Latest Quarterly Results

August 7, 2018 Cornerstone OnDemand Announces Second Quarter 2018 Financial Results

SANTA MONICA, Calif.--(BUSINESS WIRE)-- Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its second quarter ended June 30, 2018.

“We are pleased with the progress we have made through the first half of the year against all aspects of our strategic plan and the corresponding indicators of success,” said Adam Miller, the Company’s CEO. “We believe these changes are laying the foundation to transform Cornerstone into an industry-leading, high margin growth company.”

Adoption of the New Revenue Recognition Standard - ASC 606

The Company adopted the new revenue recognition accounting standard Accounting Standards Codification (“ASC”) 606 effective January 1, 2018 on a modified retrospective basis. Financial results for reporting periods during 2018 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to 2018 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard ASC 605. This press release includes additional information to reconcile the impacts of the adoption of the new revenue recognition standard on the Company’s financial results for the quarter ended June 30, 2018, which includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year.

Second Quarter 2018 Results - ASC 606 (standard adopted effective January 1, 2018):

  • Revenue for the second quarter of 2018 was $132.5 million compared to a guided range of $127.0 million to $129.0 million.
  • Subscription revenue for the second quarter of 2018 was $114.8 million compared to a guided range of $111.0 million to $113.0 million.
  • Operating loss for the second quarter of 2018 was $(3.1) million, yielding a margin of (2.3)%.
  • Non-GAAP operating income for the second quarter of 2018 was $13.2 million, yielding a margin of 10.0%.
  • Net loss for the second quarter of 2018 was $(12.0) million, or a $(0.21) diluted net loss per share.
  • Non-GAAP net income for the second quarter of 2018 was $7.8 million, or a $0.12 diluted net income per share.
  • Unlevered free cash flow for the second quarter of 2018 was $7.9 million, yielding a margin of 6.0%, compared to $(5.0) million, yielding a margin of (4.3)% in 2017.

Second Quarter 2018 Results - ASC 605

  • Revenue for the second quarter of 2018 was $133.0 million, representing a 14.0% increase compared to the prior year. Revenue growth on a constant currency basis was 11.9%.
  • Subscription revenue for the second quarter of 2018 was $116.7 million, representing a 21.1% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 18.9%.
  • Operating loss for the second quarter of 2018 was $(2.4) million, yielding a margin of (1.8)%, compared to $(18.6) million, yielding a margin of (15.9)%, in the prior year.
  • Non-GAAP operating income for the second quarter of 2018 was $13.9 million, yielding a margin of 10.4%, compared to $1.2 million, yielding a margin of 1.1%, in the prior year.
  • Net loss for the second quarter of 2018 was $(11.3) million, or a $(0.20) diluted net loss per share, compared to a net loss of $(21.3) million, or a $(0.37) diluted net loss per share, in the prior year.
  • Non-GAAP net income for the second quarter of 2018 was $8.4 million, or a $0.13 diluted net income per share, compared to $0.9 million, or a $0.02 diluted net income per share in the prior year.

“We had strong results in Q2 with another quarter of outperformance across all metrics,” said Brian Swartz, the Company’s CFO. “We have made significant progress growing recurring revenue and improving profitability.”

Recent Highlights:

  • The Company was recognized as a leader in four recent 2018IDC MarketScape vendor assessment reports published on July 17, 2018 on the worldwide integrated talent management market, including the major talent management functions of learning management, performance management and compensation management.
  • The Company was positioned as a leader in the Aragon Research2018 Globe for Corporate Learning Report.
  • The Company expanded its strategic relationship with Grovo to provide an integrated learning platform and content for businesses.
  • The Company expanded its strategic relationship with IBM to deliver unparalleled talent management technology.
  • The Company expanded its content offerings as well as the availability of integrations with LinkedIn Learning and Workplace by Facebook to help organizations prepare their workforces for the future.
  • The Company raised the bar on candidate and recruiting experience with enhancements such as a new “one-minute” mobile application for job candidates and an efficient, streamlined candidate management experience for talent acquisition professionals.
  • The Company was named as a leader in the 2018 NelsonHall NEAT Next Generation HCM tech vendor evaluation.
  • At the Company’s 2018 Annual Meeting of Stockholders held on June 14, 2018, the Company announced the election of three accomplished software industry CEOs to its Board of Directors, appointed a new Chair and moved to declassify its Board of Directors.
  • The Company ended the second quarter of 2018 with 3,363 clients and 36.7 million users.2

Stock Repurchase Program:

The following is a summary of the Company’s stock repurchases as of August 3, 2018 (in thousands, except per share information):

