Cornerstone OnDemand Announces Second Quarter 2019 Financial Results

08/05/2019

SANTA MONICA, Calif.--(BUSINESS WIRE)-- Human capital management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1, 2 for its second quarter ended June 30, 2019. The Company has provided a quarterly shareholder letter on its Investor Relations website at http://investors.cornerstoneondemand.com.

“During the second quarter, we continued the momentum we demonstrated in the first quarter of 2019 and throughout 2018,” said Adam Miller, founder and CEO of Cornerstone. “The growing skills divide is forcing companies around the world to take action to continuously train and reskill their workers. We believe our leading market position puts us in a prime position to capitalize on this multi-year macro trend.”

Second Quarter 2019 Results:

  • Revenue for the second quarter of 2019 was $141.9 million compared to a guided range of $137.0 million to $140.0 million.This represents a 7.1% increase compared to the same period of the prior year. Revenue growth on a constant currency basis was 8.7%.
  • Subscription revenue for the second quarter of 2019 was $132.6 million compared to a guided range of $131.0 million to $133.0 million.This represents a 15.5% increase compared to the same period of the prior year. Subscription revenue growth on a constant currency basis was 17.3%.
  • Operating income for the second quarter of 2019 was $(3.6) million, yielding a margin of (2.5)%, compared to $(3.1) million and margin of (2.3)% in the same period of the prior year.
  • Non-GAAP operating income for the second quarter of 2019 was $16.6 million, yielding a margin of 11.7%, compared to $13.2 million and margin of 10.0% in the same period of the prior year.
  • Net loss for the second quarter of 2019 was $(8.8) million, or a $(0.15) diluted net loss per share, compared to $(12.0) million and $(0.21) diluted net loss per share in the same period of the prior year.
  • Non-GAAP net income for the second quarter of 2019 was $12.4 million, or a $0.19 diluted net income per share, compared to $7.8 million and $0.12 diluted net income per share in the same period of the prior year.
  • Operating cash flow for the second quarter of 2019 was $21.2 million, yielding a margin of 14.9%, compared to $17.2 million, yielding a margin of 13.0%, in the same period of the prior year.
  • Unlevered free cash flow for the second quarter of 2019 was $9.5 million, yielding a margin of 6.7%, compared to $7.9 million, yielding a margin of 6.0%, in the same period of the prior year.

“During Q2, we continued to focus on margin expansion while investing in our key priorities,” said Brian Swartz, CFO of Cornerstone. “As we look out to the balance of 2019, we are encouraged by the opportunities we see ahead and are raising our financial guidance accordingly. Additionally, we expect to substantially improve our cash flow margins in 2020.”

Recent Highlights:

  • The Company's CEO, Adam Miller, was recognized as a 2019 Best CEO for Women by Comparably.
  • The Company hired Heidi Spirgi as Chief Marketing and Strategy Officer. She brings more than 20 years of experience helping organizations unleash the power of their workforce by reimagining their approach to talent management.
  • The Company announced new products including Cornerstone Create, Express Class, and Cornerstone for Salesforce learning integration to help organizations more effectively train and develop their teams by integrating learning directly into employees’ flow of work.

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.

For the third quarter ending September 30, 2019, the Company provides the following outlook:

  • Revenue between $141 million and $143 million, representing year-over-year growth at the mid-point of 6.0%3, or 7.6%4 on a constant currency basis.
  • Subscription revenue between $135 million and $137 million, representing year-over-year growth at the mid-point of 14.4%3, or 16.2%4 on a constant currency basis.

For the year ending December 31, 2019, the Company provides the following outlook:

  • Revenue between $566.5 million and $571 million, representing year-over-year growth at the mid-point of 5.7%5, 7, or 7.3%6 on a constant currency basis.
  • Subscription revenue between $539.5 million and $544 million, representing year-over-year growth at the mid-point of 14.5%5, 7, or 16.2%6 on a constant currency basis.
  • Annual recurring revenue as of December 31, 2019 between $579.5 million and $589.5 million, representing year-over-year growth at the mid-point of 14.6%,5, 7 or 15.2%5, 7 on a constant currency basis.
  • Non-GAAP operating income between $79 million and $85 million. Assuming the midpoint of the revenue range, this represents a non-GAAP operating margin of 14.4%.
  • Unlevered free cash flow between $85 million and $92 million. Assuming the midpoint of the revenue range, this represents an unlevered free cash flow margin of 15.6%.

