CSOD Cornerstone OnDemand Inc

Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its second quarter ended June 30, 2021. Additionally, in a separate release, Cornerstone announced it has entered into a definitive agreement to be acquired by Clearlake Capital Group, L.P. (together with certain of its affiliates, “Clearlake”). Under the terms of the agreement, Clearlake will acquire the outstanding shares of Cornerstone common stock for $57.50 per share in cash. The transaction has an enterprise value of approximately $5.2 billion.

Second Quarter 2021 Results2:

• Revenue for the second quarter of 2021 was $214.3 million. This represents a 16.3% increase compared to the same period of the prior year.
• Subscription revenue for the second quarter of 2021 was $206.8 million. This represents a 16.7% increase compared to the same period of the prior year.
• Income (loss) from operations for the second quarter of 2021 was $20.9 million, yielding a margin of 9.8%, compared to income (loss) from operations of $(22.4) million and a margin of (12.1)% in the same period of the prior year.
• Non-GAAP operating income for the second quarter of 2021 was $68.6 million, yielding a non-GAAP operating margin of 32.0%, compared to non-GAAP operating income of $39.9 million and a non-GAAP operating margin of 21.6% in the same period of the prior year.
• Net loss for the second quarter of 2021 was $(0.4) million, or $(0.01) diluted net loss per share, compared to net loss of $(12.0) million, or $(0.19) diluted net loss per share, in the same period of the prior year.
• Non-GAAP net income for the second quarter of 2021 was $51.9 million, or $0.73 non-GAAP diluted net income per share, compared to non-GAAP net income of $27.2 million, or $0.40 non-GAAP diluted net income per share, in the same period of the prior year.
• Net cash provided by operating activities for the second quarter of 2021 was $45.3 million, yielding a margin of 21.1%, compared to net cash provided by operating activities of $22.8 million and a margin of 12.4% in the same period of the prior year.
• Unlevered free cash flow for the second quarter of 2021 was $44.3 million, yielding a margin of 20.7%, compared to unlevered free cash flow of $15.4 million and a margin of 8.4% in the same period of the prior year. Unlevered free cash flow for the second quarter of 2021 includes approximately $4.2 million of restructuring and acquisition-related cash outflows.

Recent Highlights:

• IDC MarketScape named Cornerstone as a leader in its Worldwide Integrated Talent Management Vendor Assessment reports for learning management, talent management, performance management, and compensation management.
• Cornerstone hosted the Learning Content Summit: Reunite, Rebuild, Recharge, a free, virtual opportunity for organizations and their people to get valuable, timely insights and information to help drive much-needed skill development and agility at work.
• Cornerstone was selected as one of the 2021 Top 20 Online Learning Library Companies by Training Industry. Selection of this year’s list was based on breadth and quality of courses and content; quality of features and capabilities; industry visibility, innovation, and impact; strength of clients and geographic reach; and company size and growth potential.

1 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. See the discussion in the section titled “Non-GAAP Financial Measures and Other Key Metrics” and the reconciliations at the end of this press release.

2 On April 22, 2020, Cornerstone acquired Saba Software, Inc. (“Saba”); the discussion herein includes Saba’s results for the post-acquisition period.

Quarterly Conference Call

In light of the announced transaction with Clearlake, Cornerstone will not hold its earnings conference call previously scheduled for today, August 5, 2021 at 5 p.m. ET.

About Cornerstone

Cornerstone powers the future ready workforce, with HR software and solutions designed to unite people, teams, technology and business, and inspire a work environment of growth, agility and success for all. With an AI-powered and skills-forward system designed for the contemporary workforce, we help organizations modernize the learning and development experience, deliver the most relevant content from anywhere, accelerate talent and career mobility, and establish skills as the universal language of growth and success across the business. Cornerstone serves over 6,000 customers and 75M users and is available in 180 countries and 50 languages. Learn more at https://www.cornerstoneondemand.com/

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

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 stock-based compensation and amortization of intangible assets;

(ii)

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

(iii)

net annual dollar retention rate, which is defined as the percentage of annual recurring revenue from all customers on the first day of a fiscal year that is retained from those same customers on the last day of that same fiscal year. This percentage excludes all annual recurring revenue from new customers added during the fiscal year. Incremental sales during the fiscal year to customers are included in the calculation solely for customers that existed as of the first day of the fiscal year. Therefore, it is possible for our net annual dollar retention rate to exceed 100% in a given fiscal year if incremental sales to existing customers exceed the churn in annual recurring revenue from those same customers during that year.

