Cornerstone OnDemand Announces Third Quarter 2015 Financial Results
DEMO
Contact Us

Cornerstone OnDemand Announces Third Quarter 2015 Financial Results

Record quarterly revenue of $87.3 million, up 28% year-over-year

Record third quarter bookings of $103.7 million, up 26% year-over-year1

Ended the quarter with over 2,400 clients and approximately 22.2 million users2

SANTA MONICA, Calif. – November 5, 2015 – Talent management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its quarter ended September 30, 2015.

Revenue for the third quarter of 2015 was $87.3 million, representing a 28% increase compared to the same period in 2014.

Non-GAAP revenue for the third quarter of 2015 was $87.4 million, representing a 28% 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 $103.7 million for the third quarter of 2015, representing a 26% increase compared to the same period in 2014.1 Bookings for the first nine months of 2015 were $258.4 million, representing a 28% increase compared to the same period in 2014.1 Deferred revenue at September 30, 2015 was $206.0 million, representing a 34% increase compared to the balance at September 30, 2014.

"Our third quarter performance again demonstrates our leadership position within learning and talent management, as organizations around the world become increasingly focused on helping their employees realize their potential,” said Adam Miller, the Company’s President and CEO. “Collectively, the size of the market, our competitive positioning, and the strength of our platform, as well as our ability to retain and grow our existing client base, give us confidence in the road ahead as we continue to march towards our goal of achieving $1 billion in revenue."

The Company’s operating loss for the third quarter of 2015 was $(17.0) million, yielding an operating loss margin of (20)%, compared to an operating loss of $(9.9) million, yielding an operating loss margin of (15)%, for the third quarter of 2014.

Non-GAAP operating loss for the third quarter of 2015 was $(1.6) million, yielding a non-GAAP operating loss margin of (2)%, compared to a non-GAAP operating income of $0.1 million, yielding a non-GAAP operating income margin of 0%, for the third quarter of 2014.1

The Company’s net loss for the third quarter of 2015 was $(20.1) million, yielding a net loss margin of (23)%, or a $(0.37) net loss per share, compared to a net loss of $(14.3) million, yielding a net loss margin of (21)%, or a $(0.27) net loss per share, for the third quarter of 2014.

Non-GAAP net loss for the third quarter of 2015 was $(2.5) million, yielding a non-GAAP net loss margin of (3)%, or a $(0.05) non-GAAP net loss per share, compared to a non-GAAP net loss of $(2.2) million, yielding a non-GAAP net loss margin of (3)%, or a $(0.04) non-GAAP net loss per share, for the third quarter of 2014.1

The Company ended the quarter with over 2,400 clients and over 22.2 million users.2

1

 

Bookings, non-GAAP revenue, non-GAAP operating (loss) income, non-GAAP operating (loss) income 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 titled “Non-GAAP Financial Measures” and the reconciliations at the end of this press 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 third 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. The live call can be accessed by dialing (877) 445-4619 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 55007742. 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 November 8, 2015 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 55007742.

About Cornerstone OnDemand

Cornerstone OnDemand, Inc. is a global leader in cloud-based learning and talent management software. The company is pioneering solutions help organizations realize the potential of a modern workforce. From recruitment, onboarding, training and collaboration, to performance management, compensation, succession planning and analytics, Cornerstone is designed to enable a lifetime of learning and development that is fundamental to the growth of employees and organizations.

Based in Santa Monica, California, our solutions are used by over 2,400 clients worldwide, spanning approximately 22.5 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 fourth 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, each filed with the SEC.

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) income and non-GAAP operating (loss) income 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. For prior periods, 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. A reconciliation of non-GAAP measures to corresponding GAAP measures is not available on a forward-looking basis as a result of uncertainty regarding stock-based compensation expense and other non-recurring expenses.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

September 30,
 2015

December 31, 2014

Assets

Cash and cash equivalents

$

57,927

$

166,557

Short-term investments

156,531

116,106

Accounts receivable, net

93,281

84,499

Deferred commissions

28,066

26,236

Prepaid expenses and other current assets

17,125

13,007

Total current assets

352,930

406,405

Capitalized software development costs, net

21,284

15,719

Property and equipment, net

28,775

21,424

Long-term investments

44,396

3,938

Intangible assets, net

19,356

27,282

Goodwill

25,894

25,894

Other assets, net

4,462

4,993

Total Assets

$

497,097

$

505,655

Liabilities and StockholdersÕ Equity

Liabilities:

