Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2019 Financial Results

02/24/2020

 Announces agreement to acquire Saba to enhance Cornerstone's reach and accelerate innovation around how people learn and grow at work

SANTA MONICA, Calif.--(BUSINESS WIRE)-- People development solution provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its fourth quarter ended December 31, 2019. The Company has provided supplemental financial information located on its Investor Relations website at http://investors.cornerstoneondemand.com.

Acquisition of Saba:

Today, the Company has entered into a definitive agreement to acquire Saba, a global leader in talent experience solutions, and a portfolio company of Vector Capital. Saba has a global revenue footprint and a complementary product portfolio to Cornerstone with approximately 3,300 clients. The Company will acquire Saba in a cash and stock transaction valued at approximately $1.395 billion. It has been unanimously approved by the boards of directors of both companies and is expected to close in the second quarter of 2020.

With the addition of Saba, Cornerstone will have an expanded reach and ability to help a larger, diverse group of clients realize the potential of their people with the right learning and development opportunities. The combined company will have more than 75 million users and serve approximately 7,000 organizations, of all sizes, around the globe.

Given the combination of significant cost synergies available with the acquisition and Saba’s best-in-class margins, Cornerstone expects to substantially increase unlevered free cash flow. The company expects to utilize the higher cash flow generation to further invest in state-of-the-art solutions to optimize people development, rapidly de-lever its balance sheet, and drive shareholder returns.

Fourth Quarter 2019 Results:

  • Revenue for the fourth quarter of 2019 was $149.6 million compared to a guided range of $145.0 million to $147.0 million.This represents an 8.2% increase compared to the prior year. Revenue growth on a constant currency basis was 8.4%.
  • Subscription revenue for the fourth quarter of 2019 was $141.7 million compared to a guided range of $141.0 million to $143.0 million.This represents a 12.2% increase compared to the prior year. Subscription revenue growth on a constant currency basis was 12.4%.
  • Operating income for the fourth quarter of 2019 was $10.6 million, yielding a margin of 7.1%, compared to $2.6 million and margin of 1.9% in the same period of the prior year.
  • Non-GAAP operating income for the fourth quarter of 2019 was $28.3 million, yielding a margin of 18.9%, compared to $19.4 million and margin of 14.1% in the same period of the prior year.
  • Net income for the fourth quarter of 2019 was $9.4 million, or a $0.15 diluted net income per share, compared to $(3.2) million and $(0.05) diluted net loss per share in the same period of the prior year.
  • Non-GAAP net income for the fourth quarter of 2019 was $28.3 million, or a $0.43 diluted net income per share, compared to $15.4 million and $0.24 diluted net loss per share in the same period of the prior year.
  • Unlevered free cash flow for the fourth quarter of 2019 was $54.7 million, yielding a margin of 36.6%, compared to $33.7 million, yielding a margin of 24.4%, in the prior year.

Fiscal Year 2019 Results:

  • Revenue for the full year of 2019 was $576.5 million compared to a guided range of $572.0 million to $574.0 million. Revenue growth on a constant currency basis was 8.5%.
  • Subscription revenue for the full year of 2019 was $543.0 million compared to a guided range of $542.0 million to $544.0 million. Subscription revenue growth on a constant currency basis was 16.2%.
  • Annual recurring revenue as of December 31, 2019 was $575.0 million, compared to a guided range of $581.0 million to $590.0 million. This represents a 12.7% increase compared to the prior year. Annual recurring revenue growth on a constant currency basis was 13.0%.
  • Operating income for the full year of 2019 was $11.9 million, yielding a margin of 2.1%, compared to $(7.8) million and margin of (1.4)% in the same period of the prior year.
  • Non-GAAP operating income for the full year of 2019 was $88.8 million, yielding a margin of 15.4% compared to guided range of $85.5 million and $87.5 million.
  • Net loss for the full year of 2019 was $(4.1) million, or a $(0.07) diluted net loss per share, compared to $(33.8) million and $(0.58) diluted net loss per share in the same period of the prior year.
  • Non-GAAP net income for the full year of 2019 was $77.0 million, or a $1.17 diluted net income per share, compared to $47.0 million and $0.74 diluted net loss per share in the same period of the prior year.
  • Unlevered free cash flow for the full year of 2019 was $90.2 million, yielding a margin of 15.6%, compared to a guided range of $86 million and $92 million.