 

Prior to 2020, incremental sales were only included to the extent those sales offset any decrease in annual recurring revenue from the original amount on the first day of the fiscal year and therefore, the historical net annual dollar retention rate could never exceed 100%. Beginning in 2020, this ratio includes all customers. Previously, Cornerstone for Salesforce, Cornerstone PiiQ, Grovo, and Workpop customers were excluded from the calculation. We believe that our net annual dollar retention rate is an important metric to measure the long-term value of customer agreements and our ability to retain and incrementally sell to our customers;

(iv)

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

(v)

unlevered free cash flow margin, a non-GAAP financial measure, which is defined as unlevered free cash flow divided by revenue;

(vi)

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, acquisition-related and integration expenses, restructuring expenses, accretion of debt discount and amortization of debt issuance costs, discrete tax items, fair value adjustments on strategic investments, 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;

(vii)

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

(viii)

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, acquisition-related and integration expenses, and restructuring expenses;

(ix)

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

(x)

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. 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.
• Acquisition-related and integration. The Company excludes expenses related to acquisitions and integration 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 expenses provides investors with a supplemental view of the Company’s operational performance.
• Restructuring. The Company excludes expenses related to restructuring because the expense is not indicative of its continuing operations. The Company believes that the exclusion of these expenses provides investors with a supplemental view of the Company’s operational performance.
• Accretion of debt discount and amortization of debt issuance costs. The Company recognizes effective interest expense on its debt. The difference between the effective interest expense and the contractual interest expense, which is composed of accretion of debt discount and amortization of debt issuance costs, is 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.
• 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.
• Fair value adjustments 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.

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.

Additional Information and Where to Find It

In connection with the proposed transaction, the Company will be filing documents with the SEC, including preliminary and definitive proxy statements relating to the proposed transaction. The definitive proxy statement will be mailed to Company stockholders in connection with the proposed transaction. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PRELIMINARY AND DEFINITIVE PROXY STATEMENTS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of these documents (when they are available) and other related documents filed with the SEC at the SEC’s web site at www.sec.gov, on the Company’s website at www.cornerstoneondemand.com or by contacting Company Investor Relations at (310) 526-2531.

Participants in the Solicitation

This communication does not constitute a solicitation of proxy, an offer to purchase, or a solicitation of an offer to sell any securities. Cornerstone and Clearlake and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Cornerstone stockholders in connection with the proposed transaction. Information about Cornerstone’s directors and executive officers in the proposed transaction will be included in the proxy statement described above. Additional information regarding these individuals is set forth in Cornerstone’s Annual Report on Form 10-K for the fiscal year ended December 30, 2020, the definitive proxy statement on Schedule 14A for Cornerstone’s most recent Annual Meeting of Stockholders held in June 2021, and Cornerstone’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021. To the extent Cornerstone’s directors and executive officers or their holdings of Cornerstone securities have changed from the amounts disclosed in those filings, to Cornerstone’s knowledge, such changes have been or will be reflected on initial statements of beneficial ownership on Form 3 or statements of change in ownership on Form 4 on file with the SEC. These documents are (or, when filed, will be) available free of charge at the SEC’s website at www.sec.gov or at Cornerstone’s website at www.cornerstoneondemand.com.

Forward-Looking Statements

This communication contains forward-looking statements which include, but are not limited to, statements regarding expected timing, completion and effects of the proposed merger. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Cornerstone’s expectations and beliefs regarding these matters may not materialize. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of uncertainties, risks, and changes in circumstances, including but not limited to risks and uncertainties related to: the ability of the parties to consummate the proposed merger, satisfaction of closing conditions precedent to the consummation of the proposed merger, potential delays in consummating the merger, the ability of Cornerstone to timely and successfully achieve the anticipated benefits of the merger and the impact of health epidemics, including the COVID-19 pandemic, on the parties’ respective businesses and the actions the parties may take in response thereto. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in Cornerstone’s most recent filings with the SEC, including Cornerstone’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and any subsequent reports on Form 10-K, Form 10-Q or Form 8-K filed with the SEC from time to time and available at www.sec.gov.

