People development solution provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its second quarter ended June 30, 2020. The Company has provided supplemental financial information located on its Investor Relations website. On April 22, 2020, the Company acquired Saba Software, Inc. ("Saba"); the below discussion includes Saba's results for the post-acquisition period.
Second Quarter 2020 Results:
- Revenue for the second quarter of 2020 was $184.4 million. This represents a 30.0% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 9.2% (approximately one percentage point higher on a constant currency basis).
- Subscription revenue for the second quarter of 2020 was $177.2 million. This represents a 33.7% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 13.4% (approximately one percentage point higher on a constant currency basis).
- Operating loss for the second quarter of 2020 was $22.4 million, yielding a margin of (12.1)%, compared to operating loss of $3.6 million and margin of (2.5)% in the same period of the prior year.
- Non-GAAP operating income for the second quarter of 2020 was $39.9 million, yielding a margin of 21.6%, compared to non-GAAP operating income of $16.6 million and margin of 11.7% in the same period of the prior year.
- Net loss for the second quarter of 2020 was $12.0 million, or $(0.19) diluted net loss per share, compared to net loss of $8.8 million and $(0.15) diluted net loss per share in the same period of the prior year.
- Non-GAAP net income for the second quarter of 2020 was $27.2 million, or $0.40 diluted net income per share, compared to non-GAAP net income of $12.4 million and $0.19 diluted net income per share in the same period of the prior year.
- Unlevered free cash flow for the second quarter of 2020 was $15.4 million, yielding a margin of 8.4%, compared to unlevered free cash flow of $9.5 million and a margin of 6.7%, in the same period of the prior year. Unlevered free cash flow for the second quarter of 2020 includes approximately $17.7 million of restructuring and acquisition-related cash outflows.
"Q2 was one of the most important quarters in Cornerstone history, as the acquisition of Saba was completed and we began operating as one integrated company, while delivering strong results," said Phil Saunders, chief executive officer. "We are now embarking on a brand new chapter in Cornerstone, and we've already started the transformation from a great company into a great business."
Recent Highlights:
- After 20 years as founder and chief executive officer, Adam Miller became co-chair of the Company's board of directors. The board appointed Phil Saunders, the former chief executive officer of Saba Software, to serve as the Company’s new chief executive officer.
- On July 17, 2020, the Company announced that chief financial officer Brian Swartz will leave the Company to pursue another opportunity effective August 14, 2020. Trish Coughlin, chief accounting officer, will serve as interim chief financial officer while the search for a new chief financial officer is conducted.
"We are pleased with the solid financial results in Q2 and believe the Company is well positioned for the transformation that Phil and the leadership team plan to drive," said Brian Swartz, chief financial officer. "Trish Coughlin, our incoming interim chief financial officer, is a seasoned finance executive and will be a great addition to the executive leadership team."
Financial Outlook:
The following outlook2 is based on information available as of the date of this press release and is subject to change in the future.
For the third quarter ending September 30, 2020, the Company provides the following outlook:
- Revenue between $187.0 million and $189.0 million.
- Subscription revenue between $181.0 million and $183.0 million.
For the fourth quarter ending December 31, 2020, the Company provides the following outlook:
- Revenue between $193.0 million and $196.0 million.
- Subscription revenue between $186.0 million and $189.0 million.
For the year ending December 31, 2020, the Company provides the following outlook:
- Revenue between $715.0 million and $720.0 million.
- Subscription revenue between $689.0 million and $694.0 million.
- Non-GAAP operating income between $129.0 million and $133.0 million.
- Unlevered free cash flow between $105.0 million and $115.0 million. Included in this is approximately $60.0 million of restructuring and acquisition-related cash outflows.
The revenue, subscription revenue, and non-GAAP operating income numbers above are impacted by a deferred revenue write-down related to purchase accounting. For more information, refer to the Company's investor relations presentation.
The Company has not reconciled the guidance for non-GAAP operating income or unlevered free cash flow to the corresponding GAAP measures because it does not provide guidance for such GAAP measures and would not be able to present the reconciling items between such GAAP and non-GAAP measures without unreasonable efforts. For non-GAAP operating income, the Company excludes stock-based compensation expense, which is impacted by the number of shares issued and the market price, both of which are uncertain. The actual amount of stock-based compensation expense in the third quarter ending September 30, 2020, the fourth quarter ending December 31, 2020, and the year ending December 31, 2020 will have a significant impact on the Company’s GAAP operating margin.