        Amount

 

Remaining
# of Shares

Average Price

Total Under
Period Repurchased

per Share

Expenditures Program
November 8, 2017 - December 31, 2017 635 $ 35.55 $ 22,599
January 1, 2018 - March 31, 2018 423 $ 37.84 16,024
April 1, 2018 - June 30, 2018 444 $ 46.66   20,718  
Subtotal 1,502 $ 39.48 $ 59,341 $ 40,659
 
July 1, 2018 - August 3, 2018 43 $ 47.15   2,010  
Total 1,545 $ 39.69 $ 61,351 $ 38,649

Financial Outlook:

The following outlook is based on information available as of the date of this press release and is subject to change in the future. The Company has provided a supplemental financial presentation summarizing the adoption of ASC 606 (and on an ASC 605 basis) located on its Investor Relations website at http://investors.cornerstoneondemand.com. All numbers below are presented on an ASC 606 basis unless otherwise stated. Note that the United States dollar (USD) strengthened against the British pound (GBP) by 4.4% and the Euro (EUR) by 3.3% since the Company’s previous full year 2018 guidance was issued on May 8, 2018. For the third quarter ending September 30, 2018, the Company provides the following outlook:

  • Revenue between $129.0 million and $131.0 million, representing year-over-year growth at the mid-point of 7%3, or 7%4 on a constant currency basis.
    • Revenue growth at the mid-point on an ASC 605 basis of 7%3, or 7%4 on a constant currency basis.
  • Subscription revenue between $115.0 million and $117.0 million, representing year-over-year growth at the mid-point of 15%3, or 15%4 on a constant currency basis.
    • Subscription revenue growth at the mid-point on an ASC 605 basis of 17%3, or 17%4 on a constant currency basis.

For the year ending December 31, 2018, the Company provides the following outlook:

  • Revenue between $520.0 million and $526.0 million, representing year-over-year growth at the mid-point of 9%5, or 7%6 on a constant currency basis.
    • Revenue growth at the mid-point on an ASC 605 basis of 9%5, or 7%6 on a constant currency basis.
  • Subscription revenue between $460.0 million and $466.0 million, representing year-over-year growth at the mid-point of 17%5, or 16%6 on a constant currency basis.
    • Subscription revenue growth at the mid-point on an ASC 605 basis of 18%5, or 17%6 on a constant currency basis.
  • Annual recurring revenue as of December 31, 2018 between $484.0 million and $500.0 million.5, 7
  • Non-GAAP operating income between $58.0 million and $64.0 million. Assuming the midpoint of the revenue range, this represents an operating margin of 12%.
  • Unlevered free cash flow between $56.0 million and $62.0 million. Assuming the midpoint of the revenue range, this represents an unlevered free cash flow margin of 12%.

The Company has not reconciled the guidance for non-GAAP operating income or non-GAAP operating margin 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 and non-GAAP operating margin, the Company excludes stock-based compensation expense, which is impacted by factors that are outside of the Company’s control and can be difficult to predict. The actual amount of stock-based compensation expense in the third quarter ending September 30, 2018 and the year ending December 31, 2018 will have a significant impact on the Company’s GAAP operating margin.

 
     

1

  Financial measures presented under ASC 605, 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. Please see the discussion in the section titled “Non-GAAP Financial Measures” and the reconciliations at the end of this press release.
 

2

Includes contracted clients and active users of our enterprise human capital management platform and excludes clients and users of our Cornerstone for Salesforce and PiiQ, formerly known as Cornerstone Growth Edition, products.
 
            In order to translate the financial outlook for entities reporting in British pounds (GBP) to United States dollars (USD) and Euro (EUR) to United States dollars (USD), the following exchange rates have been applied:
 

3

  Exchange rate applied to revenue for the third quarter of 2018   $1.30 USD per GBP
 

4

Exchange rate from the third quarter of 2017 applied to calculate revenue growth for the third quarter of 2018 on a constant currency basis $1.31 USD per GBP
 

5

Exchange rate applied to revenue and annual recurring revenue for fiscal 2018 $1.30 USD per GBP
 

6

Exchange rate applied to calculate revenue growth for fiscal 2018 on a constant currency basis $1.29 USD per GBP
 

7

Exchange rate applied to annual recurring revenue for fiscal 2018 $1.16 USD per EUR

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its second quarter 2018 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 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 3765838. 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 11:59 p.m. PT on August 10, 2018 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 3765838.