The forward-looking statements included in this communication are made only as of the date hereof. Cornerstone assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

 

June 30, 2021

 

December 31, 2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

147,025

 

 

$

153,151

 

Accounts receivable, net

140,751

 

 

221,461

 

Deferred commissions, current portion

48,291

 

 

45,786

 

Prepaid expenses and other current assets

34,194

 

 

30,615

 

Total current assets

370,261

 

 

451,013

 

Capitalized software development costs, net

55,060

 

 

50,812

 

Property and equipment, net

25,520

 

 

32,271

 

Operating right-of-use assets

65,256

 

 

74,419

 

Deferred commissions, net of current portion

88,956

 

 

89,698

 

Long-term investments

1,867

 

 

8,565

 

Intangible assets, net

388,185

 

 

436,290

 

Goodwill

962,280

 

 

961,322

 

Deferred tax assets

19,877

 

 

19,169

 

Other assets

11,770

 

 

11,010

 

Total assets

$

1,989,032

 

 

$

2,134,569

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable, accrued expenses, and other current liabilities

$

118,425

 

 

$

129,908

 

Deferred revenue, current portion

404,350

 

 

446,886

 

Operating lease liabilities, current portion

14,417

 

 

10,830

 

Debt, current portion

8,297

 

 

10,047

 

Total current liabilities

545,489

 

 

597,671

 

Debt, net of current portion

1,063,048

 

 

1,176,239

 

Deferred revenue, net of current portion

2,066

 

 

5,184

 

Operating lease liabilities, net of current portion

57,081

 

 

65,911

 

Deferred tax liabilities

7,378

 

 

11,936

 

Other liabilities, non-current

5,403

 

 

8,754

 

Total liabilities

1,680,465

 

 

1,865,695

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value

7

 

 

6

 

Additional paid-in capital

887,692

 

 

835,069

 

Accumulated deficit

(577,485

)

 

(564,662

)

Accumulated other comprehensive loss

(1,647

)

 

(1,539

)

Total stockholders’ equity

308,567

 

 

268,874

 

Total liabilities and stockholders’ equity

$

1,989,032

 

 

$

2,134,569

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

214,343

 

 

$

184,358

 

 

$

423,616

 

 

$

334,494

 

Cost of revenue 1,2

60,775

 

 

58,000

 

 

121,311

 

 

99,924

 

Gross profit

153,568

 

 

126,358

 

 

302,305

 

 

234,570

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing 1,2

67,782

 

 

64,942

 

 

137,517

 

 

120,272

 

Research and development 1

27,227

 

 

28,338

 

 

57,997

 

 

52,423

 

General and administrative 1,2

31,536

 

 

25,620

 

 

63,098

 

 

50,345

 

Acquisition-related and integration

1,341

 

 

20,093

 

 

2,871

 

 

26,904

 

Restructuring1

4,764

 

 

9,733

 

 

10,853

 

 

9,733

 

Total operating expenses

132,650

 

 

148,726

 

 

272,336

 

 

259,677

 

Income (loss) from operations

20,918

 

 

(22,368

)

 

29,969

 

 

(25,107

)

Other income (expense):

 

 

 

 

 

 

 

Interest expense

(16,302

)

 

(18,219

)

 

(35,072

)

 

(23,720

)

Loss on extinguishment of debt and related expenses

(3,108

)

 

—

 

 

(3,108

)

 

—

 

Other, net

388

 

 

(514

)

 

(4,516

)

 

(5,878

)

Other expense, net

(19,022

)

 

(18,733

)

 

(42,696

)

 

(29,598

)

Income (loss) before income tax (provision) benefit

1,896

 

 

(41,101

)

 

(12,727

)

 

(54,705

)

Income tax (provision) benefit

(2,267

)

 

29,114

 

 

(96

)

 

28,943

 

Net loss

$

(371

)

 

$

(11,987

)

 

$

(12,823

)

 

$

(25,762

)

Net loss per share, basic and diluted

$

(0.01

)

 

$

(0.19

)

 

$

(0.19

)

 

$

(0.41

)

Weighted average common shares outstanding, basic and diluted

66,330

 

 

63,593

 

 

65,866

 

 

62,612

 

1 Includes stock-based compensation as follows:

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Cost of revenue

$

2,261

 

 

$

2,122

 

 

$

4,317

 

 

$

4,823

 

Sales and marketing

5,393

 

 

5,628

 

 

11,690

 

 

14,212

 

Research and development

3,357

 

 

2,724

 

 

7,412

 

 

7,524

 

General and administrative

6,212

 

 

3,421

 

 

12,085

 

 

10,506

 

Restructuring

1,303

 

 

208

 

 

2,504

 

 

208

 

Total

$

18,526

 

 

$

14,103

 