1 | Financial measures presented on a constant currency basis, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow, and unlevered free cash flow margin are non-GAAP financial measures. Refer to the discussion in the section titled "Non-GAAP Financial Measures" and the reconciliations of each non-GAAP financial measure to its most comparable GAAP financial measure at the end of this press release. | |
2 | In order to translate the financial outlook for entities reporting in GBP to USD and EUR to USD, the following exchange rates have been applied to revenue for the third quarter, fourth quarter, and full year of 2020: | |
$1.31 USD per GBP | ||
$1.18 USD per EUR |
Quarterly Conference Call
Cornerstone will host a conference call to discuss its second quarter 2020 results at 2:00 p.m. PT (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Investor Relations website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (US) or (484) 653-6763 (outside the US) and referencing passcode: 9499743. 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 August 17, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 9499743 and Web PIN: 1726.
Featured Presentation
An accompanying featured presentation will be available at https://investors.cornerstoneondemand.com/investors/overview/default.aspx.
About Cornerstone
Cornerstone is a premier people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise, and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management, and holistic employee data management and insights, Cornerstone’s people development solutions are used by approximately 6,300 customers of all sizes, spanning more than 75 million users across over 180 countries and nearly 50 languages. Learn more at www.cornerstoneondemand.com.
Note: Cornerstone® and Cornerstone OnDemand® are registered trademarks of Cornerstone OnDemand, Inc.
Forward-looking Statements
This press release and the quarterly conference call referenced above contain forward-looking statements, including, but not limited to, statements regarding the expected performance of our business, our future financial and operating performance, including our GAAP and non-GAAP guidance, strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, general business conditions, our ability to execute, the integration of Saba into our business, anticipated synergies from our acquisition of Saba, the expected departure of our chief financial officer and anticipated service of our chief accounting officer as interim chief financial officer, and our expectations regarding certain financial measures including subscription revenue, capital expenditures, unlevered free cash flow, recurring revenue growth, and operating margins. Any forward-looking statements contained in this press release or the quarterly conference call are based upon our historical performance and our current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new customers; the extent to which customers renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing customers by our services organization and implementation subcontractors; the complexity of deployments and product implementations, which can impact the timing of when revenue is recognized from new and existing customers; allowing our implementation subcontractors to contract directly with customers for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and people development provider for organizations of all sizes; changes in the proportion of our customer base that is composed of enterprise or mid-sized organizations; our ability to manage our growth, including additional headcount and entry into new geographies; our ability to expand our enterprise and mid-market sales opportunities; our ability to maintain stable and consistent quota attainment rates; continued strong demand for learning and people development in Europe, the Middle East, Africa, Asia-Pacific, and Japan; the timing and success of efforts to increase operational efficiency and cost containment; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; the impact of foreign exchange rates; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; problems caused by security breaches; costs and reputational harm that could result from defects in our solutions; the success of our strategic relationships with third parties; the loss of any of our key employees and our ability to locate qualified replacements; failure to protect our intellectual property; acts of terrorism or other vandalism, war, natural disasters, or the ongoing COVID-19 pandemic; changes in current tax or accounting rules; legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products; the failure to achieve expected synergies and efficiencies of operations between the Company and Saba; the ability of the Company and Saba to successfully integrate their respective market opportunities, technology, products, personnel, and operations; and unanticipated costs or liabilities related to businesses that we acquire. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Non-GAAP Financial Measures and Other Key Metrics
To supplement its consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures and other key metrics. These non-GAAP financial measures include:
(i) | non-GAAP cost of revenue, which is defined as cost of revenue less amortization of intangible assets and stock-based compensation; | |
(ii) | annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period; | |
(iii) | unlevered free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest; | |
(iv) | unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue; | |
(v) | non-GAAP net income and non-GAAP diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, accretion of debt discount and amortization of debt issuance costs, unrealized fair value adjustment on strategic investments, restructuring costs, acquisition-related costs, discrete tax items, and excludes the impacts of unamortized stock-based compensation expense in applying the treasury method for determining the non-GAAP weighted average number of dilutive shares outstanding; | |
(vi) | non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue; | |
(vii) | non-GAAP operating income and non-GAAP operating income margin, which are defined as income or loss from operations excluding stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs; | |
(viii) | non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, restructuring costs, and acquisition-related costs; and | |
(ix) | non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and amortization of intangible assets attributable to the corresponding GAAP financial measures. |
The Company’s management uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Company’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures and key metrics to help investors understand the operational performance of their businesses. In addition, the Company believes that the following non-GAAP adjustments are useful to management and investors for the following reasons:
- Stock-based compensation. The Company excludes stock-based compensation expense because it is non-cash in nature, and management believes that its exclusion provides additional insight into the Company’s operational performance and also provides a useful comparison of the Company’s operating results to prior periods and its peer companies. Additionally, determining the fair value of certain stock-based awards involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of such awards.
- Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because the expense is a non-cash item and management believes that its exclusion provides meaningful supplemental information regarding the Company’s operational performance and allows for a useful comparison of its operating results to prior periods and its peer companies.
- Accretion of debt discount and amortization of debt issuance costs. The Company recognizes the effective interest expense on its debt and amortizes the issuance costs over the applicable term of such debt. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are excluded from management’s assessment of the Company’s operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. In addition, the exclusion of these items provides a useful comparison of the Company’s operating results to prior periods and its peer companies.
- Fair value adjustment on strategic investments. The Company views the increase or decrease in the fair value of its strategic investments as not indicative of operational performance during any particular period and believes that the exclusion of these gains or losses provides investors with a supplemental view of the Company’s operational performance.
- Acquisition-related costs. The Company excludes costs related to acquisitions because the expenses are discrete to specific acquisitions and are not necessarily indicative of its continuing operations. The Company believes that the exclusion of these costs provides investors with a supplemental view of the Company’s operational performance.
- Restructuring. The Company excludes costs related to restructuring because the expense is not indicative of its continuing operations. The Company believes that the exclusion of these costs provides investors with a supplemental view of the Company’s operational performance.
- Discrete tax items. The Company excludes discrete income tax charges or benefits that are not expected to recur because the items are not indicative of continuing operations. The Company believes that the exclusion of these items provides investors with a supplemental view of the Company’s operational performance.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For the periods presented, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the tables included as part of this press release.
Cornerstone OnDemand, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) | |||||||
June 30, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 136,492 | $ | 215,907 | |||
Short-term investments | — | 201,579 | |||||
Accounts receivable, net | 166,644 | 131,105 | |||||
Deferred commissions, current portion | 36,299 | 33,215 | |||||
Prepaid expenses and other current assets | 36,464 | 30,512 | |||||
Total current assets | 375,899 | 612,318 | |||||
Capitalized software development costs, net | 51,088 | 50,023 | |||||
Property and equipment, net | 38,562 | 36,526 | |||||
Operating right-of-use assets | 83,527 | 72,944 | |||||
Deferred commissions, net of current portion | 71,826 | 74,563 | |||||
Long-term investments | 9,170 | 60,192 | |||||
Intangible assets, net | 480,572 | 9,440 | |||||
Goodwill | 961,602 | 47,453 | |||||
Deferred tax assets | 6,865 | 1,045 | |||||
Other assets | 10,183 | 1,597 | |||||
Total assets | $ | 2,089,294 | $ | 966,101 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 19,955 | $ | 3,803 | |||
Accrued expenses | 94,265 | 78,075 | |||||
Deferred revenue, current portion | 362,356 | 339,522 | |||||
Operating lease liabilities, current portion | 15,051 | 7,235 | |||||
Debt, current portion | 7,535 | — | |||||
Other liabilities | 15,824 | 11,015 | |||||
Total current liabilities | 514,986 | 439,650 | |||||
Debt, net of current portion | 1,224,818 | 293,174 | |||||
Deferred revenue, net of current portion | 7,639 | 6,945 | |||||