About Cornerstone OnDemand

Cornerstone OnDemand, Inc. (NASDAQ: CSOD) is a global leader in cloud-based learning and human capital management software. The Company is pioneering solutions to help organizations realize the potential of the modern workforce. From recruitment, onboarding, training and collaboration, to performance management, compensation, succession planning, people administration and analytics, Cornerstone is designed to enable a lifetime of learning and development that is fundamental to the growth of employees and organizations.

Based in Santa Monica, California, the Company’s solutions are used by 3,363 clients worldwide, spanning 36.7 million users across 192 countries and 43 languages. To learn more about Cornerstone, visit us on Twitter, Facebook and our blog. 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, our expectations regarding recurring revenue growth and operating margins, and general business conditions. 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 clients; the extent to which clients renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing clients 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 clients; allowing our implementation subcontractors to contract directly with clients for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and human capital management provider for organizations of all sizes; changes in the proportion of our client base that is comprised 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 human capital management in the U.S., Europe, Asia Pacific and Latin America; the timing and success of efforts to increase operational efficiency and cost containment; the possibility that the share repurchase program may be suspended or discontinued; 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 or natural disasters; 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; 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, 2017 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. 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 measures that have not been prepared in accordance with GAAP. 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) free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs, (iv) free cash flow margin, which is defined as free cash flow divided by revenue, (v) 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, (vi) unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue, (vii) 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 investment, 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, (viii) non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue, (ix) non-GAAP operating income and non-GAAP operating income margin, which are defined as loss from operations excluding stock-based compensation and amortization of intangible assets, (x) non-GAAP operating expenses, which exclude stock-based compensation and amortization of intangible assets, and (xi) 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 attributable to the corresponding GAAP financial measures. In addition, the Company provides investors with non-GAAP financial measures under ASC 605 to compare against the Company’s GAAP financial measures under ASC 606 and discloses revenue and subscription revenue on a constant currency basis. To present amounts on a constant currency basis, current period results for entities reporting in functional currencies other than the United States dollar are translated into the United States dollar at the prior period exchange rates as opposed to the actual exchange rates in effect for the current period. The Company presents constant currency information to provide a framework for assessing how its underlying business performed excluding the effect of foreign currency fluctuations.

The Company’s management uses these non-GAAP financial measures 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 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. Under GAAP, the Company is required to separately account for liability and equity components of the senior convertible notes that were issued in June 2013. Accordingly, for GAAP purposes, the Company is required to recognize the effective interest expense on its senior convertible notes and amortize the issuance costs over the term of the notes. 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 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.
  • Restructuring. The Company excludes costs related to restructuring because the expense is not indicative of its continuing operations and believes that the exclusion of these costs 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 prior periods, 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)
 
  June 30,   December 31,
 

2018 *

    2017  
Assets
Cash and cash equivalents $ 450,931 $ 393,576
Short-term investments 191,301 169,551
Accounts receivable, net 110,432 154,428
Deferred commissions, current portion 20,755 42,806
Prepaid expenses and other current assets   38,606     21,754  
Total current assets 812,025 782,115
 
Capitalized software development costs, net 41,504 37,431
Property and equipment, net 25,875 20,817
Deferred commissions, net of current portion 37,305
Long-term investments 2,488 96,949
Goodwill 25,894 25,894
Other assets, net   3,972     3,984  
Total Assets $ 949,063   $ 967,190  
 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable $ 9,660 $ 17,637
Accrued expenses 58,340 57,528
Deferred revenue, current portion 277,664 311,997
Convertible notes, net 253,000 248,025
Other liabilities   5,467     9,051  
Total current liabilities 604,131 644,238
 
Convertible notes, net 286,961 285,168
Other liabilities, non-current 1,642 1,498
Deferred revenue, net of current portion   12,157     14,166  
Total liabilities 904,891 945,070
 
Stockholders’ Equity:
Common stock 6 6
Additional paid-in capital 568,231 536,951
Accumulated deficit (524,342 ) (515,054 )
Accumulated other comprehensive income   277     217  
Total stockholders’ equity   44,172     22,120  
Total Liabilities and Stockholders’ Equity $ 949,063   $ 967,190  
 

*As adjusted to reflect the impact of the adoption of ASC 606.