 

$

38,008

 

 

$

37,273

 

2 Includes amortization of intangible assets as follows:

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Cost of revenue

$

9,518

 

 

$

7,396

 

 

$

19,008

 

 

$

9,059

 

Sales and marketing

14,191

 

 

10,679

 

 

28,373

 

 

10,762

 

General and administrative

603

 

 

453

 

 

1,206

 

 

453

 

Total

$

24,312

 

 

$

18,528

 

 

$

48,587

 

 

$

20,274

 

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(371

)

 

$

(11,987

)

 

$

(12,823

)

 

$

(25,762

)

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

 

 

 

 

 

 

 

Depreciation and amortization

34,309

 

 

31,195

 

 

71,109

 

 

43,159

 

Accretion of debt discount and amortization of debt issuance costs

3,966

 

 

3,597

 

 

8,150

 

 

4,687

 

Net foreign currency and other loss

(767

)

 

1,604

 

 

4,161

 

 

6,783

 

Stock-based compensation expense

18,526

 

 

14,103

 

 

38,008

 

 

37,273

 

Deferred income taxes

(1,801

)

 

(30,636

)

 

(6,004

)

 

(30,636

)

Bad debt (recoveries) expense

(280

)

 

801

 

 

(586

)

 

1,248

 

Loss on extinguishment of debt

1,999

 

 

—

 

 

1,999

 

 

—

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

(2,666

)

 

(14,182

)

 

78,728

 

 

21,334

 

Deferred commissions

(3,366

)

 

(3,786

)

 

(1,118

)

 

(3,204

)

Prepaid expenses and other assets

1,774

 

 

15,870

 

 

(4,714

)

 

9,320

 

Accounts payable, accrued expenses, and other current liabilities

16,710

 

 

27,632

 

 

(11,628

)

 

9,497

 

Deferred revenue

(23,971

)

 

(7,354

)

 

(45,486

)

 

(42,911

)

Other liabilities, non-current

1,254

 

 

(4,083

)

 

3,631

 

 

(2,026

)

Net cash provided by operating activities

45,316

 

 

22,774

 

 

123,427

 

 

28,762

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of marketable investments

—

 

 

—

 

 

—

 

 

(20,419

)

Maturities and sales of investments

—

 

 

—

 

 

—

 

 

272,173

 

Capital expenditures

(1,694

)

 

(1,304

)

 

(2,637

)

 

(2,275

)

Capitalized software costs

(7,440

)

 

(6,135

)

 

(15,161

)

 

(13,524

)

Cash paid for acquisitions, net of cash acquired

—

 

 

(1,279,533

)

 

—

 

 

(1,298,172

)

Net cash used in investing activities

(9,134

)

 

(1,286,972

)

 

(17,798

)

 

(1,062,217

)

Cash flows from financing activities

 

 

 

 

 

 

 

Repayment of debt

(22,074

)

 

—

 

 

(124,586

)

 

—

 

Proceeds from term loan debt, net of discount

—

 

 

979,582

 

 

—

 

 

979,582

 

Payments of debt issuance and modification costs

(146

)

 

(30,268

)

 

(146

)

 

(30,268

)

Proceeds from employee stock plans

4,596

 

 

2,497

 

 

12,107

 

 

12,627

 

Net cash (used in) provided by financing activities

(17,624

)

 

951,811

 

 

(112,625

)

 

961,941

 

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

(226

)

 

(2,162

)

 

961

 

 

(2,788

)

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

18,332

 

 

(314,549

)

 

(6,035

)

 

(74,302

)

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

131,487

 

 

456,154

 

 

155,854

 

 

215,907

 

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

$

149,819

 

 

$

141,605

 

 

$

149,819

 

 

$

141,605

 

Supplemental cash flow data

 

 

 

 

 

 

 

Cash paid for interest

$

8,101

 

 

$

59

 

 

$

27,077

 

 

$

8,684

 

Cash paid for income taxes

1,214

 

 

1,588

 

 

3,888

 

 

2,543

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Capitalized assets financed by accounts payable and accrued expenses

318

 

 

275

 

 

318

 

 

275

 

Capitalized stock-based compensation

1,146

 

 

1,925

 

 

2,424

 

 

4,115

 

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,

 

2021

 

2020

Cash and cash equivalents

$

147,025

 

 

$

136,492

 

Restricted cash included in prepaid expenses and other current assets

396

 

 

3,837

 

Restricted cash included in other assets

2,398

 

 