Operating lease liabilities, net of current portion | 72,266 | 67,195 | |||||
Deferred tax liabilities | 22,785 | — | |||||
Other liabilities, non-current | 5,260 | 655 | |||||
Total liabilities | 1,847,754 | 807,619 | |||||
Stockholders’ equity: | |||||||
Common stock, $0.0001 par value | 6 | 6 | |||||
Additional paid-in capital | 788,150 | 682,717 | |||||
Accumulated deficit | (550,442 | ) | (524,680 | ) | |||
Accumulated other comprehensive income | 3,826 | 439 | |||||
Total stockholders’ equity | 241,540 | 158,482 | |||||
Total liabilities and stockholders’ equity | $ | 2,089,294 | $ | 966,101 | |||
Cornerstone OnDemand, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 184,358 | $ | 141,860 | $ | 334,494 | $ | 281,977 | |||||||
Cost of revenue 1,2 | 58,000 | 40,187 | 99,924 | 73,882 | |||||||||||
Gross profit | 126,358 | 101,673 | 234,570 | 208,095 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing 1,2 | 64,942 | 58,691 | 120,272 | 113,196 | |||||||||||
Research and development 1 | 28,338 | 24,337 | 52,423 | 52,083 | |||||||||||
General and administrative 1,2 | 25,620 | 22,239 | 50,345 | 45,179 | |||||||||||
Acquisition-related costs | 20,093 | — | 26,904 | — | |||||||||||
Restructuring1 | 9,733 | — | 9,733 | — | |||||||||||
Total operating expenses | 148,726 | 105,267 | 259,677 | 210,458 | |||||||||||
Loss from operations | (22,368 | ) | (3,594 | ) | (25,107 | ) | (2,363 | ) | |||||||
Other expense: | |||||||||||||||
Interest expense | (18,219 | ) | (5,378 | ) | (23,720 | ) | (10,744 | ) | |||||||
Other, net | (514 | ) | 1,081 | (5,878 | ) | 2,474 | |||||||||
Other expense, net | (18,733 | ) | (4,297 | ) | (29,598 | ) | (8,270 | ) | |||||||
Loss before income tax provision | (41,101 | ) | (7,891 | ) | (54,705 | ) | (10,633 | ) | |||||||
Income tax benefit (provision)3 | 29,114 | (914 | ) | 28,943 | (1,636 | ) | |||||||||
Net loss | $ | (11,987 | ) | $ | (8,805 | ) | $ | (25,762 | ) | $ | (12,269 | ) | |||
Net loss per share, basic and diluted | $ | (0.19 | ) | $ | (0.15 | ) | $ | (0.41 | ) | $ | (0.21 | ) | |||
Weighted average common shares outstanding, basic and diluted | 63,593 | 59,715 | 62,612 | 59,430 | |||||||||||
1 Includes stock-based compensation as follows: | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cost of revenue | $ | 2,122 | $ | 1,786 | $ | 4,823 | $ | 2,922 | |||||||
Sales and marketing | 5,628 | 6,809 | 14,212 | 12,856 | |||||||||||
Research and development | 2,724 | 4,319 | 7,524 | 8,515 | |||||||||||
General and administrative | 3,421 | 6,237 | 10,506 | 11,903 | |||||||||||
Restructuring | 208 | — | 208 | — | |||||||||||
Total | $ | 14,103 | $ | 19,151 | $ | 37,273 | $ | 36,196 | |||||||
2 Includes amortization of intangible assets as follows: | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cost of revenue | $ | 7,396 | $ | 1,047 | $ | 9,059 | $ | 2,333 | |||||||
Sales and marketing | 10,679 | — | 10,762 | — | |||||||||||
General and administrative | 453 | — | 453 | — | |||||||||||
Total | $ | 18,528 | $ | 1,047 | $ | 20,274 | $ | 2,333 | |||||||
3 Includes a discrete income tax benefit of approximately $26.7 million during the three and six months ended June 30, 2020 related to release of valuation allowance against previously reserved deferred tax assets. | |||||||||||||||
Cornerstone OnDemand, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net loss | $ | (11,987 | ) | $ | (8,805 | ) | $ | (25,762 | ) | $ | (12,269 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 31,195 | 9,176 | 43,159 | 20,034 | |||||||||||
Accretion of debt discount and amortization of debt issuance costs | 3,597 | 1,516 | 4,687 | 2,543 | |||||||||||
Amortization (accretion) of purchased investment premium or discount, net | — | (509 | ) | 41 | (725 | ) | |||||||||