The Company has not reconciled the guidance for non-GAAP operating income or non-GAAP operating income 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 the number of shares issued and the market price, both of which are uncertain. The actual amount of stock-based compensation expense in the third quarter ending September 30, 2019 and the year ending December 31, 2019 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. Please see the discussion in the section titled “Non-GAAP Financial Measures” and the reconciliations at the end of this press release.

2


The Company adopted the new lease accounting standard Accounting Standards Codification (“ASC”) 842 effective January 1, 2019 on a modified retrospective basis. Financial results for reporting periods during 2019 are presented in compliance with the new lease standard. Historical financial results for reporting periods prior to 2019 are presented in conformity with amounts previously disclosed under the prior lease accounting standard. The new lease accounting standard does not result in any change to future operating expenses or cash flows.


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:


3


Exchange rate applied to revenue for the third quarter of 2019


$1.22 USD per GBP


4


Exchange rate from the third quarter of 2018 applied to calculate revenue growth for the third quarter of 2019 on a constant currency basis


$1.30 USD per GBP


5


Exchange rate applied to revenue and annual recurring revenue for fiscal 2019


$1.22 USD per GBP


6


Average exchange rate from fiscal 2018 applied to calculate revenue growth for fiscal 2019 on a constant currency basis


$1.33 USD per GBP


7


Exchange rate applied to revenue and annual recurring revenue for fiscal 2019


$1.12 USD per EUR

Quarterly Conference Call

Cornerstone will host a conference call to discuss its second quarter 2019 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: 5269638. 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 (2:59 p.m. ET) on August 9, 2019 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 5269638.

About Cornerstone

Cornerstone was founded with a passion for empowering people through learning and a conviction that people should be your organization’s greatest competitive advantage. Cornerstone is a global human capital management leader with a core belief that companies thrive when they help their employees to realize their potential. Putting this belief into practice, Cornerstone offers solutions to help companies strategically manage and continuously develop their talent throughout the entire employee lifecycle. Featuring comprehensive recruiting, personalized learning, development-driven performance management, and holistic HR planning, Cornerstone’s human capital management platform is successfully used by more than 3,600 global clients of all sizes, spanning over 190 countries and over 40 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, our strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, our expectations regarding certain financial measures, including subscription revenue, capital expenditures and unlevered free cash flow, 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; 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 Americas, Europe, and Asia Pacific; 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 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, 2018, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

Non-GAAP Financial Measures and Other Key Metrics

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 non-GAAP financial measures and other key metrics. These non-GAAP financial measures and other key metrics 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 basic and 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, restructuring costs, acquisition costs 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 exclude stock-based compensation, amortization of intangible assets, restructuring costs and acquisition costs,

(viii)


non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, restructuring costs and acquisition 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 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 other 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. 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.
  • 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.
  • Acquisition costs. The Company excludes costs related to acquisitions 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, 2019

 

December 31,
2018

Assets

 

 

 

Cash and cash equivalents

$

395,106

 

 

$

183,596

 

Short-term investments

7,998

 

 

204,732

 

Accounts receivable, net

103,609

 

 

125,300

 

Deferred commissions, current

17,962

 

 

24,467

 

Prepaid expenses and other current assets

38,872

 

 

34,940

 

Total current assets

563,547

 

 

573,035

 

 

 

 

 

Capitalized software development costs, net

49,341

 

 

45,416

 

Property and equipment, net

35,740

 

 

77,254

 

Operating right-of-use assets

79,838

 

 

 

Deferred commissions, non-current

60,500

 

 

45,444

 

Long-term investments

750

 

 

1,250

 

Intangible assets, net

11,534

 

 

13,867

 

Goodwill

47,453

 

 

47,453

 

Other assets, net

1,991

 

 

3,437

 

Total Assets

$

850,694

 

 

$

807,156

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Liabilities:

 

 

 

Accounts payable

$

15,843

 

 

$

11,921

 

Accrued expenses

57,685

 

 

68,331

 

Deferred revenue, current

283,878

 

 

312,526

 

Operating lease liabilities, current

11,160

 

 

 

Other liabilities

8,178

 

 

7,645

 

Total current liabilities

376,744

 

 

400,423

 

 

 

 

 

Convertible notes, net

291,038

 

 

288,967

 

Operating lease liabilities, non-current

75,150

 

 

 