1,276

 

Total cash, cash equivalents, and restricted cash

$

149,819

 

 

$

141,605

 

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 MARGIN

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

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

 

 

 

 

 

 

 

Revenue

$

214,343

 

 

$

184,358

 

 

$

423,616

 

 

$

334,494

 

Cost of revenue

60,775

 

 

58,000

 

 

121,311

 

 

99,924

 

Gross profit

$

153,568

 

 

$

126,358

 

 

$

302,305

 

 

$

234,570

 

Gross margin

71.6

%

 

68.5

%

 

71.4

%

 

70.1

%

 

 

 

 

 

 

 

 

Cost of revenue

$

60,775

 

 

$

58,000

 

 

$

121,311

 

 

$

99,924

 

Adjustments to cost of revenue:

 

 

 

 

 

 

 

Stock-based compensation1

(2,261

)

 

(2,122

)

 

(4,317

)

 

(4,260

)

Amortization of intangible assets

(9,518

)

 

(7,396

)

 

(19,008

)

 

(9,059

)

Total adjustments to cost of revenue

(11,779

)

 

(9,518

)

 

(23,325

)

 

(13,319

)

Non-GAAP cost of revenue

48,996

 

 

48,482

 

 

97,986

 

 

86,605

 

Non-GAAP gross profit

$

165,347

 

 

$

135,876

 

 

$

325,630

 

 

$

247,889

 

Non-GAAP gross margin

77.1

%

 

73.7

%

 

76.9

%

 

74.1

%

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Income (loss) from operations

$

20,918

 

 

$

(22,368

)

 

$

29,969

 

 

$

(25,107

)

Operating margin

9.8

%

 

(12.1

)%

 

7.1

%

 

(7.5

)%

Adjustments to income (loss) from operations:

 

 

 

 

 

 

 

Stock-based compensation1, 3

17,223

 

 

13,895

 

 

35,504

 

 

33,004

 

Amortization of intangible assets

24,312

 

 

18,528

 

 

48,587

 

 

20,274

 

Acquisition-related and integration2

1,341

 

 

20,093

 

 

2,871

 

 

26,904

 

Restructuring3

4,764

 

 

9,733

 

 

10,853

 

 

9,733

 

Total adjustments to income (loss) from operations

47,640

 

 

62,249

 

 

97,815

 

 

89,915

 

Non-GAAP operating income

$

68,558

 

 

$

39,881

 

 

$

127,784

 

 

$

64,808

 

Non-GAAP operating margin

32.0

%

 

21.6

%

 

30.2

%

 

19.4

%

 

 

 

 

 

 

 

 

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.

 

 

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

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

Cornerstone OnDemand, Inc.

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

(in thousands, except per share amounts)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Net loss

$

(371

)

 

$

(11,987

)

 

$

(12,823

)

 

$

(25,762

)

Adjustments to net loss

 

 

 

 

 

 

 

Stock-based compensation1, 3

17,223

 

 

13,895

 

 

35,504

 

 

33,004

 

Amortization of intangible assets

24,312

 

 

18,528

 

 

48,587

 

 

20,274

 

Acquisition-related and integration2

1,341

 

 

20,093

 

 

2,871

 

 

26,904

 

Restructuring3

4,764

 

 

9,733

 

 

10,853

 

 

9,733

 

Accretion of debt discount and amortization of debt issuance costs4

3,966

 

 

3,597

 

 

8,150

 

 

4,687

 

Income tax provision (benefit)

795

 

 

(26,659

)

 

430

 

 

(26,659

)

Fair value adjustment on strategic investments5

(117

)

 

—

 

 

6,745

 

 

—

 

Total adjustments to net loss

52,284

 

 

39,187

 

 

113,140

 

 

67,943

 

Non-GAAP net income

$

51,913

 

 

$

27,200

 

 

$

100,317

 

 

$

42,181

 

Non-GAAP basic net income per share

$

0.78

 

 

$

0.43

 

 

$

1.52

 

 

$

0.67

 

Non-GAAP diluted net income per share

$

0.73

 

 

$

0.40

 

 

$

1.43

 

 

$

0.62

 

Weighted-average common shares outstanding, basic

66,330

 

 

63,593

 

 

65,866

 

 

62,612

 

Non-GAAP weighted-average common shares outstanding, diluted

70,856

 

 

68,314

 

 

70,243

 

 

67,841

 

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.