 
Cornerstone OnDemand, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
 

2018 *

      2017    

2018 *

      2017  
Revenue $ 132,517 $ 116,651 $ 265,630 $ 228,233
Cost of revenue 1, 2   36,365     35,321     73,385     69,270  
Gross profit 96,152 81,330 192,245 158,963
Operating expenses:
Sales and marketing 1 59,821 62,073 119,066 118,967
Research and development 1 16,325 14,684 32,309 28,095
General and administrative 1 22,101 23,141 44,086 43,617
Restructuring 1   1,000         8,725      
Total operating expenses   99,247     99,898     204,186     190,679  
Loss from operations (3,095 ) (18,568 ) (11,941 ) (31,716 )
Other income (expense):
Interest income 2,665 659 4,484 1,272
Interest expense (8,791 ) (3,340 ) (17,491 ) (6,642 )
Other, net   (2,250 )   348     (2,206 )   545  
Other income (expense), net   (8,376 )   (2,333 )   (15,213 )   (4,825 )
Loss before income tax provision (11,471 ) (20,901 ) (27,154 ) (36,541 )
Income tax provision   (536 )   (364 )   (1,069 )   (935 )
Net loss $ (12,007 ) $ (21,265 ) $ (28,223 ) $ (37,476 )
Net loss per share, basic and diluted $ (0.21 ) $ (0.37 ) $ (0.49 ) $ (0.66 )
Weighted average common shares outstanding, basic and diluted   57,844     56,935     57,635     56,789  
 

1 Includes stock-based compensation as follows:

 
Three Months Ended Six Months Ended
June 30, June 30,
 

2018 *

    2017    

2018 *

    2017  
Cost of revenue $ 1,021 $ 1,203 $ 2,023 $ 2,413
Sales and marketing 6,545 6,792 12,791 13,546
Research and development 2,417 2,397 4,725 4,499
General and administrative 5,300 7,206 9,787 12,989
Restructuring   749         6,185      
Total $ 16,032   $ 17,598   $ 35,511   $ 33,447  
 

2 Cost of revenue includes amortization of intangible assets as follows:

 
Three Months Ended Six Months Ended
June 30, June 30,
 

2018 *

    2017    

2018 *

    2017  
Cost of revenue $ $ 2,217 $ $ 4,434
 

*As adjusted to reflect the impact of the adoption of ASC 606.

 
Cornerstone OnDemand, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
 

2018 *

      2017    

2018 *

      2017  
Cash flows from operating activities:
Net loss $ (12,007 ) $ (21,265 ) $ (28,223 ) $ (37,476 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 8,388 8,650 16,219 17,978
Accretion of debt discount and amortization of debt issuance costs 3,496 2,383 6,922 4,736
Purchased investment premium, net of amortization (106 ) 252 (187 ) 407
Net foreign currency gain (1,329 ) (615 ) (1,685 ) (1,145 )
Stock-based compensation expense 16,032 17,598 35,511 33,447
Changes in operating assets and liabilities:
Accounts receivable 1,207 (18,886 ) 43,095 19,371
Deferred commissions (2,212 ) 291 (2,740 ) 2,009
Prepaid expenses and other assets (7,982 ) 3,213 (16,823 ) (4,220 )
Accounts payable (250 ) 3,798 (7,855 ) (10,687 )
Accrued expenses 13,693 6,346 (1,366 ) (7,430 )
Deferred revenue (4,132 ) (1,396 ) (27,883 ) (24,033 )
Other liabilities   2,430     1,255     (2,337 )   1,432  
Net cash provided by (used in) operating activities   17,228     1,624     12,648     (5,611 )
Cash flows from investing activities:
Purchases of investments 484 (9,200 ) 484 (86,481 )
Maturities of investments 32,012 57,835 72,689 123,322
Capital expenditures (5,068 ) (1,042 ) (7,627 ) (3,740 )
Capitalized software costs   (6,263 )   (5,606 )   (12,302 )   (11,362 )
Net cash provided by investing activities   21,165     41,987     53,244     21,739  
Cash flows from financing activities:
Payments of debt issuance costs (152 )
Proceeds from employee stock plans 23,282 2,838 30,047 6,311
Repurchases of common stock   (23,908 )       (38,608 )    
Net cash (used in) provided by financing activities   (626 )   2,838     (8,713 )   6,311  
Effect of exchange rate changes on cash and cash equivalents   (181 )   693     176     1,263  
Net increase in cash and cash equivalents 37,586 47,142 57,355 23,702
Cash and cash equivalents at beginning of period   413,345     59,860     393,576     83,300  
Cash and cash equivalents at end of period $ 450,931   $ 107,002   $ 450,931   $ 107,002  
Supplemental cash flow information:
Cash paid for interest $ 2,003 $ $ 5,003 $ 1,898
Cash paid for income taxes 422 340 874 988
Proceeds from employee stock plans received in advance of stock issuance 499 508 499 508
Non-cash investing and financing activities:
Assets acquired under capital leases and other financing arrangements $ $ 1,824 $ $ 1,824
Capitalized assets financed by accounts payable and accrued expenses 3,577 2,631 3,577 2,631
Capitalized stock-based compensation 1,197 1,336 2,450 2,471
 

*As adjusted to reflect the impact of the adoption of ASC 606.