Other liabilities, non-current

960

 

 

2,484

 

Deferred revenue, non-current

9,405

 

 

13,275

 

Facility financing obligation

 

 

46,100

 

Total liabilities

753,297

 

 

751,249

 

 

 

 

 

Stockholders’ Equity:

 

 

 

Common stock

6

 

 

6

 

Additional paid-in capital

637,770

 

 

585,387

 

Accumulated deficit

(542,231

)

 

(529,962

)

Accumulated other comprehensive income

1,852

 

 

476

 

Total stockholders’ equity

97,397

 

 

55,907

 

Total Liabilities and Stockholders’ Equity

$

850,694

 

 

$

807,156

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)




 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Revenue

$

141,860

 

 

$

132,517

 

 

$

281,977

 

 

$

265,630

 

Cost of revenue 1, 2

40,187

 

 

36,365

 

 

73,882

 

 

73,385

 

Gross profit

101,673

 

 

96,152

 

 

208,095

 

 

192,245

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing 1

58,691

 

 

59,821

 

 

113,196

 

 

119,066

 

Research and development 1

24,337

 

 

16,325

 

 

52,083

 

 

32,309

 

General and administrative 1

22,239

 

 

22,101

 

 

45,179

 

 

44,086

 

Restructuring 1

 

 

1,000

 

 

 

 

8,725

 

Total operating expenses

105,267

 

 

99,247

 

 

210,458

 

 

204,186

 

Income (loss) from operations

(3,594

)

 

(3,095

)

 

(2,363

)

 

(11,941

)

Other income (expense):

 

 

 

 

 

 

 

Interest income

2,186

 

 

2,665

 

 

4,176

 

 

4,484

 

Interest expense

(5,378

)

 

(8,791

)

 

(10,744

)

 

(17,491

)

Other, net

(1,105

)

 

(2,250

)

 

(1,702

)

 

(2,206

)

Other income (expense), net

(4,297

)

 

(8,376

)

 

(8,270

)

 

(15,213

)

Loss before income tax provision

(7,891

)

 

(11,471

)

 

(10,633

)

 

(27,154

)

Income tax provision

(914

)

 

(536

)

 

(1,636

)

 

(1,069

)

Net loss

$

(8,805

)

 

$

(12,007

)

 

$

(12,269

)

 

$

(28,223

)

Net loss per share, basic and diluted

$

(0.15

)

 

$

(0.21

)

 

$

(0.21

)

 

$

(0.49

)

Weighted average common shares outstanding, basic and diluted

59,715

 

 

57,844

 

 

59,430

 

 

57,635

 

1

 

Includes stock-based compensation as follows:

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Cost of revenue

$

1,786

 

 

$

1,021

 

 

$

2,922

 

 

$

2,023

 

Sales and marketing

6,809

 

 

6,545

 

 

12,856

 

 

12,791

 

Research and development

4,319

 

 

2,417

 

 

8,515

 

 

4,725

 

General and administrative

6,237

 

 

5,300

 

 

11,903

 

 

9,787

 

Restructuring

 

 

749

 

 

 

 

6,185

 

Total

$

19,151

 

 

$

16,032

 

 

$

36,196

 

 

$

35,511

 

2

 

Cost of revenue includes amortization of intangible assets as follows:

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Cost of revenue

$

1,047

 

 

$

 

 

$

2,333

 

 

$

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)




 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

(8,805

)

 

(12,007

)

 

(12,269

)

 

(28,223

)

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

 

 

 

 

 

 

 

Depreciation and amortization

9,176

 

 

8,388

 

 

20,034

 

 

16,219

 

Accretion of debt discount and amortization of debt issuance costs

1,516

 

 

3,496

 

 

2,543

 

 

6,922

 

Purchased investment premium, net of amortization

(509

)

 

(106

)

 

(725

)

 

(187

)

Net foreign currency (gain) loss

821

 

 

(1,329

)

 

1,115

 

 

(1,685

)

Stock-based compensation expense

19,151

 

 

16,032

 

 

36,196

 

 

35,511

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

(11,081

)

 

1,207

 

 

21,874

 

 

43,095

 

Deferred commissions

(4,456

)

 

(2,212

)

 

(8,730

)

 

(2,740

)

Prepaid expenses and other assets

3,313

 

 

(7,982

)

 

6,954

 

 

(16,823

)

Accounts payable

4,387

 

 

(250

)