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

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

4 Debt discount accretion and debt issuance cost amortization have been recorded in connection with our issuance of (i) $1.0047 billion of term loan debt on April 22, 2020 as well as the modification of this debt on April 23, 2021 to effectuate a repricing; and (ii) $300.0 million in convertible notes on December 8, 2017 as well as the modification of these convertible notes on April 20, 2020 to extend the maturity date from July 1, 2021 to March 17, 2023. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions.

5 A write-up of approximately $0.1 million was recognized during the three months ended June 30, 2021 related to a strategic investment.

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,

 

2021

 

2020

 

2021

 

2020

Reconciliation of unlevered free cash flow:

 

 

 

 

 

 

 

Net cash provided by operating activities

$

45,316

 

 

$

22,774

 

 

$

123,427

 

 

$

28,762

 

Capital expenditures

(1,694

)

 

(1,304

)

 

(2,637

)

 

(2,275

)

Capitalized software costs

(7,440

)

 

(6,135

)

 

(15,161

)

 

(13,524

)

Cash paid for interest

8,101

 

 

59

 

 

27,077

 

 

8,684

 

Unlevered free cash flow

$

44,283

 

 

$

15,394

 

 

$

132,706

 

 

$

21,647

 

Unlevered free cash flow margin

20.7

%

 

8.4

%

 

31.3

%

 

6.5

%

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 2020

FY 2021

 

 

 

Q1'20

Q2'20

Q3'20

Q4'20

Q1’21

Q2’21

FY18

FY19

FY20

SELECTED METRICS:

 

 

 

 

 

 

 

 

 

Number of customers1

3,522

 

6,308

 

6,229

 

6,157

 

6,084

 

6,035

 

3,333

 

3,508

 

6,157

 

% y/y

4.6

%

84.3

%

80.8

%

75.5

%

72.7

%

(4.3

)%

2.6

%

5.3

%

75.5

%

% q/q

0.4

%

79.1

%

(1.3

)%

(1.2

)%

(1.2

)

(0.8

)

n/a

 

n/a

 

n/a

 

Number of employees

1,975

 

3,184

 

3,027

 

2,919

 

2,818

 

2,714

 

1,953

 

1,993

 

2,919

 

% y/y

(2.1

)%

56.5

%

52.4

%

46.5

%

42.7

%

(14.8

)%

3.3

%

2.0

%

46.5

%

% q/q

(0.9

)%

61.2

%

(4.9

)%

(3.6

)%

(3.5

)

(3.7

)

n/a

 

n/a

 

n/a

 

Net annual dollar retention rate2

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

105.7

%

104.6

%

95.1

%

Annual recurring revenue (in thousands)

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

510,000

 

575,000

 

840,000

 

Net cash provided by operating activities (in thousands)

5,988

 

22,774

 

33,147

 

35,025

 

78,111

 

45,316

 

90,253

 

115,549

 

96,934

 

Unlevered free cash flow (in thousands)

6,253

 

15,394

 

55,929

 

36,356

 

88,423

 

44,283

 

63,471

 

90,203

 

113,932

 

Unlevered free cash flow margin

4.2

%

8.4

%

28.0

%

17.6

%

42.3

%

20.7

%

11.8

%

15.6

%

15.4

%

FINANCIAL DATA (in thousands, except percentages):

 

 

 

 

 

 

 

 

 

Revenue

150,136

 

184,358

 

199,498

 

206,924

 

209,273

 

214,343

 

537.891

 

576,523

 

740,916

 

Subscription revenue

144,421

 

177,217

 

185,643

 

197,878

 

200,584

 

206,821

 

473.052

 

542,968

 

705,159

 

% y/y growth

10.0

%

33.7

%

35.1

%

39.6

%

38.9

%

16.7

%

n/a

 

14.8

%

29.9

%

Subscription revenue % of total revenue

96.2

%

96.1

%

93.1

%

95.6

%

95.8

%

96.5

%

87.9

%

94.2

%

95.2

%

(Loss) income from operations

(2,739

)

(22,368

)

(1,618

)

(4,826

)

9,051

 

20,918

 

(7.769

)

11,933

 

(31,551

)

MARGIN DATA:

 

 

 

 

 

 

 

 

 

