

 

 

 

(26,659

)

 

 

 

 

Total adjustments to net loss

51,045

 

 

 

21,625

 

 

 

118,988

 

 

 

62,224

 

 

Non-GAAP net income

$

35,264

 

 

 

$

20,408

 

 

 

$

77,445

 

 

 

$

48,738

 

 

Non-GAAP basic net income per share

$

0.55

 

 

 

$

0.34

 

 

 

$

1.23

 

 

 

$

0.81

 

 

Non-GAAP diluted net income per share

$

0.51

 

 

 

$

0.31

 

 

 

$

1.14

 

 

 

$

0.74

 

 

Weighted-average common shares outstanding, basic

64,375

 

 

 

60,652

 

 

 

63,204

 

 

 

59,841

 

 

Non-GAAP weighted-average common shares outstanding, diluted

68,759

 

 

 

65,961

 

 

 

68,060

 

 

 

65,485

 

 

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the nine months ended September 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

2 Costs related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, due diligence, and integration costs.

3 Stock-based compensation related to restructuring is presented in the restructuring line item.

4 Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of (i) $1.0047 billion of term loan debt on April 22, 2020; and (ii) $300.0 million in convertible notes on December 8, 2017 as well as the modification of these convertible notes on April 20, 2020 to extend the maturity date from July 1, 2021 to March 17, 2023. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions.

5 A discrete income tax benefit of approximately $26.7 million was recognized during the nine months ended September 30, 2020 related to a release of valuation allowance against previously reserved deferred tax assets.

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO UNLEVERED FREE CASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN

(A Non-GAAP Financial Measure)

(in thousands)

(unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of unlevered free cash flow:

 

 

 

 

 

 

 

Net cash provided by operating activities

$

33,147

 

 

$

24,478

 

 

$

61,909

 

 

$

52,955

 

Capital expenditures

(635

)

 

(6,713

)

 

(2,910

)

 

(15,987

)

Capitalized software costs

(6,772

)

 

(4,708

)

 

(20,296

)

 

(18,835

)

Cash paid for interest

30,189

 

 

8,625

 

 

38,873

 

 

17,356

 

Unlevered free cash flow

$

55,929

 

 

$

21,682

 

 

$

77,576

 

 

$

35,489

 

Unlevered free cash flow margin

28.0

%

 

15.0

%

 

14.5

%

 

8.3

%

Cornerstone OnDemand, Inc.

TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS

(unaudited)

The following metrics are intended as a supplement to the financial statements found in this press release and other information furnished to or filed with the SEC. In the event of discrepancies between amounts in these tables and the Company's historical disclosures or financial statements, readers should rely on the Company's filings with the SEC and financial statements in the Company's most recent earnings press release.

The Company intends to periodically review and refine the definition, methodology and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material.

 

FY 2019

FY 2020

 

 

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Q3'20

FY17

FY18

FY19

SELECTED METRICS:

 

 

 

 

 

 

 

 

 

 

Number of customers1

3,367

 

3,423

 

3,446

 

3,508

 

3,522

 

6,308

 

6,229

 

3,250

 

3,333

 

3,508

 

% y/y

8.6

%

6.9

%

5.7

%

5.3

%

4.6

%

84.3

%

80.8

%

11.4

%

2.6

%

5.3

%

% q/q

1.0

%

1.7

%

0.7

%

1.8

%

0.4

%

79.1

%

(1.3

)%

n/a

n/a

n/a

Number of employees

2,017

 

2,034

 

1,986

 

1,993

 

1,975

 

3,184

 

3,027

 

1,891

 

1,953

 

1,993

 

% y/y

10.3

%

9.9

%

5.0

%

2.0

%

(2.1

)%

56.5

%

52.4

%

3.7

%

3.3

%

2.0

%

% q/q

3.3

%

0.8

%

(2.4

)%

0.4

%

(0.9

)%

61.2

%

(4.9

)%

n/a

n/a

n/a

Annual dollar retention rate

n/a

n/a

n/a

n/a

n/a

n/a

n/a

93.5

%

92.8

%

90.3

%

Annual recurring revenue (in thousands)

n/a

n/a

n/a

n/a

n/a

n/a

n/a

439,000

 

510,000

 

575,000

 

Net cash provided by operating activities (in thousands)

7,294

 

21,183

 

24,478

 

62,594

 

5,988

 

22,774

 

33,147

 

67,510

 

90,253

 

115,549

 

Unlevered free cash flow (in thousands)

4,337

 

9,470

 

21,682

 

54,714

 

6,253

 

15,394

 

55,929

 

43,680

 

63,471

 

90,203

 

Unlevered free cash flow margin

3.1

%

6.7

%

15.0

%

36.6

%

4.2

%

8.4

%

28.0

%

9.1

%

11.8

%

15.6

%

FINANCIAL DATA (in thousands, except percentages):