“We are proud of the company we have built over the last 20 years. And with today’s announcement regarding our acquisition of Saba, we are confident about our vision, capabilities and opportunity for the next 20 years. We believe the combined business will have the reach and resources to close the skills divide for millions of people around the world and yield substantial value for our clients and shareholders,” said Adam Miller, Founder and Chief Executive Officer.

Recent Highlights:

  • The Company joined forces with Facebook to enhance the value of virtual reality training at work through Oculus integration in its learning management solution.
  • The Company acquired Clustree in order to accelerate the development of a skills engine to help organizations identify, develop, and deploy their talent for the roles needed today and in the future.
  • The Company joined Velocity Network Foundation to accelerate the development of a universal blockchain-powered network that will put people in control of their career credentials and provide organizations with transparent insights into their workforce potential.

“We are confident that the operational changes we are making to the business combined with the expanded reach, engineering expertise, and the cost synergies we expect from the anticipated acquisition of Saba will position us for ongoing success,” noted Brian Swartz, Chief Financial Officer.

Stock Repurchase Program:

The Company has an authorization to repurchase up to $150 million of its common stock.

The following is a summary of the Company’s stock repurchases as of December 31, 2019:

Period

 

# of Shares
Repurchased

 

Average Price per
Share

 

Total Expenditures
(in thousands)

August 23, 2019 - August 31, 2019

 

66,955

 

 

$

52.28

 

 

$

3,500

 

September 1, 2019 - September 30, 2019

 

186,759

 

 

$

53.7

 

 

$

10,030

 

October 1, 2019 - October 31, 2019

 

163,047

 

 

$

54.13

 

 

$

8,826

 

November 1, 2019 - November 30, 2019

 

 

 

$

 

 

$

 

December 1, 2019 - December 31, 2019

 

 

 

$

 

 

$

 

Total

 

416,761

 

 

$

53.64

 

 

$

22,356

 

At December 31, 2019, $127.6 million remained available under the share repurchase program.

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. Please note, this guidance is for Cornerstone's business today, and does not reflect the anticipated acquisition of Saba.

For the first quarter ending March 31, 2020, the Company provides the following outlook:

  • Revenue between $147.0 million and $150.0 million, representing year-over-year growth at the mid-point of 6.0%2, or 6.7%3,4 on a constant currency basis.
  • Subscription revenue between $143.0 million and $145.0 million, representing year-over-year growth at the mid-point of 9.7%2, or 10.5%3,4 on a constant currency basis.

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.

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:

2

 

Exchange rate applied to revenue for the first quarter of 2020.

$1.30 USD per GBP

3

  Exchange rate from the first quarter of 2019 applied to calculate revenue growth for the first quarter of 2020 on a constant currency basis.

$1.30 USD per GBP

4

  Exchange rate from the first quarter of 2019 applied to calculate revenue growth for the first quarter of 2020 on a constant currency basis.

$1.14 USD per EUR

Quarterly Conference Call

Cornerstone will host a conference call to discuss its fourth 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 (US) or (484) 653-6763 (outside the US) and referencing passcode: 3825969. 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 March 2, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 3825969 and Web PIN: 1726.

About Cornerstone

Cornerstone is a global 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 their people potential. Featuring comprehensive recruiting, personalized learning, modern content delivered in the flow of work, development-driven performance management and holistic workforce data management and insights, Cornerstone’s people development solutions are successfully used by more than 3,600 global clients of all sizes, spanning more than 40 million users across 187 countries and 43 languages. Learn more at www.csod.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, the anticipated acquisition of Saba, 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 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 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 coronavirus outbreak; 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; the failure to satisfy any of the conditions to the consummation of the anticipated acquisition of Saba, including regulatory approval; 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 Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2019. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 investment, 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 are defined as income (loss) from operations excluding 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 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.
  • 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.
  • 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)

 

December 31,
2019

 

December 31,
2018

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

215,907

 

 

$

183,596

 

Short-term investments

201,579

 

 

204,732

 

