Cornerstone OnDemand Announces Third Quarter 2014 Financial Results
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Cornerstone OnDemand Announces
Third Quarter 2014 Financial Results
     

Record quarterly revenue of $68.3 million, up 42% year-over-year

Record quarterly gross profit of $48.9 million, up 41% year-over-year

Record client additions, ending the quarter with over 1,900 clients.2

SANTA MONICA, Calif. – November 5, 2014 – Talent management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its quarter ended September 30, 2014.

Revenue for the third quarter of 2014 was $68.3 million, representing a 42% 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 $82.1 million for the third quarter of 2014, representing a 31% increase compared to the same period in 2013. 1 Bookings for the first nine months of 2014 were $201.8 million, representing a 37% increase compared to the same period in 2013. 1 Deferred revenue at September 30, 2014 was $153.5 million, representing a 41% increase compared to the balance at September 30, 2013.

“Our core business remains solid,” said Adam Miller, the company’s President and CEO. “With best-in-class machine learning and predictive analytics capabilities from Evolv complementing our existing products, combined with strong demand from the U.S. and Europe, we expect our core business to continue to grow well into the future.”

Gross profit for the third quarter of 2014 was $48.9 million, representing a 41% increase compared to the same period in 2013. Gross margin for the third quarter of 2014 was 71.6% compared to 71.7% in the third quarter of 2013.

Non-GAAP gross profit for the third quarter of 2014 was $49.9 million, representing a 40% increase compared to the same period in 2013.1 Non-GAAP gross margin for the third quarter of 2014 was 73.1% compared to 73.7% in the third quarter of 2013.1

The Company’s operating loss for the third quarter of 2014 was $(9.9) million, yielding an operating loss margin of (14.5)%, compared to an operating loss of $(8.2) million, yielding an operating loss margin of (17.0)%, in the third quarter of 2013.

Non-GAAP operating income for the third quarter of 2014 was $0.1 million, yielding a non-GAAP operating income margin of 0.2%, compared to a non-GAAP operating loss of $(1.1) million, yielding a non-GAAP operating loss margin of (2.2)%, in the third quarter of 2013.1

The Company’s net loss for the third quarter of 2014 was $(14.3) million, yielding a net loss margin of (20.9)%, or a $(0.27) net loss per share, compared to a net loss of $(11.1) million, yielding a net loss margin of (22.9)%, or a $(0.21) net loss per share, in the third quarter of 2013.

Non-GAAP net loss for the third quarter of 2014 was $(2.2) million, yielding a non-GAAP net loss margin of (3.2)%, or a $(0.04) non-GAAP net loss per share, compared to a non-GAAP net loss of $(1.9) million, yielding a non-GAAP net loss margin of (4.0)%, or a $(0.04) non-GAAP net loss per share, in the third quarter of 2013.1

At September 30, 2014, the Company’s total cash and cash equivalents were $104.0 million, investments were $183.7 million, and accounts receivable were $86.9 million, yielding a total of approximately $374.5 million.

The Company ended the quarter with over 16.6 million users, representing the addition of approximately 1.1 million users.2

1

Bookings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating income (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, formerly known as Cornerstone for Small Business.

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its third quarter 2014 results at 2:00 p.m. PST (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 (877) 445-4619 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 29590007. A replay of the call will also be available at http://investors.cornerstoneondemand.com/events.cfm or via telephone until 11:59 p.m. PST on November 8, 2014 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 29590007.

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 1,900 clients worldwide, spanning more than 16.6 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 release contains 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 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; 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. and Europe; 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; our ability to successfully integrate our operations with those of recently acquired Evolv Inc.; 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-Q filed with the SEC on August 7, 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 (used in) provided by 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, (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, acquisition related costs, accretion of debt discount and amortization of debt issuance costs, and other amortization costs and other expenses, (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 employer-related taxes and amortization of certain intangible assets reflected in cost of revenue, (vii) non-GAAP operating income (loss) and non-GAAP operating income (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 (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 STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(14,311

)

 

$

(11,054

)

 

$

(46,733

)

 

$

(29,671

)

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

3,546

 

 

2,550

 

 

9,831

 

 

6,997

 

Accretion of debt discount and amortization of debt issuance costs

2,081

 

 

1,981

 

 

6,167

 

 

2,267

 

Purchased investment premium, net of amortization

(432

)

 

(3,031

)

 

225

 

 

(3,031

)

Unrealized foreign exchange loss (gain)

1,194

 

 

(191

)

 

1,329

 

 

375

 

Stock-based compensation expense

8,478

 

 

5,917

 

 

24,504

 

 

14,263

 

Deferred income taxes

 

 

28

 

 

 

 

(350

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

(19,655

)

 

(10,529

)

 

(20,920

)

 

(8,045

)

Deferred commissions

(1,356

)

 

(1,231

)

 

(3,527

)

 

(3,041

)

Prepaid expenses and other assets

(1,061

)

 

(1,034

)

 

845

 

 

(4,249

)