Accounts payable

$

13,614

$

16,737

Accrued expenses

30,416

29,476

Deferred revenue, current portion

191,951

180,598

Capital lease obligations, current portion

51

236

Debt, current portion

57

351

Other liabilities

2,933

3,052

Total current liabilities

239,022

230,450

Convertible notes, net

230,676

225,094

Other liabilities, non-current

3,247

3,871

Deferred revenue, net of current portion

14,045

10,738

Total liabilities

486,990

470,153

StockholdersÕ Equity:

Common stock

5

5

Additional paid-in capital

377,574

336,692

Accumulated deficit

(368,039

)

(301,366

)

Accumulated other comprehensive income

567

171

Total stockholdersÕ equity

10,107

35,502

Total Liabilities and StockholdersÕ Equity

$

497,09

$

505,655

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Revenue

$

87,271

$

68,318

$

243,789

$

187,195

Cost of revenue 1, 2

27,246

19.374

79,801

54,187

Gross profit

60,025

48,944

163,988

133,008

Operating expenses:

Sales and marketing 1

53,255

41,512

150,659

116,259

Research and development 1

10,457

7,552

30,207

21,335

General and administrative 1

13,194

9,576

36,545

30,485

Amortization of certain acquired intangible assets

150

211

450

675

Total operating expenses

77,056

58,851

217,861

168,754

Loss from operations

(17,031

)

(9,907

)

(53,873

)

(35,746

)

Other income (expense):

Interest income

218

174

590

587

Interest expense

(3,138

)

(3,049

)

(9,343

)

(9,087

)

Other, net

(66

)

(1,351

)

(3,257

)

(1,956

)

Other income (expense), net

(2,986

)

(4,226

)

(12,010

)

(10,456

)

Loss before income tax provision

(20,017

)

(14,133

)

(65,883

)

(46,202

)

Income tax provision

(132

)

(178

)

(790

)

(531

)

Net loss

$

(20,149

)

$

(14,311

)

$

(66,673

)

$

(46,733

)

Net loss per share, basic and diluted

$

(0.37

)

$

(0.27

)

$

(1.24

)

$

(0.88

)

Weighted average common shares outstanding, basic and diluted

54,260

53,423

53,917

53,130

1

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Cost of revenue

$

1,206

$

653

$

2,876

$

2,042

Sales and marketing

6,979

5,553

17,233

13,688

Research and development

1,672

936

4,192

2,556

General and administrative

2,759

1,627

6,902

6,815

                  Total

$

12,616

$

8,769

$

31,203

$

25,101

2

Cost of revenue includes amortization of intangibles as follows:

Three Months Ended

Nine Months Ended

September 30,

September30,

2015

2014

2015

2014

Cost of revenue

$

2,492

$

312

$

7,476

$

936

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Cash flows from operating activities:

Net loss

$

(20,149

)

$

(14,311

)

$

(66,673

)

$

(46,733

)

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

Depreciation and amortization

6,993

3,546

19,897

9,831

Accretion of debt discount and amortization of debt issuance costs

2,186

2,081

6,478

6,167

Purchased investment premium, net of amortization

(206)

(432

)

(94)

225

Net foreign currency loss

(529)

1,194

1,669

1,329

Stock-based compensation expense

12,167

8,478

30,668

24,504

Changes in operating assets and liabilities:

Accounts receivable

(13,009

)

(19,655

)

(9,523)

(20,920

)

Deferred commissions

(885

)

(1,356

)

(2,1272

)

(3,527

)

Prepaid expenses and other assets

(1,217

)

(1,061

)

(4,789

)

845

Accounts payable

662

(600)

(1,045

)

2,037

Accrued expenses

894

598

386

125

Deferred revenue

18,754

16,120

16,544

15,664

Other liabilities

387

1,245

(675

)

(978

)

Net cash used in by operating activities

6,048

(4,153

)

(9,284

)

(11,431

)

Cash flows from investing activities:

Purchases of investments

(58,152

)

(41,516

)

(162,191

)

(124,191

)

Maturities of investments

35,609

57,594

81,415

139,849

Purchases of property and equipment

(6,497

)

(3,253

)

(15,006

)

(10,522

)

Capitalized software costs

(3,366

)

(2,337

)

(9,996

)

(7,000

)

Net cash provided by (used in) investing activities

(32,406)

10,488

(105,778)

(1,864

)

Cash flows from financing activities:

Repayment of debt

(79

)

(144

)

(295

)

(425

)

Principal payments under capital lease obligations

(37

)

(183

)

(185

)

(701

)

Proceeds from employee stock plans

5,539

2,383

9,197

9,721

Net cash provided by financing activities

5,423

2,056

8,717

8,595

Effect of exchange rate changes on cash and cash equivalents

(517)

(975

)

(2,285

)

(889)

Net decrease in cash and cash equivalents

(21,452

)

7,416

(108,630

)

(5,589

)