 

 

 

 

 

 

 

 

 

 

Revenue

140,117

 

141,860

 

144,952

 

149,594

 

150,136

 

184,358

 

199,498

 

 

537,891

 

576,523

 

Subscription revenue

131,256

 

132,562

 

137,446

 

141,704

 

144,421

 

177,217

 

185,643

 

 

473,052

 

542,968

 

% y/y growth

16.0

%

15.5

%

15.7

%

12.2

%

10.0

%

33.7

%

35.1

%

 

 

14.8

%

% y/y growth constant currency2

18.2

%

17.3

%

17.2

%

12.4

%

10.7

%

n/a

n/a

 

 

16.2

%

Subscription revenue % of total revenue

93.7

%

93.4

%

94.8

%

94.7

%

96.2

%

96.1

%

93.1

%

 

87.9

%

94.2

%

Income (loss) from operations

1,231

 

(3,594

)

3,713

 

10,583

 

(2,739

)

(22,368

)

(1,618

)

 

(7,769

)

11,933

 

MARGIN DATA:

 

 

 

 

 

 

 

 

 

 

Gross margin

76.0

%

71.7

%

74.4

%

74.5

%

72.1

%

68.5

%

67.7

%

 

73.2

%

74.1

%

Sales and marketing % of revenue

38.9

%

41.4

%

39.9

%

37.9

%

36.9

%

35.2

%

36.0

%

 

41.8

%

39.5

%

Research and development % of revenue

19.8

%

17.2

%

17.7

%

15.6

%

16.0

%

15.4

%

14.9

%

 

14.3

%

17.5

%

General and administrative % of revenue

16.4

%

15.6

%

14.2

%

13.9

%

16.5

%

13.8

%

14.5

%

 

16.7

%

15.0

%

Acquisition-related costs % of revenue

 

 

 

 

4.5

%

10.9

%

2.4

%

 

0.2

%

 

Restructuring % of revenue

 

 

 

 

 

5.3

%

0.7

%

 

1.7

%

 

Operating margin

0.9

%

(2.5

)%

2.6

%

7.1

%

(1.8

)%

(12.1

)%

(0.8

)%

 

(1.4

)%

2.1

%

NON-GAAP MARGIN DATA:

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

77.7

%

73.7

%

76.3

%

76.3

%

74.6

%

73.7

%

73.5

%

 

74.1

%

76.0

%

Non-GAAP sales and marketing % of revenue

34.6

%

36.6

%

34.4

%

33.2

%

31.7

%

26.4

%

25.3

%

 

37.2

%

34.7

%

Non-GAAP research and development % of revenue

16.8

%

14.1

%

14.8

%

13.5

%

13.8

%

13.9

%

12.7

%

 

12.1

%

14.8

%

Non-GAAP general and administrative % of revenue

12.3

%

11.3

%

10.3

%

10.6

%

12.5

%

11.8

%

12.1

%

 

13.2

%

11.1

%

Non-GAAP operating margin

14.0

%

11.7

%

16.7

%

18.9

%

16.6

%

21.6

%

23.4

%

 

11.8

%

15.4

%

Non-GAAP research and development plus capitalized software % of revenue

22.1

%

18.8

%

18.0

%

17.4

%

18.7

%

17.2

%

16.1

%

 

16.8

%

19.1

%

FOREIGN EXCHANGE RATES:

 

 

 

 

 

 

 

 

 

 

GBP to USD average period rate

1.30

 

1.29

 

1.23

 

1.29

 

1.28

 

1.23

 

1.32

 

1.29

 

1.34

 

1.28

 

GBP to USD end of period spot rate

1.30

 

1.27

 

1.23

 

1.32

 

1.23

 

1.23

 

1.28

 

1.35

 

1.27

 

1.32

 

EUR to USD average period rate

1.14

 

1.12

 

1.11

 

1.11

 

1.10

 

0.94

 

1.11

 

1.14

 

1.18

 

1.12

 

EUR to USD end of period spot rate

1.12

 

1.14

 

1.09

 

1.12

 

1.10

 

1.12

 

1.17

 

1.20

 

1.14

 

1.12

 

1 During the second quarter of 2020, we adjusted our method of determining customer count to exclude customers that are sold through resellers that share one tenant or instance of our product. The numbers included here reflect this change. We continue to exclude customers from our Cornerstone for Salesforce, PiiQ, Grovo, Workpop, and Clustree products from our customer count metrics.

2 We have historically presented constant currency information, a non-GAAP financial measure, to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency fluctuations. However, due to the acquisition of Saba in the second quarter of 2020, constant currency results on a combined company basis were not presented for the second and third quarter in 2020 as the historical comparative periods did not include the combined company results for a full quarter.

 

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com