Accounts payable

(600

)

 

(906

)

 

2,037

 

 

3,011

 

Accrued expenses

598

 

 

3,756

 

 

125

 

 

2,308

 

Deferred revenue

16,120

 

 

12,324

 

 

15,664

 

 

16,562

 

Other liabilities

1,245

 

 

470

 

 

(978

)

 

540

 

Net cash used in operating activities

(4,153

)

 

(950

)

 

(11,431

)

 

(2,064

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of investments

(41,516

)

 

(203,959

)

 

(124,191

)

 

(203,959

)

Maturities of investments

57,594

 

 

5,459

 

 

139,849

 

 

5,459

 

Purchases of property and equipment

(3,253

)

 

(4,090

)

 

(10,522

)

 

(6,467

)

Capitalized software costs

(2,337

)

 

(1,573

)

 

(7,000

)

 

(4,987

)

Net cash provided by (used in) investing activities

10,488

 

 

(204,163

)

 

(1,864

)

 

(209,954

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from the issuance of convertible notes, net

 

 

(379

)

 

 

 

245,664

 

Payments for convertible note hedges

 

 

 

 

 

 

(49,537

)

Proceeds from the issuance of warrants

 

 

 

 

 

 

23,225

 

Proceeds from issuance of debt

 

 

 

 

 

 

1,914

 

Repayment of debt

(144

)

 

(125

)

 

(425

)

 

(3,901

)

Principal payments under capital lease obligations

(183

)

 

(402

)

 

(701

)

 

(1,389

)

Proceeds from stock option and warrant exercises

2,383

 

 

5,098

 

 

9,721

 

 

9,238

 

Net cash provided by financing activities

2,056

 

 

4,192

 

 

8,595

 

 

225,214

 

Effect of exchange rate changes on cash and cash equivalents

(975

)

 

298

 

 

(889

)

 

3

 

Net increase (decrease) in cash and cash equivalents

7,416

 

 

(200,623

)

 

(5,589

)

 

13,199

 

Cash and cash equivalents at beginning of period

96,578

 

 

290,264

 

 

109,583

 

 

76,442

 

Cash and cash equivalents at end of period

$

103,994

 

 

$

89,641

 

 

$

103,994

 

 

$

89,641

 

 

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 INCOME (LOSS) AND OPERATING MARGIN TO NON-GAAP OPERATING MARGIN

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2014

 

2013

 

2014

 

2013

Revenue

$

68,318

 

 

$

48,270

 

 

$

187,195

 

 

$

130,273

 

Cost of revenue

19,374

 

 

13,644

 

 

54,187

 

 

38,060

 

Gross profit

$

48,944

 

 

$

34,626

 

 

$

133,008

 

 

$

92,213

 

Gross margin

71.6

%

 

71.7

%

 

71.1

%

 

70.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

68,318

 

 

$

48,270

 

 

$

187,195

 

 

$

130,273

 

Adjustments to revenue 1

 

 

 

 

 

 

169

 

Non-GAAP revenue

$

68,318

 

 

$

48,270

 

 

$

187,195

 

 

$

130,442

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

19,374

 

 

$

13,644

 

 

$

54,187

 

 

$

38,060

 

Adjustments to costs of revenue

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

(312

)

 

(313

)

 

(936

)

 

(939

)

Stock based compensation and employer-related taxes

(653

)

 

(621

)

 

(2,042

)

 

(1,578

)

Total adjustments to cost of revenue

(965

)

 

(934

)

 

(2,978

)

 

(2,517

)

Non-GAAP costs of revenue

18,409

 

 

12,710

 

 

51,209

 

 

35,543

 

Non-GAAP gross profit

$

49,909

 

 

$

35,560

 

 

$

135,986

 

 

$

94,899

 

Non-GAAP gross margin

73.1

%

 

73.7

%

 

72.6

%

 

72.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

$

(9,907

)

 

$

(8,203

)

 

$

(35,746

)

 

$

(26,149

)

Operating margin

(14.5

)%

 

(17.0

)%

 

(19.1

)%

 

(20.1

)%

Adjustments to loss from operations

 

 

 

 

 

 

 

 

 

 

 

Adjustments to revenue 1

 

 

 

 

 

 

169

 

Stock-based compensation and employer-related taxes

8,769

 

 

6,557

 

 

25,101

 

 

15,139

 

Amortization of intangible assets

523

 

 

564

 

 

1,611

 

 

1,692

 

Acquisition costs 2

731

 

 

 

 

731

 

 

 

Total adjustments to loss from operations

10,023

 

 

7,121

 

 

27,443

 

 

17,000

 

Non-GAAP operating income (loss)

$

116

 

 

$

(1,082

)

 

$

(8,303

)

 

$

(9,149

)

Non-GAAP operating income (loss) margin

0.2

%

 

(2.2

)%

 

(4.4

)%

 

(7.0

)%

 

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, $0.2 million of revenue was not recognized during the nine months ended September 30, 2013. Therefore, revenue is adjusted by an increase of $0.2 million to arrive at non-GAAP revenue for the nine months ended September 30, 2013.