 
Cornerstone OnDemand, Inc.
CONSOLIDATED BALANCE SHEETS
RECONCILIATION OF THE IMPACTS OF THE ADOPTION OF ASC 606
(in thousands)
(unaudited)
 
   

December 31,

June 30, 2018

2017

    Without
As Reported Impacts of Adoption As Reported
(ASC 606) Adoption (ASC 605) (ASC 605)
Assets
Cash and cash equivalents $ 450,931 $ $ 450,931 $ 393,576
Short-term investments 191,301 191,301 169,551
Accounts receivable, net 110,432 110,432 154,428
Deferred commissions, current portion 20,755 20,239 40,994 42,806
Prepaid expenses and other current assets   38,606         38,606     21,754  
Total current assets 812,025 20,239 832,264 782,115
 
Capitalized software development costs, net 41,504 41,504 37,431
Property and equipment, net 25,875 25,875 20,817
Deferred commissions, net of current portion 37,305 (37,305 )
Long-term investments 2,488 2,488 96,949
Goodwill 25,894 25,894 25,894
Other assets, net   3,972         3,972     3,984  
Total Assets $ 949,063   $ (17,066 ) $ 931,997   $ 967,190  
 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable $ 9,660 $ $ 9,660 $ 17,637
Accrued expenses 58,340 (2,280 ) 56,060 57,528
Deferred revenue, current portion 277,664 6,025 283,689 311,997
Convertible notes, net 253,000 253,000 248,025
Other liabilities   5,467         5,467     9,051  
Total current liabilities 604,131 3,745 607,876 644,238
 
Convertible notes, net 286,961 286,961 285,168
Other liabilities, non-current 1,642 1,642 1,498
Deferred revenue, net of current portion   12,157         12,157     14,166  
Total liabilities 904,891 3,745 908,636 945,070
 
Stockholders’ Equity:
Common stock 6 6 6
Additional paid-in capital 568,231 568,231 536,951
Accumulated deficit (524,342 ) (20,811 ) (545,153 ) (515,054 )
Accumulated other comprehensive income   277         277     217  
Total stockholders’ equity   44,172     (20,811 )   23,361     22,120  
Total Liabilities and Stockholders’ Equity $ 949,063   $ (17,066 ) $ 931,997   $ 967,190  
 
Cornerstone OnDemand, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF THE IMPACTS OF THE ADOPTION OF ASC 606
(in thousands, except per share data)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
As     Without As As     Without As
Reported Impacts Adoption Reported Reported Impacts Adoption Reported
(ASC of (ASC (ASC (ASC of (ASC (ASC

606)

Adoption

605)

605)

606)

Adoption

605)

605)

Revenue $ 132,517 $ 476 $ 132,993 $ 116,651 $ 265,630 $ 35 $ 265,665 $ 228,233
Cost of revenue   36,365         36,365     35,321     73,385         73,385     69,270  
Gross profit 96,152 476 96,628 81,330 192,245 35 192,280 158,963
Operating expenses:
Sales and marketing 59,821 (200 ) 59,621 62,073 119,066 100 119,166 118,967
Research and development 16,325 16,325 14,684 32,309 32,309 28,095
General and administrative 22,101 22,101 23,141 44,086 44,086 43,617
Restructuring   1,000         1,000         8,725         8,725      
Total operating expenses   99,247     (200 )   99,047     99,898     204,186     100     204,286     190,679  
Loss from operations (3,095 ) 676 (2,419 ) (18,568 ) (11,941 ) (65 ) (12,006 ) (31,716 )
Other income (expense):
Interest income 2,665 2,665 659 4,484 4,484 1,272
Interest expense (8,791 ) (8,791 ) (3,340 ) (17,491 ) (17,491 ) (6,642 )
Other, net   (2,250 )       (2,250 )   348     (2,206 )       (2,206 )   545  
Other income (expense), net   (8,376 )       (8,376 )   (2,333 )   (15,213 )       (15,213 )   (4,825 )
Loss before income tax provision (11,471 ) 676 (10,795 ) (20,901 ) (27,154 ) (65 ) (27,219 ) (36,541 )
Income tax provision   (536 )       (536 )   (364 )   (1,069 )       (1,069 )   (935 )
Net loss $ (12,007 ) $ 676   $ (11,331 ) $ (21,265 ) $ (28,223 ) $ (65 ) $ (28,288 ) $ (37,476 )
Net loss per share, basic and diluted $ (0.21 ) $ (0.20 ) $ (0.37 ) $ (0.49 ) $ (0.49 ) $ (0.66 )
Weighted average common shares outstanding, basic and diluted   57,844     57,844     56,935     57,635     57,635     56,789  
 

