Cornerstone OnDemand Announces First Quarter 2014 Financial Results
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Cornerstone OnDemand Announces First Quarter 2014 Financial Results      

  • Record quarterly revenue of $57.4 million, up 52% year-over-year
  • Record first quarter bookings of $49.7 million, up 38% year-over-year1
  • Record quarterly gross profit of $40.0 million, up 52% year-over-year
  • Ended the quarter with over 1,700 clients and over 14.5 million users2

SANTA MONICA, Calif. – May 1, 2014 Talent management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its fourth quarter and fiscal year ended March 31, 2014.

Revenue for the first quarter of 2014 was $57.4 million, representing a 52% increase compared to the same period in 2013.

Bookings, which the Company defines as revenue plus the change in deferred revenue for the period, were $49.7 million for the first quarter of 2014, representing a 38% increase compared to the same period in 2013. 1 Deferred revenue at March 31, 2014 was $131.1 million, which was 45% higher than the balance at March 31, 2013.

“The first quarter once again demonstrated that the Cornerstone solution is applicable to organizations of all sizes, in every region and in every vertical,” said Adam Miller, the company’s President and CEO. “We believe that the combination of our huge market opportunity and weakened competitive environment, coupled with growing worldwide distribution, a track-record of innovation, and a blue-chip client roster, positions Cornerstone to be the long-term technology leader in our space.”

Gross profit for the first quarter of 2014 was $40.0 million, representing a 52% increase compared to the same period in 2013. Gross margin for the first quarter of 2014 was 69.7% compared to 70.1% in the first quarter of 2013.

Non-GAAP gross profit for the first quarter of 2014 was $41.1 million, representing a 51% increase compared to the same period in 2013.1 Non-GAAP gross margin for the first quarter of 2014 was 71.6% compared to 72.2% in the first quarter of 2013.1

The Company’s net loss for the first quarter of 2014 was $15.8 million yielding a net loss margin of (27.5)%, or $0.30 net loss per share, compared to a net loss of $9.9 million yielding a net loss margin of (26.4)%, or $0.20 net loss per share, in the first quarter of 2013.

Non-GAAP net loss for the first quarter of 2014 was $5.1 million yielding a non-GAAP net loss margin of (8.8)%, or $0.10 net loss per share, compared to a non-GAAP net loss of $5.3 million yielding a non-GAAP net loss margin of (14.1)%, or $0.10 net loss per share, in the first quarter of 2013.1 This represents a non-GAAP net loss margin improvement of 530 basis points.1

For the first quarter of 2014, net cash provided by operating activities was $0.9 million as compared to $0.5 million for the same period in 2013.

At March 31, 2014, the Company’s total cash and cash equivalents were $108.7 million, investments were $200.5 million, and accounts receivable were $52.5 million, yielding a total of approximately $361.7 million.

The Company ended the quarter with over 1,700 clients and over 14.5 million users.2

1

Bookings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss, non-GAAP net loss margin and non-GAAP net loss per share are non-GAAP financial measures. Please see the discussion in the section “Non-GAAP Financial Measures” and the reconciliations at the end of this release.

2

Includes contracted clients and active users of our Enterprise and Mid-Market solution, excluding Cornerstone for Salesforce and Cornerstone Growth Edition, formerly known as Cornerstone for Small Business.

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its first quarter 2014 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 Web site at http://investors.cornerstoneondemand.com/events.cfm. The live call can be accessed by dialing (888) 357-3694 (U.S.) or (973) 890-8276 (outside the U.S.) and referencing passcode: 35146652. A replay of the call will also be available at http://investors.cornerstoneondemand.com/events.cfm or via telephone until 11:59 p.m. PT on May 4, 2014 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 35146652.

About Cornerstone OnDemand

Cornerstone OnDemand, Inc. is a leader in cloud-based applications for talent management. Our solutions help organizations recruit, train, manage and engage their employees, empowering their people and increasing workforce productivity. Based in Santa Monica, California, our solutions are used by over 1,700 clients worldwide, spanning more than 14.5 million users across 191 countries and in 41 languages. For more information about Cornerstone OnDemand, Inc., visit www.csod.com