Accounts receivable, net

131,105

 

 

125,300

 

Deferred commissions, current portion

33,215

 

 

25,531

 

Prepaid expenses and other current assets

30,512

 

 

34,940

 

Total current assets

612,318

 

 

574,099

 

Capitalized software development costs, net

50,023

 

 

45,416

 

Property and equipment, net

36,526

 

 

77,254

 

Operating right-of-use assets

72,944

 

 

 

Deferred commissions, net of current portion

74,563

 

 

55,450

 

Long-term investments

60,192

 

 

1,250

 

Intangible assets, net

9,440

 

 

13,867

 

Goodwill

47,453

 

 

47,453

 

Other assets, net

2,642

 

 

3,437

 

Total assets

$

966,101

 

 

$

818,226

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,803

 

 

$

11,921

 

Accrued expenses

78,075

 

 

70,065

 

Deferred revenue, current portion

339,522

 

 

312,526

 

Operating lease liabilities, current portion

7,235

 

 

 

Other liabilities

11,015

 

 

7,645

 

Total current liabilities

439,650

 

 

402,157

 

Convertible notes, net

293,174

 

 

288,967

 

Deferred revenue, net of current portion

6,945

 

 

13,275

 

Operating lease liabilities, net of current portion

67,195

 

 

 

Facility financing obligation

 

 

46,100

 

Other liabilities, non-current

655

 

 

2,484

 

Total liabilities

807,619

 

 

752,983

 

Stockholders’ equity:

 

 

 

Common stock

6

 

 

6

 

Additional paid-in capital

682,717

 

 

585,387

 

Accumulated deficit

(524,680

)

 

(520,626

)

Accumulated other comprehensive income

439

 

 

476

 

Total stockholders’ equity

158,482

 

 

65,243

 

Total liabilities and stockholders’ equity

$

966,101

 

 

$

818,226

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

Revenue

$

149,594

 

 

$

138,247

 

 

$

576,523

 

 

$

537,891

 

Cost of revenue 1, 2

38,166

 

 

34,793

 

 

149,215

 

 

144,349

 

Gross profit

111,428

 

 

103,454

 

 

427,308

 

 

393,542

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing 1

56,722

 

 

52,354

 

 

227,733

 

 

224,635

 

Research and development 1

23,373

 

 

24,967

 

 

101,151

 

 

76,981

 

General and administrative 1

20,750

 

 

23,535

 

 

86,491

 

 

90,749

 

Restructuring 1

 

 

 

 

 

 

8,946

 

Total operating expenses

100,845

 

 

100,856

 

 

415,375

 

 

401,311

 

Income (loss) from operations

10,583

 

 

2,598

 

 

11,933

 

 

(7,769

)

Other income (expense):

 

 

 

 

 

 

 

Interest income

1,924

 

 

1,653

 

 

8,178

 

 

7,796

 

Interest expense

(5,416

)

 

(5,350

)

 

(21,559

)

 

(28,176

)

Other, net

2,804

 

 

(1,070

)

 

84

 

 

(3,098

)

Other expense, net

(688

)

 

(4,767

)

 

(13,297

)

 

(23,478

)

Income (loss) before income tax provision

9,895

 

 

(2,169

)

 

(1,364

)

 

(31,247

)

Income tax provision

(463

)

 

(1,004

)

 

(2,690

)

 

(2,595

)

Net income (loss)

$

9,432

 

 

$

(3,173

)

 

$

(4,054

)

 

$

(33,842

)

Net income (loss) per share, basic

$

0.16

 

 

$

(0.05

)

 

$

(0.07

)

 

$

(0.58

)

Net income (loss) per share, diluted

$

0.15

 

 

$

(0.05

)

 

$

(0.07

)

 

(0.58

)

Weighted average common shares outstanding, basic

60,813

 

 

58,649

 

 

60,086

 

 

58,159

 

Weighted average common shares outstanding, diluted

63,482

 

 

58,649

 

 

60,086

 

 

58,159

 

1

 

Includes stock-based compensation as follows:

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

Cost of revenue

$

1,612

 

 

$

1,113

 

 

$

6,282

 

 

$

4,218

 

 

Sales and marketing

7,009

 