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 FROM OPERATIONS TO NON-GAAP OPERATING INCOME AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME MARGIN AND RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF ASC 606

(in thousands)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
As     Without As As     Without

As

Reported Impacts of Adoption Reported Reported Impacts of Adoption

Reported

(ASC 606) Adoption (ASC 605) (ASC 605) (ASC 606) Adoption (ASC 605) (ASC 605)
Reconciliation of cost of revenue, gross profit and gross margin:
Revenue $ 132,517 $ 476 $ 132,993 $ 116,651 $ 265,630 $ 35 $ 265,665 $ 228,233
Cost of revenue   36,365       36,365     35,321     73,385         73,385     69,270  
Gross profit $ 96,152   $ 476 $ 96,628   $ 81,330   $ 192,245   $ 35   $ 192,280   $ 158,963  
Gross margin 72.6 % 72.7 % 69.7 % 72.4 % 72.4 % 69.6 %
 
Cost of revenue $ 36,365 $ $ 36,365 $ 35,321 $ 73,385 $ $ 73,385 $ 69,270
Adjustments to cost of revenue:
Amortization of intangible assets (2,217 ) (4,434 )
Stock-based compensation   (1,021 )     (1,021 )   (1,203 )   (2,023 )       (2,023 )   (2,413 )
Total adjustments to cost of revenue   (1,021 )     (1,021 )   (3,420 )   (2,023 )       (2,023 )   (6,847 )
Non-GAAP costs of revenue   35,344       35,344     31,901     71,362         71,362     62,423  
Non-GAAP gross profit $ 97,173   $ 476 $ 97,649   $ 84,750   $ 194,268   $ 35   $ 194,303   $ 165,810  
Non-GAAP gross margin 73.3 % 73.4 % 72.7 % 73.1 % 73.1 % 72.6 %
 
Reconciliation of operating income (loss) and operating income (loss) margin:
Loss from operations $ (3,095 ) $ 676 $ (2,419 ) $ (18,568 ) $ (11,941 ) $ (65 ) $ (12,006 ) $ (31,716 )
Operating margin (2.3 )% (1.8 )% (15.9 )% (4.5 )% (4.5 )% (13.9 )%
Adjustments to loss from operations:
Stock-based compensation 15,283 15,283 17,598 29,326 29,326 33,447
Amortization of intangible assets 2,217 4,434
Restructuring   1,000       1,000         8,725         8,725      
Total adjustments to loss from operations   16,283       16,283     19,815     38,051         38,051     37,881  
Non-GAAP operating income $ 13,188   $ 676 $ 13,864   $ 1,247   $ 26,110   $ (65 ) $ 26,045   $ 6,165  
Non-GAAP operating income margin 10.0 % 10.4 % 1.1 % 9.8 % 9.8 % 2.7 %
 
Cornerstone OnDemand, Inc.

RECONCILIATIONS OF NET LOSS TO NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER SHARE AND RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF ASC 606

(in thousands, except per share amounts)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
As     Without As As     Without As
Reported Impacts of Adoption Reported Reported Impacts of Adoption Reported
(ASC 606) Adoption (ASC 605) (ASC 605) (ASC 606) Adoption (ASC 605) (ASC 605)
Net loss $ (12,007 ) $ 676 $ (11,331 ) $ (21,265 ) $ (28,223 ) $ (65 ) $ (28,288 ) $ (37,476 )
Adjustments to net loss
Stock-based compensation 15,283 15,283 17,598 29,326 29,326 33,447
Amortization of intangible assets 2,217 4,434
Accretion of debt discount and amortization of debt issuance costs1 3,496 3,496 2,383 6,922 6,922 4,736
Fair value adjustment on strategic investments 2 600
Restructuring   1,000       1,000         8,725         8,725      
Total adjustments to net loss   19,779       19,779     22,198     44,973         44,973     43,217  
Non-GAAP net income $ 7,772   $ 676 $ 8,448   $ 933   $ 16,750   $ (65 ) $ 16,685   $ 5,741  
Non-GAAP basic net income per share $ 0.13 $ 0.15 $ 0.02 $ 0.29 $ 0.29 $ 0.10
Non-GAAP diluted net income per share $ 0.12 $ 0.13 $ 0.02 $ 0.27 $ 0.26 $ 0.09
Weighted-average common shares outstanding, basic 57,844 57,844 56,935 57,635 57,635 56,789
Non-GAAP weighted-average common shares outstanding, diluted 63,733 63,733 62,103 63,163 63,163 61,897
 
     

1

  Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of $253.0 million in convertible notes on June 17, 2013 and $300.0 million in convertible notes on December 8, 2017. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions.