Gross margin

72.1

%

68.5

%

67.7

%

69.8

%

71.1

%

71.6

%

73.2

%

74.1

%

69.4

%

Sales and marketing % of revenue

36.9

%

35.2

%

36.0

%

35.5

%

33.3

%

31.6

%

41.8

%

39.5

%

35.8

%

Research and development % of revenue

16.0

%

15.4

%

14.9

%

14.9

%

14.7

%

12.7

%

14.3

%

17.5

%

15.2

%

General and administrative % of revenue

16.5

%

13.8

%

14.5

%

15.2

%

15.1

%

14.7

%

16.7

%

15.0

%

14.9

%

Acquisition-related and integration % of revenue

4.5

%

10.9

%

2.4

%

2.7

%

0.7

%

0.6

%

0.2

%

—

 

5.0

%

Restructuring % of revenue

—

 

5.3

%

0.7

%

3.9

%

2.9

%

2.2

%

1.7

%

—

 

2.6

%

Operating margin

(1.8

)%

(12.1

)%

(0.8

)%

(2.3

)%

4.3

%

9.8

%

(1.4

)%

2.1

%

(4.3

)%

NON-GAAP MARGIN DATA:

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

74.6

%

73.7

%

73.5

%

75.2

%

76.6

%

77.1

%

74.1

%

76.0

%

74.2

%

Non-GAAP sales and marketing % of revenue

31.7

%

26.4

%

25.3

%

25.4

%

23.5

%

22.5

%

37.2

%

34.7

%

26.9

%

Non-GAAP research and development % of revenue

13.8

%

13.9

%

12.7

%

12.3

%

12.8

%

11.1

%

12.1

%

14.8

%

13.1

%

Non-GAAP general and administrative % of revenue

12.5

%

11.8

%

12.1

%

12.3

%

12.0

%

11.5

%

13.2

%

11.1

%

12.2

%

Non-GAAP operating margin

16.6

%

21.6

%

23.4

%

25.2

%

28.3

%

32.0

%

11.8

%

15.4

%

22.1

%

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

18.7

%

17.2

%

16.1

%

15.6

%

16.5

%

14.6

%

16.8

%

19.1

%

16.8

%

FOREIGN EXCHANGE RATES:

 

 

 

 

 

 

 

 

 

GBP to USD average period rate

1.28

 

1.26

 

1.29

 

1.32

 

1.38

 

1.40

 

1.34

 

1.28

 

1.29

 

GBP to USD end of period spot rate

1.23

 

1.23

 

1.28

 

1.37

 

1.38

 

1.38

 

1.27

 

1.32

 

1.37

 

EUR to USD average period rate

1.10

 

1.11

 

1.17

 

1.19

 

1.21

 

1.20

 

1.18

 

1.12

 

1.14

 

EUR to USD end of period spot rate

1.10

 

1.12

 

1.17

 

1.23

 

1.17

 

1.19

 

1.14

 

1.12

 

1.23

 

 

 

 

 

 

 

 

 

 

 

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 During 2020, we adjusted our method of determining our net annual dollar retention rate. Prior to 2020, incremental sales were only included to the extent those sales offset any decrease in annual recurring revenue from the original amount on the first day of the fiscal year and therefore, the historical net annual dollar retention rate could never exceed 100%. Beginning in 2020, this ratio includes all customers. Previously, Cornerstone for Salesforce, Cornerstone PiiQ, Grovo, and Workpop customers were excluded from the calculation. The percentages included here reflect these changes.

 

FY 2020

FY 2021

 

 

 

 

Q1'20

Q2'20

Q3'20

Q4'20

Q1’21

Q2’21

FY18

FY19

FY20

NON-GAAP RECONCILIATIONS FOR SELECTED METRICS

(in thousands, except percentages):

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

5,988

 

22,774

 

33,147

 

35,025

 

78,111

 

45,316

 

90,253

 

115,549

 

96,934

 

Capital expenditures

(971

)

(1,304

)

(635

)

(2,875

)

(943

)

(1,694

)

(14,895

)

(18,034

)

(5,785

)

Capitalized software costs

(7,389

)

(6,135

)

(6,772

)

(6,779

)

(7,721

)

(7,440

)

(25,515

)

(24,668

)

(27,075

)

Cash paid for interest

8,625

 

59

 

30,189

 

10,985

 

18,976

 

8,101

 

13,628

 

17,356

 

49,858

 

Unlevered free cash flow

6,253

 

15,394

 

55,929

 

36,356

 

88,423

 

44,283

 

63,471

 

90,203

 

113,932

 

Unlevered free cash flow margin

4.2

%

8.4

%

28.0

%

17.6

%

42.3

%

20.7

%

11.8

%

15.6

%

15.4

%

 

 

 

 