 

5,722

 

 

27,780

 

 

24,440

 

 

Research and development

3,203

 

 

3,863

 

 

16,003

 

 

11,800

 

 

General and administrative

4,892

 

 

4,817

 

 

22,365

 

 

19,872

 

 

Restructuring

 

 

 

 

 

 

6,227

 

 

Total

$

16,716

 

 

$

15,515

 

 

$

72,430

 

 

$

66,557

 

2

 

Cost of revenue includes amortization of intangible assets as follows:

 

 

Three Months Ended

 

Year Ended

 

 

December 31

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

Cost of revenue

$

1,047

 

 

$

625

 

 

$

4,427

 

 

$

833

 

   

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

 

 

 

Net income (loss)

$

9,432

 

 

$

(3,173

)

 

$

(4,054

)

 

$

(33,842

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

10,751

 

 

9,909

 

 

41,599

 

 

35,260

 

Accretion of debt discount and amortization of debt issuance costs

1,077

 

 

1,011

 

 

4,207

 

 

8,929

 

Purchased investment premium, net of amortization

(57

)

 

(588

)

 

(957

)

 

(160

)

Net foreign currency and other gain

(3,133

)

 

82

 

 

(629

)

 

(440

)

Stock-based compensation expense

16,716

 

 

15,515

 

 

72,430

 

 

66,557

 

Deferred income taxes

61

 

 

123

 

 

61

 

 

123

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

(29,454

)

 

(28,558

)

 

(5,554

)

 

27,199

 

Deferred commissions

(13,111

)

 

(8,212

)

 

(27,241

)

 

(15,316

)

Prepaid expenses and other assets

245

 

 

(1,951

)

 

12,834

 

 

(11,443

)

Accounts payable

(2,719

)

 

762

 

 

(8,759

)

 

(5,496

)

Accrued expenses

13,991

 

 

9,270

 

 

8,428

 

 

9,291

 

Deferred revenue

58,683

 

 

49,498

 

 

19,635

 

 

10,803

 

Other liabilities

112

 

 

1,299

 

 

3,549

 

 

(1,212

)

Net cash provided by operating activities

62,594

 

 

44,987

 

 

115,549

 

 

90,253

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of marketable investments

(79,001

)

 

 

 

(282,426

)

 

(125,109

)

Purchases of non-marketable investments

(9,000

)

 

 

 

(9,000

)

 

 

Maturities of investments

28,917

 

 

50,550

 

 

236,401

 

 

185,733

 

Capital expenditures

(2,047

)

 

(4,734

)

 

(18,034

)

 

(14,895

)

Capitalized software costs

(5,833

)

 

(6,572

)

 

(24,668

)

 

(25,515

)

Cash paid for acquisition, net of cash acquired

 

 

(22,997

)

 

 

 

(41,090

)

Net cash (used in) provided by investing activities

(66,964

)

 

16,247

 

 

(97,727

)

 

(20,876

)

Cash flows from financing activities

 

 

 

 

 

 

 

Payments of debt issuance costs and proceeds from convertible notes

 

 

 

 

 

 

(152

)

Repayment of debt

 

 

 

 

 

 

(253,000

)

Proceeds from employee stock plans

9,528

 

 

10,928

 

 

42,600

 

 

54,402

 

Repurchases of common stock

(8,826

)

 

(24,515

)

 

(22,356

)

 

(79,266

)

Payment of tax withholdings for employee stock plans

 

 

 

 

(5,469

)

 

 

Net cash provided by (used in) financing activities

702

 

 

(13,587

)

 

14,775

 

 

(278,016

)

Effect of exchange rate changes on cash and cash equivalents

837

 

 

(609

)

 

(286

)

 

(1,341

)

Net (decrease) increase in cash and cash equivalents

(2,831

)

 

47,038

 

 

32,311

 

 

(209,980

)

Cash and cash equivalents at beginning of period

218,738

 

 

136,558

 

 

183,596

 

 

393,576

 

Cash and cash equivalents at end of period

$

215,907

 

 

$

183,596

 

 

$

215,907

 

 

$

183,596

 

Supplemental cash flow data

 

 

 

 

 

 

 

Cash paid for interest

$

 