2

Fair value adjustment recorded for our strategic investments in privately-held companies.
 
Cornerstone OnDemand, Inc.
RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES TO UNLEVERED FREE CASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN
(A Non-GAAP Financial Measure)
(in thousands)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
Reconciliation of unlevered free cash flow:
Net cash provided by (used in) operating activities $ 17,228 $ 1,624 $ 12,648 $ (5,611 )
Capital expenditures (5,068 ) (1,042 ) (7,627 ) (3,740 )
Capitalized software costs (6,263 ) (5,606 ) (12,302 ) (11,362 )
Cash paid for interest   2,003         5,003     1,898  
Unlevered free cash flow $ 7,900   $ (5,024 ) $ (2,278 ) $ (18,815 )
Unlevered free cash flow margin   6.0 %   (4.3 )%   (0.9 )%   (8.2 )%
 
Cornerstone OnDemand, Inc.
TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS

(unaudited)

 

The following metrics are intended as a supplement to the financial statements found in this release and other information furnished 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 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 2017   FY 2018   Full Year
Q1'17   Q2'17   Q3'17   Q4'17 Q1'18   Q2'18 FY15   FY16   FY17
SELECTED METRICS:                                
Number of clients 1 2,998 3,076 3,146 3,250 3,280 3,363 2,595 2,918 3,250
% y/y 12.3 % 12.7 % 12.2 % 11.4 % 9.4 % 9.3 % 20.5 % 12.4 % 11.4 %
% q/q 2.7 % 2.6 % 2.3 % 3.3 % 0.9 % 2.5 % n/a n/a n/a
Number of users (in millions) 1 31.0 32.1 33.5 35.3 36.0 36.7 23.8 29.9 35.3
% y/y 24.2 % 22.3 % 21.1 % 18.1 % 16.1 % 14.3 % 31.8 % 25.6 % 18.1 %
% q/q 3.7 % 3.6 % 4.3 % 5.4 % 2.0 % 1.9 % n/a n/a n/a
Number of employees 1,859 1,933 1,960 1,891 1,829 1,851 1,645 1,823 1,891
% y/y 10.6 % 12.3 % 9.6 % 3.7 % (1.6 )% (4.2 )% 20.9 % 10.8 % 3.7 %
% q/q 2.0 % 4.0 % 1.4 % (3.5 )% (3.3 )% 1.2 % n/a n/a n/a
Annual dollar retention rate n/a n/a n/a n/a n/a n/a 95.4 % 95.1 % 93.5 %
Annual recurring revenue n/a n/a n/a n/a n/a n/a n/a n/a 439,000
Unlevered free cash flow (13,791 ) (5,024 ) 16,075 46,420 (10,178 ) 7,900 16,795 16,411 43,680
Unlevered free cash flow margin (12.4 )% (4.3 )% 13.2 % 35.2 % (7.6 )% 6.0 % 4.9 % 3.9 % 9.1 %
FINANCIAL DATA - ASC 605 (in thousands, except percentages):                                
Revenue 111,582 116,651 121,796 131,956 132,672 132,993 339,651 423,124 481,985
% y/y 12.3 % 9.0 % 13.0 % 21.0 % 18.9 % 14.0 % 28.9 % 24.6 % 13.9 %
% y/y (Constant currency) 17.2 % 12.7 % 13.1 % 18.3 % 14.8 % 11.9 % n/a 29.1 % 15.3 %
Subscription revenue 92,932 96,416 101,130 106,286 114,433 116,737 270,093 339,756 396,764
% y/y 16.6 % 14.5 % 17.1 % 18.8 % 23.1 % 21.1 % n/a 25.8 % 16.8 %
% y/y (Constant currency) 21.6 % 16.3 % 17.5 % 15.8 % 19.1 % 18.9 % n/a n/a 17.7 %
Subscription revenue % of total revenue 83.3 % 82.7 % 83.0 % 80.5 % 86.3 % 87.8 % 79.5 % 80.3 % 82.3 %
Loss from operations (13,148 ) (18,568 ) (12,104 ) (5,436 ) (9,587 ) (2,419 ) (68,707 ) (56,342 ) (49,256 )
FINANCIAL DATA - ASC 606 (in thousands, except percentages):                                
Revenue 133,113 132,517
Subscription revenue 113,134 114,771
Subscription revenue % of total revenue 85.0 % 86.6 %
Loss from operations (8,846 ) (3,095 )
