Cornerstone OnDemand Announces Second Quarter 2015 Financial Results
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Cornerstone OnDemand Announces Second Quarter 2015 Financial Results

Record quarterly revenue of $82.6 million, up 34% year-over-year

Record second quarter bookings of $91.3 million, up 30% year-over-year1

Ended the quarter with over 2,300 clients and approximately 20.5 million users2

SANTA MONICA, Calif. – August 6, 2015 – Talent management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its quarter ended June 30, 2015.

Revenue for the second quarter of 2015 was $82.6 million, representing a 34% increase compared to the same period in 2014. Non-GAAP revenue for the second quarter of 2015 was $82.8 million, representing a 35% increase compared to the same period in 2014.1

Bookings, which the Company defines as revenue plus the change in deferred revenue for the period, were $91.3 million for the second quarter of 2015, representing a 30% increase compared to the same period in 2014.1 Bookings for the first six months of 2015 were $154.8 million, representing a 29% increase compared to the same period in 2014.1 Deferred revenue at June 30, 2015 was $189.6 million, representing a 36% increase compared to the balance at June 30, 2014.

“Our Q2 results reflect another quarter of strong performance, highlighted by sustained execution from the core business and contributions from Latin America and the public sector,” said Adam Miller, the Company’s President and CEO. “Our demonstrated global demand, momentum from recent investments, and commitment to operational excellence, drives our enthusiasm about the path ahead.”

The Company’s operating loss for the second quarter of 2015 was $(19.2) million, yielding an operating loss margin of (23)%, compared to an operating loss of $(13.1) million, yielding an operating loss margin of (21)%, for the second quarter of 2014.

Non-GAAP operating loss for the second quarter of 2015 was $(6.5) million, yielding a non-GAAP operating loss margin of (8)%, compared to a non-GAAP operating loss of $(4.4) million, yielding a non-GAAP operating loss margin of (7)%, for the second quarter of 2014.1

The Company’s net loss for the second quarter of 2015 was $(23.3) million, yielding a net loss margin of (28)%, or a $(0.43) net loss per share, compared to a net loss of $(16.6) million, yielding a net loss margin of (27)%, or a $(0.31) net loss per share, for the second quarter of 2014.

Non-GAAP net loss for the second quarter of 2015 was $(8.4) million, yielding a non-GAAP net loss margin of (10)%, or a $(0.16) non-GAAP net loss per share, compared to a non-GAAP net loss of $(5.9) million, yielding a non-GAAP net loss margin of (10)%, or a $(0.11) non-GAAP net loss per share, for the second quarter of 2014.1

The Company ended the quarter with over 2,300 clients and over 20.5 million users.2

1

 

Bookings, non-GAAP revenue, non-GAAP operating loss, non-GAAP operating loss 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.

 

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its second quarter 2015 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/investors/news-and-events/events/default.aspx. The live call can be accessed by dialing (877) 445-4619 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 76954681. A replay of the call will also be available at http://investors.cornerstoneondemand.com/investors/news-and-events/events/default.aspx or via telephone until 11:59 p.m. PT on May 9, 2015 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 76954681.

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 2,300 clients worldwide, spanning approximately 20.5 million users across 191 countries and in 42 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 press release and the quarterly conference call referenced above contain forward-looking statements, including statements regarding Cornerstone OnDemand’s future financial performance, including the performance of our core business and emerging businesses, market growth, the demand for and benefits from the use of Cornerstone OnDemand’s current and future solutions, and general business conditions, as well as Cornerstone OnDemand’s expectations regarding gross margins, revenue, non-GAAP net income or loss, non-GAAP loss per share, net loss margin, non-GAAP cash flows provided by operating activities for the third quarter and full year of 2015 and the demand for our products relative to our competitors’ products. Any forward-looking statements contained in this press release or the quarterly conference call 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; the timing of when consulting services are delivered to our new and existing clients by our services organization and implementation subcontractors; the complexity of deployments and product implementations, which can impact the timing of when revenue is recognized from new and existing clients; our 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; our ability to expand our enterprise and mid-market sales teams; our ability to maintain stable and consistent quota attainment rates; our ability to exploit Big Data to drive increased demand for our products; continued strong demand for talent management in the U.S., Europe, Asia Pacific and Latin America; 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 Quarterly Report on Form 10-Q filed with the SEC on May 8, 2015.