 

$

 

 

$

17,356

 

 

$

13,628

 

Cash paid for income taxes

216

 

 

286

 

 

1,704

 

 

1,859

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Assets acquired under capital leases and other financing arrangements

$

 

 

$

46,100

 

 

$

1,276

 

 

$

47,070

 

Capitalized assets financed by accounts payable and accrued expenses

490

 

 

1,566

 

 

490

 

 

1,566

 

Capitalized stock-based compensation

1,420

 

 

1,295

 

 

4,847

 

 

5,042

 

 

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, INCOME (LOSS) FROM OPERATIONS TO NON-GAAP OPERATING INCOME, AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME MARGIN

(in thousands)

(unaudited)

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Revenue

$

149,594

 

 

$

138,247

 

 

$

576,523

 

 

$

537,891

 

Cost of revenue

38,166

 

 

34,793

 

 

149,215

 

 

144,349

 

Gross profit

$

111,428

 

 

$

103,454

 

 

$

427,308

 

 

$

393,542

 

Gross margin

74.5

%

 

74.8

%

 

74.1

%

 

73.2

%

 

 

 

 

 

 

 

 

Cost of revenue

$

38,166

 

 

$

34,793

 

 

$

149,215

 

 

$

144,349

 

Adjustments to cost of revenue:

 

 

 

 

 

 

 

Stock-based compensation

(1,612

)

 

(1,113

)

 

(6,282

)

 

(4,218

)

Amortization of intangible assets

(1,047

)

 

(625

)

 

(4,427

)

 

(833

)

Total adjustments to cost of revenue

(2,659

)

 

(1,738

)

 

(10,709

)

 

(5,051

)

Non-GAAP costs of revenue

35,507

 

 

33,055

 

 

138,506

 

 

139,298

 

Non-GAAP gross profit

$

114,087

 

 

$

105,192

 

 

$

438,017

 

 

$

398,593

 

Non-GAAP gross margin

76.3

%

 

76.1

%

 

76.0

%

 

74.1

%

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Income (loss) from operations

$

10,583

 

 

$

2,598

 

 

$

11,933

 

 

$

(7,769

)

Operating margin

7.1

%

 

1.9

%

 

2.1

%

 

(1.4

) %

Adjustments to loss from operations:

 

 

 

 

 

 

 

Stock-based compensation

16,716

 

 

15,515

 

 

72,430

 

 

60,330

 

Amortization of intangible assets

1,047

 

 

625

 

 

4,427

 

 

833

 

Restructuring1

 

 

 

 

 

 

8,946

 

Acquisition costs2

 

 

705

 

 

 

 

1,057

 

Total adjustments to income (loss) from operations

17,763

 

 

16,845

 

 

76,857

 

 

71,166

 

Non-GAAP operating income

$

28,346

 

 

$

19,443

 

 

$

88,790

 

 

$

63,397

 

Non-GAAP operating income margin

18.9

%

 

14.1

%

 

15.4

%

 

11.8

%

1

 

Restructuring costs includes $6.2 million of stock-based compensation for the twelve months ended December 31, 2018.

2

 

Costs related to the Company’s acquisition of Workpop Inc. and Grovo Learning, Inc.

Cornerstone OnDemand, Inc.

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

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

Net income (loss)

$

9,432

 

 

$

(3,173

)

 

$

(4,054

)

 

$

(33,842

)

Adjustments to net income (loss)

 

 

 

 

 

 

 

Stock-based compensation

16,716

 

 

15,515

 

 

72,430

 

 

60,330

 

Amortization of intangible assets

1,047

 

 

625

 

 

4,427

 

 

833

 

Acquisition costs1

 

 

705

 

 

 

 

1,057

 

Accretion of debt discount and amortization of debt issuance costs2

1,077

 

 

1,011

 

 

4,207

 

 

8,929

 

Fair value adjustment on strategic investments 3

 

 

750

 

 

 

 

750

 

Restructuring4

 

 

 

 

 

 

8,946

 

Total adjustments to net income (loss)

18,840

 

 

18,606

 

 

81,064

 

 

80,845

 

Non-GAAP net income

$

28,272

 

 

$

15,433

 