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

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Cornerstone OnDemand’s future financial performance, market growth, the demand for and benefits from the use of Cornerstone OnDemand’s solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon Cornerstone OnDemand’s historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Cornerstone OnDemand’s expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Cornerstone OnDemand disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from Cornerstone OnDemand’s current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new clients; the extent to which clients renew their subscriptions for our solution; our ability to compete as the talent management provider for organizations of all sizes; changes in the proportion of our client base that is comprised of enterprise or mid-sized organizations; our ability to manage our growth, including additional headcount and entry into new geographies; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; costs and reputational harm that could result from defects in our solution; the success of our strategic relationships with third parties; the loss of any of our key employees; failure to protect our intellectual property; acts of terrorism or other vandalism, war or natural disasters; changes in current tax or accounting rules; unanticipated costs or liabilities related to businesses that we acquire; and other risks and uncertainties. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in Cornerstone OnDemand’s reports filed with the SEC, including its Form 10-K filed with the SEC on February 26, 2014.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, Cornerstone OnDemand has provided in this release certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include (i) non-GAAP revenue, which is defined as revenue plus revenue not recognized in the period due to the impact of purchase accounting rules on deferred revenue acquired through acquisitions, (ii) bookings, which are defined as revenue plus the change in deferred revenue for the period, (iii) non-GAAP net cash provided by operating activities, which excludes payment of premium on investments net of related amortization and employer-related taxes from stock-based compensation, (iv) non-GAAP net loss and non-GAAP net loss per share, which are based on non-GAAP revenue and exclude, for the periods in which they are present, stock-based compensation and employer-related payroll taxes, amortization of intangible assets, adjustments to taxes related to acquisition adjustments, accretion of debt discount and amortization of debt issuance costs, (v) non-GAAP net loss margin, which is defined as non-GAAP net loss divided by non-GAAP revenue, (vi) non-GAAP gross profit and non-GAAP gross margin, which are calculated based on non-GAAP revenue and exclude stock-based compensation and amortization of certain intangible assets reflected in cost of revenue, (vii) non-GAAP loss from operations and non-GAAP operating margin, which are calculated based on operating loss and exclude adjustments to revenue, stock-based compensation and employer-related taxes, and amortization of intangible assets, and (viii) non-GAAP operating expenses, which exclude stock-based compensation, employer-related taxes, and amortization of intangible assets, 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 employer-related taxes attributable to the corresponding GAAP financial measures.

Cornerstone OnDemand’s management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating Cornerstone OnDemand’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items Cornerstone excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry.

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. A reconciliation of the non-GAAP financial measures to such GAAP measures has been provided in the tables included as part of this press release.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

March 31,
2014

December 31, 2013

Assets

 

 

 

Cash and cash equivalents

$

108,685

 

$

109,583

Short-term investments

184,421

 

199,925

Accounts receivable, net

52,545

 

67,191

Deferred commissions

15,947

 

16,634

Prepaid expenses and other current assets

11,890

 

14,118

Total current assets

373,488

 

407,451

 

 

 

 

Capitalized software development costs, net

11,732

 

10,665

Property and equipment, net

17,333

 

14,436

Long-term investments

16,029

 

Intangible assets, net

4,068

 

4,632

Goodwill

8,193

 

8,193

Other assets, net

5,675

 

5,978

Total Assets

$

436,518

 

$

451,355

 

 

 

 

Liabilities and Stockholders Equity

 

 

 

Liabilities:

 

 

 

Accounts payable

$

12,293

 

$

10,037

Accrued expenses

16,603

 

22,288

Deferred revenue, current portion

129,226

 

135,322

Capital lease obligations, current portion

683

 

905

Debt, current portion

503

 

519

Other liabilities

1,019

 

4,203

Total current liabilities

160,327

 

173,274

 

 

 

 

Convertible notes, net

219,714

 

217,965

Other liabilities, non-current

3,427

 

3,111

Deferred revenue, net of current portion

1,846

 

3,500

Capital lease obligations, net of current portion

121

 

218

Debt, net of current portion

269

 

392

Total liabilities

385,704

 

398,460

 

 

 

 

Stockholders' Equity:

 

 

 

Common stock

5

 

5

Additional paid-in capital

303,125

 

289,307

Accumulated deficit

(252,257

)

 

(236,467

)

Accumulated other comprehensive (loss) income

(59

)

 

50

Total stockholders' equity

50,814

 

52,895

Total Liabilities and Stockholders' Equity

$

436,518

 

$

451,355

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Three Months Ended

 

March 31,

 

2014

 

2013

Revenue

$

57,409

 