 

1,606

 

 

(7,855

)

Accrued expenses

13,568

 

 

13,693

 

 

(9,719

)

 

(1,366

)

Deferred revenue

(8,615

)

 

(4,132

)

 

(32,574

)

 

(27,883

)

Other liabilities

2,717

 

 

2,430

 

 

2,172

 

 

(2,337

)

Net cash provided by operating activities

21,183

 

 

17,228

 

 

28,477

 

 

12,648

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of investments

(82

)

 

484

 

 

(82

)

 

484

 

Maturities of investments

27,095

 

 

32,012

 

 

197,774

 

 

72,689

 

Capital expenditures

(5,031

)

 

(5,068

)

 

(9,274

)

 

(7,627

)

Capitalized software costs

(6,728

)

 

(6,263

)

 

(14,127

)

 

(12,302

)

Net cash provided by investing activities

15,254

 

 

21,165

 

 

174,291

 

 

53,244

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments of debt issuance costs

 

 

 

 

 

 

(152

)

Proceeds from employee stock plans

7,371

 

 

23,282

 

 

14,211

 

 

30,047

 

Payment of tax withholdings for employee stock plans

(5,469

)

 

 

 

(5,469

)

 

 

Repurchases of common stock

 

 

(23,908

)

 

 

 

(38,608

)

Net cash provided by (used in) financing activities

1,902

 

 

(626

)

 

8,742

 

 

(8,713

)

Effect of exchange rate changes on cash and cash equivalents

(248

)

 

(181

)

 

 

 

176

 

Net increase in cash and cash equivalents

38,091

 

 

37,586

 

 

211,510

 

 

57,355

 

Cash and cash equivalents at beginning of period

357,015

 

 

413,345

 

 

183,596

 

 

393,576

 

Cash and cash equivalents at end of period

$

395,106

 

 

$

450,931

 

 

$

395,106

 

 

$

450,931

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

$

46

 

 

$

2,003

 

 

$

8,731

 

 

$

5,003

 

Cash paid for income taxes

580

 

 

422

 

 

970

 

 

874

 

Proceeds from employee stock plans received in advance of stock issuance

720

 

 

499

 

 

720

 

 

499

 

Cash paid for operating leases

3,099

 

 

 

 

5,700

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

 

 

 

86,120

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Assets acquired under capital leases and other financing arrangements

$

1,702

 

 

$

 

 

$

1,702

 

 

$

 

Capitalized assets financed by accounts payable and accrued expenses

2,728

 

 

3,577

 

 

2,728

 

 

3,577

 

Capitalized stock-based compensation

1,361

 

 

1,198

 

 

2,113

 

 

2,451

 

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

(in thousands)

(unaudited)




 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Revenue

$

141,860

 

 

$

132,517

 

 

$

281,977

 

 

$

265,630

 

Cost of revenue

40,187

 

 

36,365

 

 

73,882

 

 

73,385

 

Gross profit

$

101,673

 

 

$

96,152

 

 

$

208,095

 

 

$

192,245

 

Gross margin

71.7

%

 

72.6

%

 

73.8

%

 

72.4

%

 

 

 

 

 

 

 

 

Cost of revenue

$

40,187

 

 

$

36,365

 

 

$

73,882

 

 

$

73,385

 

Adjustments to cost of revenue:

 

 

 

 

 

 

 

Stock-based compensation

(1,786

)

 

(1,021

)

 

(2,922

)

 

(2,023

)

Amortization of intangible assets

(1,047

)

 

 

 

(2,333

)

 

 

Total adjustments to cost of revenue

(2,833

)

 

(1,021

)

 

(5,255

)

 

(2,023

)

Non-GAAP costs of revenue

37,354

 

 

35,344

 

 

68,627

 

 

71,362

 

Non-GAAP gross profit

$

104,506

 

 

$

97,173

 

 

$

213,350

 

 

$

194,268

 

Non-GAAP gross margin

73.7

%

 

73.3

%

 

75.7

%

 

73.1

%

 

 

 

 

 

 

 

 

Reconciliation of operating loss and operating income margin:

 

 

 

 

 

 

 

Loss from operations

$

(3,594

)

 

$

(3,095

)

 

$

(2,363

)

 

$

(11,941

)

Operating margin

(2.5

)%

 

(2.3

)%

 

(0.8

)%

 

(4.5

)%

Adjustments to loss from operations:

 

 

 

 

 

 

 

Stock-based compensation

19,151

 

 

15,283

 

 

36,196

 

 

29,326

 

Amortization of intangible assets

1,047

 

 

 

 

2,333

 

 

 

Restructuring

 

 

1,000

 

 

 

 

8,725

 

Total adjustments to income (loss) from operations

20,198

 

 

16,283

 

 

38,529

 

 

38,051

 

Non-GAAP operating income

$

16,604

 

 

$

13,188

 

 

$

36,166

 

 

$

26,110

 

Non-GAAP operating income margin

11.7

%

 

10.0

%

 

12.8

%

 

9.8

%

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

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Net loss

$

(8,805

)

 

$

(12,007

)

 

$

(12,269

)

 

$

(28,223

)

Adjustments to net loss

 

 

 

 

 

 

 

Stock-based compensation

19,151

 

 

15,283

 

 

36,196

 

 

29,326

 

Amortization of intangible assets

1,047

 

 

 

 

2,333

 

 

 

Accretion of debt discount and amortization of debt issuance costs1

1,043

 

 

3,496

 

 

2,069

 

 

6,922

 

Restructuring

 

 

1,000

 

 

 

 

8,725

 

Total adjustments to net loss

21,241

 

 

19,779

 

 

40,598

 

 

44,973

 

Non-GAAP net income

$

12,436

 

 

$

7,772

 

 

$

28,329

 

 

$

16,750

 

Non-GAAP basic net income per share

$

0.21

 

 

$

0.13

 

 

$

0.48

 

 

$

0.29

 

Non-GAAP diluted net income per share

$

0.19

 

 

$

0.12

 

 

$

0.43

 

 

$

0.27

 

Weighted-average common shares outstanding, basic

59,715

 

 

57,844

 

 

59,430

 

 

57,635

 

Non-GAAP weighted-average common shares outstanding, diluted

65,767

 

 

63,733

 

 

65,297

 

 

63,163

 

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.

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,

 

2019

 

2018

 

2019

 

2018

Reconciliation of unlevered free cash flow:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

21,183

 

 

$

17,228

 

 

$

28,477

 

 

$

12,648

 

Capital expenditures

(5,031

)

 

(5,068

)

 

(9,274

)

 

(7,627

)

Capitalized software costs

(6,728

)

 

(6,263

)

 

(14,127

)

 

(12,302

)

Cash paid for interest

46

 

 

2,003

 

 

8,731

 

 

5,003

 

Unlevered free cash flow

$

9,470

 

 

$

7,900

 

 

$

13,807

 

 

$

(2,278

)

Unlevered free cash flow margin

6.7

%

 

6.0

%

 

4.9

%

 

(0.9

)%

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 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 2018

 

FY 2019

 

Full Year

 

Q1'18

Q2'18

Q3'18

Q4'18

 

Q1'19

Q2'19

 

FY16

FY17

FY18

SELECTED METRICS:

 

 

 

 

 

 

 

 

 

 

 

Number of clients 1

3,280

 

3,363

 

3,428

 

3,535

 

 

3,567

 

3,604

 

 

2,918

 

3,250

 

3,535

 

% y/y

9.4

%

9.3

%

9.0

%

8.8

%

 

8.8

%

7.2

%

 

12.4

%

11.4

%

8.8

%

% q/q

0.9

%

2.5

%

1.9

%

3.1

%

 

0.9

%

1.0

%

 

n/a

n/a

n/a

Number of employees

1,829

 

1,851

 

1,892

 

1,953

 

 

2,017

 

2,034

 

 

1,823

 

1,891

 

1,953

 

% y/y

(1.6

)%

(4.2

)%

(3.5

)%

3.3

%

 

10.3

%

9.9

%

 

10.8

%

3.7

%

3.3

%

% q/q

(3.3

)%

1.2

%

2.2

%

3.2

%

 

3.3

%

0.8

%

 

n/a

n/a

n/a

Annual dollar retention rate

n/a

n/a

n/a

n/a

 

n/a

n/a

 

95.1

%

93.5

%

92.8

%

Annual recurring revenue (in thousands)

n/a

n/a

n/a

n/a

 

n/a

n/a

 

n/a

439,000

 

510,000

 

Net cash (used in) provided by operating activities (in thousands)

(4,580

)

17,228

 

32,617

 

44,988

 

 

7,294

 

21,183

 

 