Net foreign currency and other loss | 2,405 | 821 | 7,990 | 1,115 | |||||||||||
Stock-based compensation expense | 14,103 | 19,151 | 37,273 | 36,196 | |||||||||||
Deferred income taxes | (30,636 | ) | — | (30,636 | ) | — | |||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||||||
Accounts receivable | (14,182 | ) | (11,081 | ) | 21,334 | 21,874 | |||||||||
Deferred commissions | (3,786 | ) | (4,456 | ) | (3,204 | ) | (8,730 | ) | |||||||
Prepaid expenses and other assets | 15,870 | 3,313 | 9,320 | 6,954 | |||||||||||
Accounts payable | 3,275 | 4,387 | 3,798 | 1,606 | |||||||||||
Accrued expenses | 20,572 | 13,568 | 2,493 | (9,719 | ) | ||||||||||
Deferred revenue | (7,354 | ) | (8,615 | ) | (42,911 | ) | (32,574 | ) | |||||||
Other liabilities | (298 | ) | 2,717 | 1,180 | 2,172 | ||||||||||
Net cash provided by operating activities | 22,774 | 21,183 | 28,762 | 28,477 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of marketable investments | — | (82 | ) | (20,419 | ) | (82 | ) | ||||||||
Maturities and sales of investments | — | 27,095 | 272,173 | 197,774 | |||||||||||
Capital expenditures | (1,304 | ) | (5,031 | ) | (2,275 | ) | (9,274 | ) | |||||||
Capitalized software costs | (6,135 | ) | (6,728 | ) | (13,524 | ) | (14,127 | ) | |||||||
Cash paid for acquisitions, net of cash acquired | (1,279,533 | ) | — | (1,298,172 | ) | — | |||||||||
Net cash (used in) provided by investing activities | (1,286,972 | ) | 15,254 | (1,062,217 | ) | 174,291 | |||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from term loan debt, net of discount | 979,582 | — | 979,582 | — | |||||||||||
Payments of debt issuance and modification costs | (30,268 | ) | — | (30,268 | ) | — | |||||||||
Proceeds from employee stock plans | 2,497 | 7,371 | 12,627 | 14,211 | |||||||||||
Payment of tax withholdings for employee stock plans | — | (5,469 | ) | — | (5,469 | ) | |||||||||
Net cash provided by financing activities | 951,811 | 1,902 | 961,941 | 8,742 | |||||||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash1 | (2,162 | ) | (248 | ) | (2,788 | ) | — | ||||||||
Net (decrease) increase in cash, cash equivalents, and restricted cash1 | (314,549 | ) | 38,091 | (74,302 | ) | 211,510 | |||||||||
Cash, cash equivalents, and restricted cash at beginning of period1 | 456,154 | 357,015 | 215,907 | 183,596 | |||||||||||
Cash, cash equivalents, and restricted cash at end of period1 | $ | 141,605 | $ | 395,106 | $ | 141,605 | $ | 395,106 | |||||||
Supplemental cash flow data | |||||||||||||||
Cash paid for interest | $ | 59 | $ | 46 | $ | 8,684 | $ | 8,731 | |||||||
Cash paid for income taxes | 1,588 | 580 | 2,543 | 970 | |||||||||||
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 | 275 | 2,728 | 275 | 2,728 | |||||||||||
Capitalized stock-based compensation | 1,925 | 1,361 | 4,115 | 2,113 | |||||||||||
Issuance of common stock for partial consideration for acquisition | 32,889 | — | 32,889 | — | |||||||||||
Increase in debt discount as a result of modification of Convertible Notes | 18,598 | — | 18,598 | — | |||||||||||
1 Below is a reconciliation of cash, cash equivalents, and restricted cash. | |||||||
As of June 30, | |||||||
2020 | 2019 | ||||||
Cash and cash equivalents | $ | 136,492 | $ | 395,106 | |||
Restricted cash included in other assets, net | 1,276 | — | |||||
Restricted cash included in prepaid expenses and other current assets | 3,837 | — | |||||
Total cash, cash equivalents, and restricted cash | $ | 141,605 | $ | 395,106 | |||
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, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Reconciliation of cost of revenue, gross profit, and gross margin: | |||||||||||||||
Revenue | $ | 184,358 | $ | 141,860 | $ | 334,494 | $ | 281,977 | |||||||