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 press release and the quarterly conference call held on the date hereof 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) non-GAAP cost of revenue, which is defined as cost of revenue less amortization of intangible assets and stock-based compensation and employer-related taxes, (iii) bookings, which are defined as revenue plus the change in deferred revenue for the period, (iv) non-GAAP net cash used in operating activities, which excludes payment of acquisition related costs, payment of premium on investments net of related amortization and employer-related taxes from stock-based compensation, (v) non-GAAP net cash used in operating activities margin, which is defined as non-GAAP net cash used in operating activities divided by non-GAAP revenue, (vi) 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, acquisition related costs, accretion of debt discount and amortization of debt issuance costs, and other amortization costs, (vii) non-GAAP net loss margin, which is defined as non-GAAP net loss divided by non-GAAP revenue, (viii) non-GAAP gross profit and non-GAAP gross margin, which are calculated based on non-GAAP revenue and exclude stock-based compensation and employer-related taxes and amortization of certain intangible assets reflected in cost of revenue, (ix) non-GAAP operating loss and non-GAAP operating loss margin, which are calculated based on operating loss and exclude adjustments to revenue, stock-based compensation and employer-related taxes, amortization of intangible assets and acquisition costs, and (x) non-GAAP operating expenses, which exclude stock-based compensation, employer-related taxes, and amortization of intangible assets, and (xi) 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 OnDemand 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)

June 30,
 2015

December 31, 2014

Assets

Cash and cash equivalents

$

79,379

$

166,557

Short-term investments

146,003

116,106

Accounts receivable, net

80,623

84,499

Deferred commissions

27,565

26,236

Prepaid expenses and other current assets

15,786

13,007

Total current assets

349,356

406,405

Capitalized software development costs, net

19,177

15,719

Property and equipment, net

29,813

21,424

Long-term investments

32,156

3,938

Intangible assets, net

21,998

27,282

Goodwill

25,894

25,894

Other assets, net

5,011

4,993

Total Assets

$

483,405

$

505,655

Liabilities and StockholdersÕ Equity

Liabilities:

Accounts payable

$

15,882

$

16,737

Accrued expenses

30,949

29,476

Deferred revenue, current portion

177,510

180,598

Capital lease obligations, current portion

88

236

Debt, current portion

136

351

Other liabilities

2,419

3,052

Total current liabilities

226,984

230,450

Convertible notes, net

228,792

225,094

Other liabilities, non-current

3,411

3,871

Deferred revenue, net of current portion

12,074

10,738

Total liabilities

471,261

470,153

StockholdersÕ Equity:

Common stock

5

5

Additional paid-in capital

360,029

336,692

Accumulated deficit

(347,890

)

(301,366

)

Accumulated other comprehensive income

171

Total stockholdersÕ equity

12,144

35,502

Total Liabilities and StockholdersÕ Equity

$

483,405

$

505,655

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Revenue

$

82,563

$

61,468

$

156,518

$

118,877

Cost of revenue 1, 2

27,893

17,409

52,555

34,813

Gross profit

54,670

44,059

103,963

84,064

Operating expenses:

Sales and marketing 1

51,446

39,608

97,404

74,747

Research and development 1

9,983

6,900

19,750

13,783

General and administrative 1

12,260

10,455

23,351

20,909

Amortization of certain acquired intangible assets

150

213

300

464

Total operating expenses

73,839

57,176

140,805

109,903

Loss from operations

(19,169

)

(13,117

)

(36,842

)

(25,839

)

Other income (expense):

Interest income

202

190

372

413

Interest expense

(3,114

)

(3,028

)

(6,205

)

(6,038

)

Other, net

(801

)

(477

)

(3,191

)

(605

)

Other income (expense), net

(3,713

)

(3,315

)

(9,024

)

(6,230

)

Loss before income tax provision

(22,882

)

(16,432

)

(45,866

)

(32,069

)

Income tax provision

(380

)

(200

)

(658

)

(353

)

Net loss

$

(23,262

)

$

(16,632

)

$

(46,524

)

$

(32,422

)

Net loss per share, basic and diluted

$

(0.43

)

$

(0.31

)

$

(0.86

)

$

(0.61

)

Weighted average common shares outstanding, basic and diluted

53,987

53,197

53,886

52,963

1

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Cost of revenue

$

851

$

587

$

1,670

$

1,389

Sales and marketing

5,534

4,421

10,254

8,135

Research and development

1,348

817

2,520

1,620

General and administrative

2,102

2,367

4,143

5,188

                  Total

$

9,835

$

8,192

$

18,587

$

16,332

2

Cost of revenue includes amortization of intangibles as follows:

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Cost of revenue

$

2,492

$

312

$

4,984

$

624

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Cash flows from operating activities:

Net loss

$

(23,262

)

$

(16,632

)

$

(46,524

)

$

(32,422

)

Adjustments to reconcile net loss to net cash used in by operating activities:

Depreciation and amortization

6,676

3,213

12,904

6,285

Accretion of debt discount and amortization of debt issuance costs

2,159

2,055

4,292

4,086

Purchased investment premium, net of amortization

177

(269

)

112

657

Net foreign currency loss

311

264

2,198

135

Stock-based compensation expense

9,784

8,134

18,501

16,026

Changes in operating assets and liabilities:

Accounts receivable

(17,870

)

(16,162

)

3,486

(1,265

)

Deferred commissions

(2,216

)

(2,912

)

(1,242

)

(2,171

)

Prepaid expenses and other assets

(57

)

(598

)

(3,572

)

1,906

Accounts payable

655

1,549

(1,707

)

2,637

Accrued expenses

6,446

4,928

(508

)

(473

)

Deferred revenue

4,894

7,624

(2,210

)

(456

)

Other liabilities

(379

)

649

(1,062

)

(2,223

)

Net cash used in by operating activities

(12,682

)

(8,157

)

(15,332

)

(7,278

)

Cash flows from investing activities:

Purchases of investments

(22,542

)

(65,171

)

(104,039

)

(82,675

)

Maturities of investments

31,309

66,243

45,806

82,255

Purchases of property and equipment

(3,445

)

(4,073

)

(8,509

)

(7,269

)

Capitalized software costs

(3,159

)

(2,314

)

(6,630

)

(4,663

)

Net cash provided by (used in) investing activities

2,163

(5,315

)

(73,372

)

(12,352

)

Cash flows from financing activities:

Repayment of debt

(92

)

(142

)

(216

)

(281

)

Principal payments under capital lease obligations

(53

)

(200

)

(148

)

(518

)

Proceeds from employee stock plans

2,275

1,729

3,658

7,338

Net cash provided by financing activities

2,130

1,387

3,294

6,539

Effect of exchange rate changes on cash and cash equivalents

1,120

(22

)

(1,768

)

86

Net decrease in cash and cash equivalents

(7,269

)

(12,107

)

(87,178

)

(13,005

)

Cash and cash equivalents at beginning of period

86,648

108,685

166,557

109,583

Cash and cash equivalents at end of period

$

79,379

$

96,578

$

79,379

$

96,578

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF REVENUE TO NON-GAAP REVENUE, 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 LOSS AND OPERATING MARGIN TO NON-GAAP OPERATING MARGIN

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Revenue

$

82,563

$

61,468

$

156,518

$

118,877

Cost of revenue

27,893

17,409

52,555

34,813

Gross profit

$

54,670

$

44,059

$

103,963

$

84,064

Gross margin

66

%

72

%

66

%

71

%

Revenue

$

82,563

$

61,468

$

156,518

$

118,877

Adjustments to revenue 1

226

706

Non-GAAP revenue

$

82,789

$

61,468

$

157,224

$

118,877

Cost of revenue

$

27,893

$

17,409

$

52,555

$

34,813

Adjustments to costs of revenue

Amortization of intangible assets

(2,492

)

(312

)

(4,984

)

(624

)

Stock based compensation and employer-related taxes

(851

)

(587

)

(1,670

)

(1,389

)

Total adjustments to cost of revenue

(3,343

)

(899

)

(6,654

)

(2,013

)

Non-GAAP costs of revenue

24,550

16,510

45,901

32,800

Non-GAAP gross profit

$

58,239

$

44,958

$

111,323

$

86,077

Non-GAAP gross margin

70

%

73

%

71

%

72

%

Loss from operations

$

(19,169

)

$

(13,117

)

$

(36,842

)

$

(25,839

)

Operating margin

(23

)%

(21

)%

(24

)%

(22

)%

Adjustments to loss from operations

Adjustments to revenue 1

226

706

Stock-based compensation and employer-related taxes

9,835

8,192

18,587

16,332

Amortization of intangible assets

2,642

525

5,284

1,088

Total adjustments to loss from operations

12,703

8,717

24,577

17,420

Non-GAAP operating loss

$

(6,466

)