MARGIN DATA - ASC 605 (in thousands, except percentages):                                
Gross margin 69.6 % 69.7 % 70.7 % 71.3 % 72.1 % 72.7 % 67.7 % 67.9 % 70.4 %
Sales and marketing % of revenue 51.0 % 53.2 % 49.7 % 46.0 % 44.9 % 44.8 % 61.0 % 53.3 % 49.9 %
Research and development % of revenue 12.0 % 12.6 % 13.5 % 13.3 % 12.0 % 12.3 % 12.1 % 11.1 % 12.9 %
General and administrative % of revenue 18.4 % 19.8 % 17.4 % 14.9 % 16.6 % 16.6 % 14.7 % 16.8 % 17.6 %
Restructuring % of revenue % % % 1.2 % 5.8 % 0.8 % % % %
Operating margin (11.8 )% (15.9 )% (9.9 )% (4.1 )% (7.2 )% (1.8 )% (20.2 )% (13.3 )% (10.2 )%
MARGIN DATA - ASC 606 (in thousands, except percentages):                                
Gross margin 72.2 % 72.6 %
Sales and marketing % of revenue 44.5 % 45.1 %
Research and development % of revenue 12.0 % 12.3 %
General and administrative % of revenue 16.5 % 16.7 %
Restructuring % of revenue 5.8 % 0.8 %
Operating margin (6.6 )% (2.3 )%
NON-GAAP MARGIN DATA - ASC 605 (in thousands, except percentages):                                
Non-GAAP gross margin 72.6 % 72.7 % 73.5 % 72.8 % 72.9 % 73.4 % 71.7 % 71.2 % 72.9 %
Non-GAAP sales and marketing % of revenue 44.9 % 47.4 % 43.2 % 40.8 % 40.2 % 39.9 % 54.0 % 47.3 % 44.0 %
Non-GAAP research and development % of revenue 10.1 % 10.5 % 11.3 % 10.4 % 10.3 % 10.5 % 10.3 % 9.3 % 10.6 %
Non-GAAP general and administrative % of revenue 13.2 % 13.7 % 12.7 % 11.8 % 13.2 % 12.6 % 11.9 % 12.8 % 12.8 %
Non-GAAP restructuring % of revenue % % % % % % % % %
Non-GAAP operating margin 4.4 % 1.1 % 6.3 % 9.9 % 9.2 % 10.4 % (4.4 )% 1.8 % 5.6 %
Non-GAAP research and development plus capitalized software % of revenue 15.3 % 15.3 % 15.0 % 14.0 % 14.9 % 15.2 % 14.2 % 13.2 % 14.9 %
NON-GAAP MARGIN DATA - ASC 606 (in thousands, except percentages):                                
Non-GAAP gross margin 72.9 % 73.3 %
Non-GAAP sales and marketing % of revenue 39.8 % 40.2 %
Non-GAAP research and development % of revenue 10.3 % 10.5 %
Non-GAAP general and administrative % of revenue 13.1 % 12.7 %
Non-GAAP restructuring % of revenue % %
Non-GAAP operating margin 9.7 % 10.0 %
Non-GAAP research and development plus capitalized software % of revenue 14.8 % 15.2 %
FOREIGN EXCHANGE RATES:                                
GBP to USD average period rate 1.24 1.28 1.31 1.33 1.39 1.36 1.53 1.36 1.29
GBP to USD end of period spot rate 1.24 1.30 1.34 1.35 1.40 1.32 1.48 1.23 1.35
EUR to USD average period rate n/a 1.10 1.18 1.18 1.23 1.19 n/a n/a 1.14
EUR to USD end of period spot rate n/a 1.14 1.18 1.20 1.23 1.17 n/a n/a 1.20
 

1 Includes contracted clients and users of our Enterprise and Mid-Market solution, excluding Cornerstone for Salesforce and PiiQ.

 

Note: As discussed on the Company’s fourth quarter 2017 earnings call, the Company reported that total billings is no longer relevant in the assessment of its performance and beginning in the first quarter 2018, the Company will no longer report or guide to total billings.

Investor Relations Contact:
Jennifer Gianola
Cornerstone OnDemand
Phone: +1 (310) 382-9478
jgianola@csod.com
or
Media Contact:
Kristy Gonzalez
Cornerstone OnDemand
Phone: +1 (310) 382-9563
kgonzalez@csod.com

Source: Cornerstone OnDemand

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