Cash and cash equivalents at beginning of period

79,379

96,578

166,557

109,583

Cash and cash equivalents at end of period

$

57,927

$

103,994

$

57,927

$

103,994

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

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Revenue

$

87,271

$

68,318

$

243,789

$

187,195

Cost of revenue

27,246

19,374

79,801

54,187

Gross profit

$

60,025

$

48,944

$

163,988

$

133,008

Gross margin

69

%

72

%

67

%

71

%

Revenue

$

82,271

$

68,318

$

243,789

$

187,195

Adjustments to revenue 1

161

867

Non-GAAP revenue

$

87,432

$

68,318

$

244,656

$

187,195

Cost of revenue

$

27,246

$

19,374

$

79,801

$

54,187

Adjustments to costs of revenue

Amortization of intangible assets

(2,492

)

(312

)

(7,476

)

(936

)

Stock based compensation and employer-related taxes

(1,206

)

(653

)

(2,876

)

(2,042

)

Total adjustments to cost of revenue

(3,698

)

(965

)

(10,352

)

(2,978

)

Non-GAAP costs of revenue

23,548

18,409

69,449

51,209

Non-GAAP gross profit

$

63,884

$

49,909

$

175,207

$

135,986

Non-GAAP gross margin

73

%

73

%

72

%

73

%

Loss from operations

$

(17,031

)

$

(9,907

)

$

(53,873

)

$

(35,746

)

Operating margin

(20

)%

(15

)%

(22

)%

(19

)%

Adjustments to loss from operations

Adjustments to revenue 1

161

867

Stock-based compensation and employer-related taxes

12,616

8,769

31,203

25,101

Amortization of intangible assets

2,642

523

7,926

1,611

Total adjustments to loss from operations

15,419

10,023

39,996

27,443

Non-GAAP operating loss

$

(1,612

)

$

116

$

(13,877

)

$

(8,303

)

Non-GAAP operating loss margin

(2

)%

%

(6

)%

(4

)%

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 $0.9 million of revenue was not recognized during the three and nine months ended September 30, 2015, respectively. Therefore, revenue is adjusted by an increase of $0.2 million and $0.9 million to arrive at non-GAAP revenue for the three and nine months ended September 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

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net loss

$

(20,149

)

$

(14,311

)

$

(66,673

)

$

(46,733

)

Net loss margin

(23

)%

(21

)%

(27

)%

(25

)%

Adjustments to net loss

Stock-based compensation and employer-related payroll taxes

12,616

8,769

31,203

25,101

Acquisition related:

Adjustments to revenue

161

867

Amortization of intangible assets

2,571

452

7,713

1,398

Accretion of debt discount and amortization of debt issuance costs 1

2,186

2,081

6,478

6,167

Other amortization costs

71

71

213

213

Total adjustments to net loss

17,605

12,104

46,474

33,610

Non-GAAP net loss

$

(2,544

)

$

(2,207

)

$

(20,199

)

$

(13,123

)

Non-GAAP net loss margin

(3

)%

(3

)%

(8

)%

(7

)%

Weighted-average common shares outstanding, basic and diluted

54,260

53,423

53,917

53,130

Non-GAAP net loss per share

$

(0.05

)

$

(0.04

)

$

(0.37

)

$

(0.25

)

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 September 30, 2015

Revenue

$

87,271

Deferred revenue at June 30, 2015

$

189,584

Deferred revenue at September 30, 2015

205,996

Change in deferred revenue

16,412

16,412

Bookings

$

103,683

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

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

26

%

Deferred Revenue Balance

Nine Months Ended    September 30, 2015

Revenue

$

243,789

Deferred revenue at December 31, 2014

$

191,336

Deferred revenue at September 30, 2015

205,996

Change in deferred revenue

14,660

14,660

Bookings

$

258,449

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

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

28

%

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

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net cash provided by (used in) by operating activities

$

6,048

$

(4,153

)

$

(9,284

)

$

(11,431

)

Net cash provided by (used in) operating activities margin

(7

)%

(6

)%

(4

)%

(6

)%

Payment of acquisition related costs 1

13

799

13

Payment of employer related taxes from stock-based compensation

449

291

535

597

Purchased investment premium, net of amortization

206

432

94

(225

)

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

$

6,703

$

(3,417

)

$

(7,856

)

$

(11,046

)

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

8

%

(5

)%

(3

)%

(6

)%

1

Costs paid during the nine months ended September 30, 2015, and three and nine months ended September 30, 2014related 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:
Michelle Haworth
Cornerstone OnDemand
Phone: +1 (310) 752-0178
mhaworth@csod.com

Join over 27.7 million people using Cornerstone HCM to realize their potential

Let's Talk