$

(4,400

)

$

(12,265

)

$

(8,419

)

Non-GAAP operating loss margin

(8

)%

(7

)%

(8

)%

(7

)%

1

Due to purchase accounting rules, upon acquisition of Evolv Inc., Cornerstone OnDemand recorded an adjustment of $1.9 million to reduce the balance of deferred revenue related to the assumed client contracts acquired from Evolv Inc. As a result of this adjustment, $0.2 million and $0.7 million of revenue was not recognized during the three and six months ended June 30, 2015, respectively. Therefore, revenue is adjusted by an increase of $0.2 million and $0.7 million to arrive at non-GAAP revenue for the three and six months ended June 30, 2015, respectively.

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

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Net loss

$

(23,262

)

$

(16,632

)

$

(46,524

)

$

(32,422

)

Net loss margin

(28

)%

(27

)%

(30

)%

(27

)%

Adjustments to net loss

Stock-based compensation and employer-related payroll taxes

9,835

8,192

18,587

16,332

Acquisition related:

Adjustments to revenue

226

706

Amortization of intangible assets

2,571

454

5,142

946

Accretion of debt discount and amortization of debt issuance costs 1

2,159

2,055

4,292

4,086

Other amortization costs

71

71

142

142

Total adjustments to net loss

14,862

10,772

28,869

21,506

Non-GAAP net loss

$

(8,400

)

$

(5,860

)

$

(17,655

)

$

(10,916

)

Non-GAAP net loss margin

(10

)%

(10

)%

(11

)%

(9

)%

Weighted-average common shares outstanding, basic and diluted

53,987

53,197

53,886

52,963

Non-GAAP net loss per share

$

(0.16

)

$

(0.11

)

$

(0.33

)

$

(0.21

)

1

Debt discount accretion and debt issuance cost amortization has been recorded in connection with our issuance of $253.0 million in convertible notes on June 17, 2013. 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

(in thousands)

(unaudited)

Deferred Revenue Balance

Three Months Ended June 30, 2015

Revenue

$

82,563

Deferred revenue at March 31, 2015

$

180,856

Deferred revenue at June 30, 2015

189,584

Change in deferred revenue

8,728

8,728

Bookings

$

91,291

Deferred Revenue Balance

Three Months Ended June 30, 2014

Revenue

$

61,468

Deferred revenue at March 31, 2014

$

131,072

Deferred revenue at June 30, 2014

139,712

Change in deferred revenue

8,640

8,640

Bookings

$

70,108

Percentage period-over-period increase in bookings for the three months ended June 30, 2015

30

%

Deferred Revenue Balance

Six Months Ended     June 30, 2015

Revenue

$

156,518

Deferred revenue at December 31, 2014

$

191,336

Deferred revenue at June 30, 2015

189,584

Change in deferred revenue

(1,752

)

(1,752

)

Bookings

$

154,766

Deferred Revenue Balance

Six Months Ended     June 30, 2014

Revenue

$

118,877

Deferred revenue at December 31, 2013

$

138,822

Deferred revenue at June 30, 2014

139,712

Change in deferred revenue

890

890

Bookings

$

119,767

Percentage period-over-period increase in bookings for the six months ended June 30, 2015

29

%

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH USED IN OPERATING ACTIVITIES TO NON-GAAP NET CASH USED IN OPERATING ACTIVITIES AND NON-GAAP NET CASH USED IN OPERATING ACTIVITIES MARGIN

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Net cash used in by operating activities

$

(12,682

)

$

(8,157

)

$

(15,332

)

$

(7,278

)

Net cash used in operating activities margin

(15

)%

(13

)%

(10

)%

(6

)%

Payment of acquisition related costs 1

62

799

Payment of employer related taxes from stock-based compensation

51

58

86

306

Purchased investment premium, net of amortization

(177

)

269

(112

)

(657

)

Non-GAAP net cash used in operating activities

$

(12,746

)

$

(7,830

)

$

(14,559

)

$

(7,629

)

Non-GAAP net cash used in operating activities margin

(15

)%

(13

)%

(9

)%

(6

)%

1

Costs paid during the three and six months ended June 30, 2015, related to acquisition of Evolv Inc.

 

 

 

 

 

 

 

Cornerstone OnDemand, Inc.

 

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

or

Media Contact:
Sarah Platte
Cornerstone OnDemand
Phone: +1 (310) 752-1799
splatte@csod.com

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