2

 

Costs related to acquisition of Evolv Inc.

 

 

 

 

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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2014

 

2013

 

2014

 

2013

Net loss

$

(14,311

)

 

$

(11,054

)

 

$

(46,733

)

 

$

(29,671

)

Net loss margin

(20.9

)%

 

(22.9

)%

 

(25.0

)%

 

(22.8

)%

Adjustments to net loss

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and employer-related payroll taxes

8,769

 

 

6,557

 

 

25,101

 

 

15,139

 

Acquisition related:

 

 

 

 

 

 

 

 

 

 

 

Adjustments to revenue 1

 

 

 

 

 

 

169

 

Amortization of intangible assets

452

 

 

493

 

 

1,398

 

 

1,477

 

Adjustments for income tax provision (benefit) 2

 

 

27

 

 

 

 

(351

)

Acquisition costs 3

731

 

 

 

 

731

 

 

 

Accretion of debt discount and amortization of debt issuance costs 4

2,081

 

 

1,981

 

 

6,167

 

 

2,267

 

Other amortization costs and other expenses

71

 

 

71

 

 

213

 

 

215

 

Total adjustments to net loss

12,104

 

 

9,129

 

 

33,610

 

 

18,916

 

Non-GAAP net loss

$

(2,207

)

 

$

(1,925

)

 

$

(13,123

)

 

$

(10,755

)

Non-GAAP net loss margin

(3.2

)%

 

(4.0

)%

 

(7.0

)%

 

(8.2

)%

Weighted-average common shares outstanding, basic and diluted

53,423

 

 

51,544

 

 

53,130

 

 

51,164

 

Non-GAAP net loss per share

$

(0.04

)

 

$

(0.04

)

 

$

(0.25

)

 

$

(0.21

)

 

1

 

As of September 30, 2013, approximately $0.2 million in estimated revenue was not recognized during the nine months ended September 30, 2013, due to purchase accounting rules.

2

 

Income tax effects related to acquisition related adjustments for Sonar Limited.

3

 

Costs related to acquisition of Evolv Inc.

4

 

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 September 30, 2014

 

 

 

 

 

 

Revenue

 

 

 

$

68,318

 

Deferred revenue at June 30, 2014

$

139,712

 

 

 

 

Deferred revenue at September 30, 2014

153,467

 

 

 

 

Change in deferred revenue

13,755

 

 

13,755

 

Bookings

 

 

 

$

82,073

 

 

 

 

 

 

 

 

Deferred Revenue Balance

 

Three Months Ended September 30, 2013

 

 

 

 

 

 

Revenue

 

 

 

$

48,270

 

Deferred revenue at June 30, 2013

$

95,040

 

 

 

 

Deferred revenue at September 30, 2013

109,212

 

 

 

 

Change in deferred revenue

14,172

 

 

14,172

 

Bookings

 

 

 

$

62,442

 

 

 

 

 

 

 

Percentage period-over-period increase in bookings for the three months ended September 30, 2014

 

 

 

31

%

 

 

 

 

 

 

 

Deferred Revenue Balance

 

Nine Months Ended     September 30, 2014

 

 

 

 

 

 

Revenue

 

 

 

$

187,195

 

Deferred revenue at December 31, 2013

$

138,822

 

 

 

 

Deferred revenue at September 30, 2014

153,467

 

 

 

 

Change in deferred revenue

14,645

 

 

14,645

 

Bookings

 

 

 

$

201,840

 

 

 

 

 

 

 

 

Deferred Revenue Balance

 

Nine Months Ended     September 30, 2013

 

 

 

 

 

 

Revenue

 

 

 

$

130,273

 

Deferred revenue at December 31, 2012

$

92,252

 

 

 

 

Deferred revenue at September 30, 2013

109,212

 

 

 

 

Change in deferred revenue

16,960

 

 

16,960

 

Bookings

 

 

 

$

147,233

 

 

 

 

 

 

 

Percentage period-over-period increase in bookings for the nine months ended September 30, 2014

 

 

 

37

%

 

 

 

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH USED IN OPERATING ACTIVITIES TO NON-GAAP NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2014

 

2013

 

2014

 

2013

Net cash used in operating activities

$

(4,153

)

 

$

(950

)

 

$

(11,431

)

 

$

(2,064

)

Payment of acquisition related costs 1

13

 

 

 

 

13

 

 

 

Payment of employer related taxes from stock-based compensation

291

 

 

640

 

 

597

 

 

876

 

Purchased investment premium, net of amortization

432

 

 

3,031

 

 

(225

)

 

3,031

 

Non-GAAP net cash (used in) provided by operating activities

$

(3,417

)

 

$

2,721

 

 

$

(11,046

)

 

$

1,843

 

 

1

 

Costs paid during the three months ended September 30, 2014, 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:
Elizabeth Flax
Cornerstone OnDemand
Phone: +1 (310) 752-1860
eflax@csod.com

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