 

$

77,010

 

 

$

47,003

 

Non-GAAP basic net income per share

$

0.46

 

 

$

0.26

 

 

$

1.28

 

 

$

0.81

 

Non-GAAP diluted net income per share

$

0.43

 

 

$

0.24

 

 

$

1.17

 

 

$

0.74

 

Weighted-average common shares outstanding, basic

60,813

 

 

58,649

 

 

60,086

 

 

58,159

 

Non-GAAP weighted-average common shares outstanding, diluted

66,072

 

 

64,281

 

 

65,605

 

 

63,412

 

1

 

Costs related to the Company’s acquisition of Workpop Inc. and Grovo Learning, Inc.

2

 

Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of $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.

3

 

Fair value adjustment recorded for our strategic investments in privately-held companies.

4

 

Restructuring costs include $6.2 million of stock-based compensation for the twelve months ended December 31, 2018.

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

 

Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

Reconciliation of unlevered free cash flow:

 

 

 

 

 

 

 

Net cash provided by operating activities

$

62,594

 

 

$

44,987

 

 

$

115,549

 

 

$

90,253

 

Capital expenditures

(2,047

)

 

(4,734

)

 

(18,034

)

 

(14,895

)

Capitalized software costs

(5,833

)

 

(6,572

)

 

(24,668

)

 

(25,515

)

Cash paid for interest

 

 

 

 

17,356

 

 

13,628

 

Unlevered free cash flow

$

54,714

 

 

$

33,681

 

 

$

90,203

 

 

$

63,471

 

Unlevered free cash flow margin

36.6

%

 

24.4

%

 

15.6

%

 

11.8

%

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

 

 

 

 

 

Q1'18

 

Q2'18

 

Q3'18

 

Q4'18

 

 

Q1'19

 

Q2'19

 

Q3'19

 

Q4'19

 

 

FY17

 

FY18

 

FY19

SELECTED METRICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of customers1

 

3,280

 

3,363

 

3,428

 

3,535

 

 

3,567

 

3,604

 

3,645

 

3,698

 

 

3,250

 

3,535

 

3,698

% y/y

 

9.4%

 

9.3%

 

9.0%

 

8.8%

 

 

8.8%

 

7.2%

 

6.3%

 

4.6%

 

 

11.4%

 

8.8%

 

4.6%

% q/q

 

0.9%

 

2.5%

 

1.9%

 

3.1%

 

 

0.9%

 

1.0%

 

1.1%

 

1.5%

 

 

n/a

 

n/a

 

n/a

Number of employees

 

1,829

 

1,851

 

1,892

 

1,953

 

 

2,017

 

2,034

 

1,986

 

1,993

 

 

1,891

 

1,953

 

1,993

% y/y

 

(1.6)%

 

(4.2)%

 

(3.5)%

 

3.3%

 

 

10.3%

 

9.9%

 

5.0%

 

2.0%

 

 

3.7%

 

3.3%

 

2.0%

% q/q

 

(3.3)%

 

1.2%

 

2.2%

 

3.2%

 

 

3.3%

 

0.8%

 

(2.4)%

 

0.4%

 

 

n/a

 

n/a

 

n/a

Annual dollar retention rate

 

n/a

 

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

 

n/a

 

 

439,000

 

510,000

 

575,000

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

 

(4,580)

 

17,228

 

32,617

 

44,987

 

 

7,294

 

21,183

 

24,478

 

62,594

 

 

67,510

 

90,253

 

115,549

Unlevered free cash flow (in thousands)

 

(10,178)

 

7,900

 

32,067

 

33,681

 

 

4,337

 

9,470

 

21,682

 

54,714

 

 

43,680

 

63,471

 

90,203

Unlevered free cash flow margin

 

(7.6)%

 

6.0%

 

23.9%

 

24.4%

 

 

3.1%

 

6.7%

 

15.0%

 

36.6%

 

 

9.1%

 

11.8%

 

15.6%

FINANCIAL DATA (in thousands, except percentages):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

133,113

 

132,517

 

134,014

 

138,247

 

 

140,117

 

141,860

 

144,952

 

149,594

 

 

 

537,891

 

576,523

Subscription revenue

 