$

37,657

Cost of revenue 1, 2

17,404

 

11,252

Gross profit

40,005

 

26,405

Operating expenses:

 

 

 

Sales and marketing 1

35,139

 

23,010

Research and development 1

6,883

 

4,419

General and administrative 1

10,454

 

8,566

Amortization of certain acquired intangible assets

251

 

251

Total operating expenses

52,727

 

36,246

Loss from operations

(12,722

)

 

(9,841

)

Other income (expense):

 

 

 

Interest income

223

 

Interest expense

(3,010

)

 

(79

)

Other, net

(128

)

 

(13

)

Other income (expense), net

(2,915

)

 

(92

)

Loss before income tax provision

(15,637

)

 

(9,933

)

Income tax provision

(153

)

 

(1

)

Net loss

$

(15,790

)

 

$

(9,934

)

Net loss per share, basic and diluted

$

(0.30

)

 

$

(0.20

)

Weighted average common shares outstanding, basic and diluted

52,726

 

50,798

1

Includes stock-based compensation and employer-related taxes as follows:

 

Three Months Ended

 

March 31,

 

2014

 

2013

Cost of revenue

$

802

 

$

440

Sales and marketing

3,714

 

1,686

Research and development

803

 

344

General and administrative

2,821

 

1,570

Total

$

8,140

 

$

4,040

2

Cost of revenue includes amortization of intangibles as follows:

 

Three Months Ended

 

March 31,

 

2014

 

2013

Cost of revenue

$

312

 

$

313

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Three Months Ended

 

March 31,

 

2014

 

2013

Cash flows from operating activities:

 

 

 

Net loss

$

(15,790

)

 

$

(9,934

)

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

 

 

 

Depreciation and amortization

3,072

 

2,124

Accretion of debt discount and amortization of debt issuance costs

2,031

 

Purchased investment premium, net of amortization

926

 

Unrealized foreign exchange (gain) loss

(129

)

 

286

Stock-based compensation expense

7,892

 

3,999

Deferred income taxes

 

(129

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

14,897

 

9,552

Deferred commissions

741

 

(1,841

)

Prepaid expenses and other assets

2,504

 

(1,075

)

Accounts payable

1,088

 

1,248

Accrued expenses

(5,401

)

 

(3,277

)

Deferred revenue

(8,080

)

 

(271

)

Other liabilities

(2,872

)

 

(204

)

Net cash provided by operating activities

879

 

478

Cash flows from investing activities:

 

 

 

Purchases of investment securities

(17,504

)

 

Maturities of investment securities

16,012

 

Purchases of property and equipment

(3,196

)

 

(1,467

)

Capitalized software costs

(2,349

)

 

(1,935

)

Net cash used in investing activities

(7,037

)

 

(3,402

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of debt

 

1,914

Repayment of debt

(139

)

 

(361

)

Principal payments under capital lease obligations

(318

)

 

(459

)

Proceeds from stock option and warrant exercises

5,609

 

1,726

Net cash provided by financing activities

5,152

 

2,820

Effect of exchange rate changes on cash and cash equivalents

108

 

(168

)

Net decrease in cash and cash equivalents

(898

)

 

(272

)

Cash and cash equivalents at beginning of period

109,583

 

76,442

Cash and cash equivalents at end of period

$

108,685

 

$

76,170

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF REVENUE TO NON-GAAP REVENUE, GROSS PROFIT AND GROSS MARGIN TO NON-GAAP GROSS PROFIT AND NON-GAAP GROSS MARGIN, LOSS FROM OPERATIONS TO NON-GAAP LOSS FROM OPERATIONS AND OPERATING MARGIN TO NON-GAAP OPERATING MARGIN

(in thousands)

(unaudited)

Three Months Ended

March 31,

 

Three Months Ended

 

March 31,

 

2014

 

2013

Revenue

$

57,409

 

$

37,657

Cost of revenue

17,404

 

11,252

Gross profit

$

40,005

 

$

26,405

Gross margin

69.7

%

 

70.1

%

 

 

 

 

Revenue

$

57,409

 

$

37,657

Adjustments to revenue 1

 

133

Non-GAAP revenue

$

57,409

 

$

37,790

 

 

 

 

Cost of revenue

$

17,404

 

$

11,252

Adjustments to costs of revenue

 

 

 

Amortization of intangible assets

(312

)

 

(313

)

Stock based compensation and employer-related taxes

(802

)