 

 

 

 

 

 

Gross margin

72.1

%

68.5

%

67.7

%

69.8

%

71.1

%

71.6

%

73.2

%

74.1

%

69.4

%

Stock-based compensation

1.4

%

1.2

%

1.1

%

0.9

%

1.0

%

1.1

%

0.7

%

1.1

%

1.0

%

Amortization of intangible assets

1.1

%

4.0

%

4.7

%

4.5

%

4.5

%

4.4

%

0.2

%

0.8

%

3.8

%

Non-GAAP gross margin

74.6

%

73.7

%

73.5

%

75.2

%

76.6

%

77.1

%

74.1

%

76.0

%

74.2

%

 

 

 

 

 

 

 

 

 

 

Sales and marketing % of revenue

36.9

%

35.2

%

36.0

%

35.5

%

33.3

%

31.6

%

41.8

%

39.5

%

35.8

%

Stock-based compensation

(5.1

)%

(3.0

)%

(3.5

)%

(3.3

)%

(3.1

)%

(2.5

)%

(4.6

)%

(4.8

)%

(3.6

)%

Amortization of intangible assets

(0.1

)%

(5.8

)%

(7.2

)%

(6.8

)%

(6.7

)%

(6.6

)%

—

%

—

%

(5.3

)%

Non-GAAP sales and marketing % of revenue

31.7

%

26.4

%

25.3

%

25.4

%

23.5

%

22.5

%

37.2

%

34.7

%

26.9

%

 

 

 

 

 

 

 

 

 

 

Research and development % of revenue

16.0

%

15.4

%

14.9

%

14.9

%

14.7

%

12.7

%

14.3

%

17.5

%

15.2

%

Stock-based compensation

(2.2

)%

(1.5

)%

(2.2

)%

(2.6

)%

(1.9

)%

(1.6

)%

(2.2

)%

(2.7

)%

(2.1

)%

Non-GAAP research and development % of revenue

13.8

%

13.9

%

12.7

%

12.3

%

12.8

%

11.1

%

12.1

%

14.8

%

13.1

%

 

 

 

 

 

 

 

 

 

 

General and administrative % of revenue

16.5

%

13.8

%

14.5

%

15.2

%

15.1

%

14.7

%

16.7

%

15.0

%

14.9

%

Stock-based compensation

(4.0

)%

(1.8

)%

(2.1

)%

(2.6

)%

(2.8

)%

(2.9

)%

(3.5

)%

(3.9

)%

(2.5

)%

Amortization of intangible assets

—

%

(0.2

)%

(0.3

)%

(0.3

)%

(0.3

)%

(0.3

)%

—

%

—

%

(0.2

)%

Non-GAAP general and administrative % of revenue

12.5

%

11.8

%

12.1

%

12.3

%

12.0

%

11.5

%

13.2

%

11.1

%

12.2

%

 

 

 

 

 

 

 

 

 

 

Operating margin

(1.8

)%

(12.1

)%

(0.8

)%

(2.3

)%

4.3

%

9.8

%

(1.4

)%

2.1

%

(4.3

)%

Stock-based compensation

12.7

%

7.4

%

8.9

%

9.3

%

8.8

%

8.1

%

11.1

%

12.5

%

9.5

%

Amortization of intangible assets

1.2

%

10.1

%

12.2

%

11.6

%

11.6

%

11.3

%

0.2

%

0.8

%

9.3

%

Acquisition-related and integration

4.5

%

10.9

%

2.4

%

2.7

%

0.7

%

0.6

%

0.2

%

—

%

5.0

%

Restructuring

—

%

5.3

%

0.7

%

3.9

%

2.9

%

2.2

%

1.7

%

—

%

2.6

%

Non-GAAP operating margin

16.6

%

21.6

%

23.4

%

25.2

%

28.3

%

32.0

%

11.8

%

15.4

%

22.1

%

 

 

 

 

 

 

 

 

 

 

Research and development plus capitalized software % of revenue

20.9

%

18.7

%

18.3

%

18.2

%

18.4

%

16.2

%

19.0

%

21.8

%

18.9

%

Stock-based compensation

(2.2

)%

(1.5

)%

(2.2

)%

(2.6

)%

(1.9

)%

(1.6

)%

(2.2

)%

(2.7

)%

(2.1

)%

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

18.7

%

17.2

%

16.1

%

15.6

%

16.5

%

14.6

%

16.8

%

19.1

%

16.8

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805005990/en/

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

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