35,252

 

67,510

 

90,253

 

Unlevered free cash flow (in thousands)

(10,178

)

7,900

 

32,067

 

33,681

 

 

4,337

 

9,470

 

 

16,411

 

43,680

 

63,471

 

Unlevered free cash flow margin

(7.6

)%

6.0

%

23.9

%

24.4

%

 

3.1

%

6.7

%

 

3.9

%

9.1

%

11.8

%

FINANCIAL DATA - ASC 606 (in thousands, except percentages):

 

 

 

 

 

 

 

 

 

 

 

Revenue

133,113

 

132,517

 

134,014

 

138,247

 

 

140,117

 

141,860

 

 

 

 

537,891

 

Subscription revenue

113,134

 

114,771

 

118,844

 

126,303

 

 

131,256

 

132,562

 

 

 

 

473,052

 

Subscription revenue % of total revenue

85.0

%

86.6

%

88.7

%

91.4

%

 

93.7

%

93.5

%

 

 

 

87.9

%

(Loss) income from operations

(8,846

)

(3,095

)

1,574

 

2,598

 

 

1,231

 

(3,594

)

 

 

 

(7,769

)

MARGIN DATA - ASC 606:

 

 

 

 

 

 

 

 

 

 

 

Gross margin

72.2

%

72.6

%

73.0

%

74.8

%

 

76.0

%

71.7

%

 

 

 

73.2

%

Sales and marketing % of revenue

44.5

%

45.1

%

39.7

%

37.9

%

 

38.9

%

41.4

%

 

 

 

41.8

%

Research and development % of revenue

12.0

%

12.3

%

14.7

%

18.1

%

 

19.8

%

17.2

%

 

 

 

14.3

%

General and administrative % of revenue

16.5

%

16.7

%

17.3

%

17.0

%

 

16.4

%

15.7

%

 

 

 

16.9

%

Restructuring % of revenue

5.8

%

0.8

%

0.2

%

%

 

%

%

 

 

 

1.7

%

Operating margin

(6.6

)%

(2.3

)%

1.2

%

1.9

%

 

0.9

%

(2.5

)%

 

 

 

(1.4

)%

NON-GAAP MARGIN DATA - ASC 606:

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

72.9

%

73.3

%

74.0

%

76.1

%

 

77.7

%

73.7

%

 

 

 

74.1

%

Non-GAAP sales and marketing % of revenue

39.8

%

40.2

%

35.3

%

33.7

%

 

34.6

%

36.6

%

 

 

 

37.2

%

Non-GAAP research and development % of revenue

10.3

%

10.5

%

12.3

%

15.3

%

 

16.8

%

14.1

%

 

 

 

12.1

%

Non-GAAP general and administrative % of revenue

13.1

%

12.7

%

13.1

%

13.0

%

 

12.3

%

11.3

%

 

 

 

13.0

%

Non-GAAP operating margin

9.7

%

10.0

%

13.3

%

14.1

%

 

14.0

%

11.7

%

 

 

 

11.8

%

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

14.8

%

15.2

%

17.3

%

20.0

%

 

22.1

%

18.9

%

 

 

 

19.1

%

FOREIGN EXCHANGE RATES:

 

 

 

 

 

 

 

 

 

 

 

GBP to USD average period rate

1.39

 

1.36

 

1.30

 

1.29

 

 

1.30

 

1.29

 

 

1.36

 

1.29

 

1.34

 

GBP to USD end of period spot rate

1.40

 

1.32

 

1.30

 

1.27

 

 

1.30

 

1.27

 

 

1.23

 

1.35

 

1.27

 

EUR to USD average period rate

1.23

 

1.19

 

1.16

 

1.14

 

 

1.14

 

1.12

 

 

n/a

1.14

 

1.18

 

EUR to USD end of period spot rate

1.23

 

1.17

 

1.16

 

1.14

 

 

1.12

 

1.14

 

 

n/a

1.20

 

1.14

 

1

 

Includes contracted clients of our enterprise human capital management platform and excludes clients and users of Cornerstone for Salesforce, PiiQ, Workpop Inc. and Grovo Learning, Inc.

 

Investor Relations Contact:
Jason Gold
Phone: +1 (310) 526-2531
jgold@csod.com

Media Contact:
Deaira Irons
Phone: +1 (310) 752-0164
dirons@csod.com

Source: Cornerstone OnDemand, Inc.

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