 

(440

)

Total adjustments to cost of revenue

(1,114

)

 

(753

)

Non-GAAP costs of revenue

16,290

 

10,499

Non-GAAP gross profit

$

41,119

 

$

27,291

Non-GAAP gross margin

71.6

%

 

72.2

%

 

 

 

 

Loss from operations

$

(12,722

)

 

$

(9,841

)

Operating margin

(22.2

)%

 

(26.1

)%

Adjustments to loss from operations

 

 

 

Adjustments to revenue 1

 

133

Stock-based compensation and employer-related taxes

8,140

 

4,040

Amortization of intangible assets

563

 

564

Total adjustments to loss from operations

8,703

 

4,737

Non-GAAP loss from operations

$

(4,019

)

 

$

(5,104

)

Non-GAAP operating margin

(7.0

)%

 

(13.5

)%

1

Due to purchase accounting rules, upon acquisition, Cornerstone recorded an adjustment of $1.6 million to reduce the balance of deferred revenue related to the assumed client contracts acquired from Sonar Limited. As a result of this adjustment, $0.1 million of revenue was not recognized during the three months ended March 31, 2013. Therefore, revenue is adjusted by an increase of $0.1 million to arrive at non-GAAP revenue for the three months ended March 31, 2013.

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF NET LOSS TO NON-GAAP NET LOSS, NON-GAAP NET LOSS MARGIN AND NON-GAAP NET LOSS PER SHARE

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

March 31,

 

Three Months Ended

 

March 31,

 

2014

 

2013

Net loss

$

(15,790

)

 

$

(9,934

)

Net loss margin

(27.5

)%

 

(26.4

)%

Adjustments to net loss

 

 

 

Stock-based compensation and employer-related payroll taxes

8,140

 

4,040

Acquisition related:

 

Adjustments to revenue 1

 

133

Amortization of intangible assets

492

 

492

Adjustments for income tax benefit 2

 

(129

)

Accretion of debt discount and amortization of debt issuance costs 3

2,031

 

Other amortization costs and other expenses

71

 

72

Total adjustments to net loss

10,734

 

4,608

Non-GAAP net loss

$

(5,056

)

 

$

(5,326

)

Non-GAAP net loss margin

(8.8

)%

 

(14.1

)%

Weighted-average common shares outstanding, basic and diluted

52,726

 

50,798

Non-GAAP net loss per share

$

(0.10

)

 

$

(0.10

)

1

As of March 31, 2013, approximately $0.1 million in estimated revenues were not recognized during the three months ended March 31, 2013, due to purchase accounting rules.

2

Income tax effects related to acquisition related adjustments.

3

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

Cornerstone OnDemand, Inc.

CALCULATIONS OF BOOKINGS

(dollars in thousands)

(unaudited)

Deferred Revenue Balance

Three Months Ended March 31, 2014

 

Revenue

 

 

$

57,409

Deferred revenue at December 31, 2013

$

138,822

 

 

Deferred revenue at March 31, 2014

131,072

 

 

Change in deferred revenue

(7,750

)

 

(7,750

)

Bookings

 

$

49,659

Deferred Revenue Balance

Three Months Ended March 31, 2013

Revenue

 

 

$

37,657

Deferred revenue at December 31, 2012

$

92,252

 

 

Deferred revenue at March 31, 2013

90,534

 

 

Change in deferred revenue

(1,718

)

 

(1,718

)

Bookings

 

 

$

35,939

 

Percentage period-over-period increase in bookings for the three months ended March 31, 2014

 

 

38

%

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO NON-GAAP NET CASH PROVIDED BY OPERATING ACTIVITIES

(in thousands)

(unaudited)

Three Months Ended

March 31,

 

Three Months Ended

 

March 31,

 

2014

 

2013

Net cash provided by operating activities

$

879

 

$

478

Payment of employer related taxes from stock-based compensation

248

 

58

Purchased investment premium, net of amortization

(926

)

 

Non-GAAP net cash provided by operating activities

$

201

 

$

536

Cornerstone OnDemand, Inc.

Investor Relations Contact:
Alexandra Geller
Cornerstone OnDemand
Phone: +1 (310) 752-1870
ageller@csod.com

or

Media Contact:
Elizabeth Flax
Cornerstone OnDemand
Phone: +1 (310) 752-1860
eflax@csod.com

Source: Cornerstone OnDemand

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