Cost of revenue | 58,000 | 40,187 | 99,924 | 73,882 | |||||||||||
Gross profit | $ | 126,358 | $ | 101,673 | $ | 234,570 | $ | 208,095 | |||||||
Gross margin | 68.5 | % | 71.7 | % | 70.1 | % | 73.8 | % | |||||||
Cost of revenue | $ | 58,000 | $ | 40,187 | $ | 99,924 | $ | 73,882 | |||||||
Adjustments to cost of revenue: | |||||||||||||||
Stock-based compensation1 | (2,122 | ) | (1,786 | ) | (4,260 | ) | (2,922 | ) | |||||||
Amortization of intangible assets | (7,396 | ) | (1,047 | ) | (9,059 | ) | (2,333 | ) | |||||||
Total adjustments to cost of revenue | (9,518 | ) | (2,833 | ) | (13,319 | ) | (5,255 | ) | |||||||
Non-GAAP cost of revenue | 48,482 | 37,354 | 86,605 | 68,627 | |||||||||||
Non-GAAP gross profit | $ | 135,876 | $ | 104,506 | $ | 247,889 | $ | 213,350 | |||||||
Non-GAAP gross margin | 73.7 | % | 73.7 | % | 74.1 | % | 75.7 | % | |||||||
Reconciliation of loss from operations and operating margin: | |||||||||||||||
Loss from operations | $ | (22,368 | ) | $ | (3,594 | ) | $ | (25,107 | ) | $ | (2,363 | ) | |||
Operating margin | (12.1 | )% | (2.5 | )% | (7.5 | )% | (0.8 | )% | |||||||
Adjustments to loss from operations: | |||||||||||||||
Stock-based compensation1, 3 | 13,895 | 19,151 | 33,004 | 36,196 | |||||||||||
Amortization of intangible assets | 18,528 | 1,047 | 20,274 | 2,333 | |||||||||||
Acquisition-related costs2 | 20,093 | — | 26,904 | — | |||||||||||
Restructuring3 | 9,733 | — | 9,733 | — | |||||||||||
Total adjustments to loss from operations | 62,249 | 20,198 | 89,915 | 38,529 | |||||||||||
Non-GAAP operating income | $ | 39,881 | $ | 16,604 | $ | 64,808 | $ | 36,166 | |||||||
Non-GAAP operating income margin | 21.6 | % | 11.7 | % | 19.4 | % | 12.8 | % | |||||||
1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the six months ended June 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. There is no such difference for the three months ended June 30, 2020. | |||
Six Months Ended | |||
June 30, | |||
2020 | |||
Cost of revenue | $ | 4,260 | |
Sales and marketing | 13,302 | ||
Research and development | 6,110 | ||
General and administrative | 9,332 | ||
Total | $ | 33,004 | |
2 Costs related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, and due diligence costs. | |||
3 Stock-based compensation related to restructuring is presented in the restructuring line item. | |||
Cornerstone OnDemand, Inc. RECONCILIATIONS OF NET LOSS TO NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER SHARE (in thousands, except per share amounts) (unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net loss | $ | (11,987 | ) | $ | (8,805 | ) | $ | (25,762 | ) | $ | (12,269 | ) | |||
Adjustments to net loss | |||||||||||||||
Stock-based compensation1, 3 | 13,895 | 19,151 | 33,004 | 36,196 | |||||||||||
Amortization of intangible assets | 18,528 | 1,047 | 20,274 | 2,333 | |||||||||||
Acquisition-related costs2 | 20,093 | — | 26,904 | — | |||||||||||
Restructuring3 | 9,733 | — | 9,733 | — | |||||||||||
Accretion of debt discount and amortization of debt issuance costs4 | 3,597 | 1,043 | 4,687 | 2,069 | |||||||||||
Income tax benefit5 | (26,659 | ) | — | (26,659 | ) | — | |||||||||
Total adjustments to net loss | 39,187 | 21,241 | 67,943 | 40,598 | |||||||||||
Non-GAAP net income | $ | 27,200 | $ | 12,436 | $ | 42,181 | $ | 28,329 | |||||||
Non-GAAP basic net income per share | $ | 0.43 | $ | 0.21 | $ | 0.67 | $ | 0.48 | |||||||
Non-GAAP diluted net income per share | $ | 0.40 | $ | 0.19 | $ | 0.62 | $ | 0.43 | |||||||
Weighted-average common shares outstanding, basic | 63,593 | 59,715 | 62,612 | 59,430 | |||||||||||
Non-GAAP weighted-average common shares outstanding, diluted | 68,314 | 65,767 | 67,841 | 65,297 | |||||||||||