113,134

 

114,771

 

118,844

 

126,303

 

 

131,256

 

132,562

 

137,446

 

141,704

 

 

 

473,052

 

542,968

% y/y growth

 

 

 

 

 

 

16.0%

 

15.5%

 

15.7%

 

12.2%

 

 

 

 

14.8%

% y/y growth constant currency

 

 

 

 

 

 

18.2%

 

17.3%

 

17.2%

 

12.4%

 

 

 

 

16.2%

Subscription revenue % of total revenue

 

85.0%

 

86.6%

 

88.7%

 

91.4%

 

 

93.7%

 

93.4%

 

94.8%

 

94.7%

 

 

 

87.9%

 

94.2%

(Loss) income from operations

 

(8,846)

 

(3,095)

 

1,574

 

2,598

 

 

1,231

 

(3,594)

 

3,713

 

10,583

 

 

 

(7,769)

 

11,933

MARGIN DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

72.2%

 

72.6%

 

73.0%

 

74.8%

 

 

76.0%

 

71.7%

 

74.4%

 

74.5%

 

 

 

73.2%

 

74.1%

Sales and marketing % of revenue

 

44.5%

 

45.1%

 

39.7%

 

37.9%

 

 

38.9%

 

41.4%

 

39.9%

 

37.9%

 

 

 

41.8%

 

39.5%

Research and development % of revenue

 

12.0%

 

12.3%

 

14.7%

 

18.1%

 

 

19.8%

 

17.2%

 

17.7%

 

15.6%

 

 

 

14.3%

 

17.5%

General and administrative % of revenue

 

16.5%

 

16.7%

 

17.3%

 

17.0%

 

 

16.4%

 

15.7%

 

14.2%

 

13.9%

 

 

 

16.9%

 

15.0%

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)%

 

2.6%

 

7.1%

 

 

 

(1.4)%

 

2.1%

NON-GAAP MARGIN DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

72.9%

 

73.3%

 

74.0%

 

76.1%

 

 

77.7%

 

73.7%

 

76.3%

 

76.3%

 

 

 

74.1%

 

76.0%

Non-GAAP sales and marketing % of revenue

 

39.8%

 

40.2%

 

35.3%

 

33.7%

 

 

34.6%

 

36.6%

 

34.4%

 

33.2%

 

 

 

37.2%

 

34.7%

Non-GAAP research and development % of revenue

 

10.3%

 

10.5%

 

12.3%

 

15.3%

 

 

16.8%

 

14.1%

 

14.8%

 

13.5%

 

 

 

12.1%

 

14.8%

Non-GAAP general and administrative % of revenue

 

13.1%

 

12.7%

 

13.1%

 

13.0%

 

 

12.3%

 

11.3%

 

10.3%

 

10.6%

 

 

 

13.0%

 

11.1%

Non-GAAP operating margin

 

9.7%

 

10.0%

 

13.3%

 

14.1%

 

 

14.0%

 

11.7%

 

16.7%

 

18.9%

 

 

 

11.8%

 

15.4%

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

 

14.8%

 

15.2%

 

17.3%

 

20.1%

 

 

22.1%

 

18.8%

 

18.0%

 

17.4%

 

 

 

16.8%

 

19.1%

FOREIGN EXCHANGE RATES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GBP to USD average period rate

 

1.39

 

1.36

 

1.30

 

1.29

 

 

1.30

 

1.29

 

1.23

 

1.29

 

 

1.29

 

1.34

 

1.28

GBP to USD end of period spot rate

 

1.40

 

1.32

 

1.30

 

1.27

 

 

1.30

 

1.27

 

1.23

 

1.32

 

 

1.35

 

1.27

 

1.32

EUR to USD average period rate

 

1.23

 

1.19

 

1.16

 

1.14

 

 

1.14

 

1.12

 

1.11

 

1.11

 

 

1.14

 

1.18

 

1.12

EUR to USD end of period spot rate

 

1.23

 

1.17

 

1.16

 

1.14

 

 

1.12

 

1.14

 

1.09

 

1.12

 

 

1.20

 

1.14

 

1.12

1

 

Includes contracted customers of our enterprise people development platform and excludes customers 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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