1 | The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the six months ended June 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. There is no such difference for the three months ended June 30, 2020. | |
2 | Costs related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, and due diligence costs. | |
3 | Stock-based compensation related to restructuring is presented in the restructuring line item. | |
4 | Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of (i) $1.0047 billion of term loan debt on April 22, 2020; and (ii) $300.0 million in convertible notes on December 8, 2017 as well as the modification of these convertible notes on April 20, 2020 to extend the maturity date from July 1, 2021 to March 17, 2023. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions. | |
5 | As described above, this adjustment is a discrete income tax benefit of approximately $26.7 million during both the three and six months ended June 30, 2020 related to release of valuation allowance against previously reserved deferred tax assets. |
Cornerstone OnDemand, Inc. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO UNLEVERED FREE CASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN (A Non-GAAP Financial Measure) (in thousands) (unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Reconciliation of unlevered free cash flow: | |||||||||||||||
Net cash provided by operating activities | $ | 22,774 | $ | 21,183 | $ | 28,762 | $ | 28,477 | |||||||
Capital expenditures | (1,304 | ) | (5,031 | ) | (2,275 | ) | (9,274 | ) | |||||||
Capitalized software costs | (6,135 | ) | (6,728 | ) | (13,524 | ) | (14,127 | ) | |||||||
Cash paid for interest | 59 | 46 | 8,684 | 8,731 | |||||||||||
Unlevered free cash flow | $ | 15,394 | $ | 9,470 | $ | 21,647 | $ | 13,807 | |||||||
Unlevered free cash flow margin | 8.4 | % | 6.7 | % | 6.5 | % | 4.9 | % | |||||||
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 to or filed with the SEC. In the event of discrepancies between amounts in these tables and the Company’s historical disclosures or financial statements, readers should rely on the Company’s filings with the SEC and financial statements in the Company’s most recent earnings press release. | |||||||||||||||||||
The Company intends to periodically review and refine the definition, methodology and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material. | |||||||||||||||||||
FY 2019 | FY 2020 | ||||||||||||||||||
Q1'19 | Q2'19 | Q3'19 | Q4'19 | Q1'20 | Q2'20 | FY17 | FY18 | FY19 | |||||||||||
SELECTED METRICS: | |||||||||||||||||||
Number of customers1 | 3,367 | 3,423 | 3,446 | 3,508 | 3,522 | 6,308 | 3,250 | 3,333 | 3,508 | ||||||||||
% y/y | 8.6 | % | 6.9 | % | 5.7 | % | 5.3 | % | 4.6 | % | 84.3 | % | 11.4 | % | 2.6 | % | 5.3 | % | |
% q/q | 1.0 | % | 1.7 | % | 0.7 | % | 1.8 | % | 0.4 | % | 79.1 | % | n/a | n/a | n/a | ||||
Number of employees | 2,017 | 2,034 | 1,986 | 1,993 | 1,975 | 3,184 | 1,891 | 1,953 | 1,993 | ||||||||||
% y/y | 10.3 | % | 9.9 | % | 5.0 | % | 2.0 | % | (2.1 | )% | 56.5 | % | 3.7 | % | 3.3 | % | 2.0 | % | |
% q/q | 3.3 | % | 0.8 | % | (2.4 | )% | 0.4 | % | (0.9 | )% | 61.2 | % | n/a | n/a | n/a | ||||
Annual dollar retention rate | 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 | 439,000 | 510,000 | 575,000 | ||||||||||
Net cash provided by operating activities (in thousands) | 7,294 | 21,183 | 24,478 | 62,594 | 5,988 | 22,774 | 67,510 | 90,253 | 115,549 | ||||||||||
Unlevered free cash flow (in thousands) | 4,337 | 9,470 | 21,682 | 54,714 | 6,253 | 15,394 | 43,680 | 63,471 | 90,203 | ||||||||||
Unlevered free cash flow margin | 3.1 | % | 6.7 | % | 15.0 | % | 36.6 | % | 4.2 | % | 8.4 | % | 9.1 | % | 11.8 | % | 15.6 | % | |
FINANCIAL DATA (in thousands, except percentages): | |||||||||||||||||||
Revenue | 140,117 | 141,860 | 144,952 | 149,594 | 150,136 | 184,358 | — | 537,891 | 576,523 | ||||||||||
Subscription revenue | 131,256 | 132,562 | 137,446 | 141,704 | 144,421 | 177,217 | — | 473,052 | 542,968 | ||||||||||
% y/y growth | 16.0 | % | 15.5 | % | 15.7 | % | 12.2 | % | 10.0 | % | 33.7 | % | — | — | 14.8 | % | |||
% y/y growth constant currency2 | 18.2 | % | 17.3 | % | 17.2 | % | 12.4 | % | 10.7 | % | n/a | — | — | 16.2 | % | ||||
Subscription revenue % of total revenue | 93.7 | % | 93.4 | % | 94.8 | % | 94.7 | % | 96.2 | % | 96.1 | % | — | 87.9 | % | 94.2 | % | ||
Income (loss) from operations | 1,231 | (3,594 | ) | 3,713 | 10,583 | (2,739 | ) | (22,368 | ) | — | (7,769 | ) | 11,933 | ||||||
MARGIN DATA: | |||||||||||||||||||
Gross margin | 76.0 | % | 71.7 | % | 74.4 | % | 74.5 | % | 72.1 | % | 68.5 | % | — | 73.2 | % | 74.1 | % | ||
Sales and marketing % of revenue | 38.9 | % | 41.4 | % | 39.9 | % | 37.9 | % | 36.9 | % | 35.2 | % | — | 41.8 | % | 39.5 | % | ||
Research and development % of revenue | 19.8 | % | 17.2 | % | 17.7 | % | 15.6 | % | 16.0 | % | 15.4 | % | — | 14.3 | % | 17.5 | % | ||
General and administrative % of revenue | 16.4 | % | 15.6 | % | 14.2 | % | 13.9 | % | 16.5 | % | 13.8 | % | — | 16.7 | % | 15.0 | % | ||
Acquisition-related costs % of revenue | — | — | — | — | 4.5 | % | 10.9 | % | — | 0.2 | % | — | |||||||
Restructuring % of revenue | — | — | — | — | — | 5.3 | % | — | 1.7 | % | — | ||||||||
Operating margin | 0.9 | % | (2.5 | )% | 2.6 | % | 7.1 | % | (1.8 | )% | (12.1 | )% | — | (1.4 | )% | 2.1 | % | ||
NON-GAAP MARGIN DATA: | |||||||||||||||||||
Non-GAAP gross margin | 77.7 | % | 73.7 | % | 76.3 | % | 76.3 | % | 74.6 | % | 73.7 | % | — | 74.1 | % | 76.0 | % | ||
Non-GAAP sales and marketing % of revenue | 34.6 | % | 36.6 | % | 34.4 | % | 33.2 | % | 31.7 | % | 26.4 | % | — | 37.2 | % | 34.7 | % | ||
Non-GAAP research and development % of revenue | 16.8 | % | 14.1 | % | 14.8 | % | 13.5 | % | 13.8 | % | 13.9 | % | — | 12.1 | % | 14.8 | % | ||
Non-GAAP general and administrative % of revenue | 12.3 | % | 11.3 | % | 10.3 | % | 10.6 | % | 12.5 | % | 11.8 | % | — | 13.2 | % | 11.1 | % | ||
Non-GAAP operating margin | 14.0 | % | 11.7 | % | 16.7 | % | 18.9 | % | 16.6 | % | 21.6 | % | — | 11.8 | % | 15.4 | % | ||
Non-GAAP research and development plus capitalized software % of revenue | 22.1 | % | 18.8 | % | 18.0 | % | 17.4 | % | 18.7 | % | 17.2 | % | — | 16.8 | % | 19.1 | % | ||
FOREIGN EXCHANGE RATES: | |||||||||||||||||||
GBP to USD average period rate | 1.30 | 1.29 | 1.23 | 1.29 | 1.28 | 1.23 | 1.29 | 1.34 | 1.28 | ||||||||||
GBP to USD end of period spot rate | 1.30 | 1.27 | 1.23 | 1.32 | 1.23 | 1.23 | 1.35 | 1.27 | 1.32 | ||||||||||
EUR to USD average period rate | 1.14 | 1.12 | 1.11 | 1.11 | 1.10 | 0.94 | 1.14 | 1.18 | 1.12 | ||||||||||
EUR to USD end of period spot rate | 1.12 | 1.14 | 1.09 | 1.12 | 1.10 | 1.12 | 1.20 | 1.14 | 1.12 | ||||||||||
1 During the second quarter of 2020, we adjusted our method of determining customer count to exclude customers that are sold through resellers that share one tenant or instance of our product. The numbers included here reflect this change. We continue to exclude customers from our Cornerstone for Salesforce, PiiQ, Grovo, Workpop, and Clustree products from our customer count metrics. | |||||||||||||||||||
2 We have historically presented constant currency information, a non-GAAP financial measure, to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency fluctuations. However, due to the acquisition of Saba in the second quarter of 2020, constant currency results on a combined company basis were not presented as the historical comparative period did not include the combined company results for a full quarter. | |||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200810005612/en/
Contacts:
Jason Gold
Phone: +1 (310) 526-2531
jgold@csod.com
