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Cornerstone OnDemand Announces First Quarter 2021 Financial Results

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People development solutions provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its first quarter ended March 31, 2021. The Company has provided supplemental financial information located on its Investor Relations website. On April 22, 2020, the Company acquired Saba Software, Inc. ("Saba"); the discussion below includes Saba’s results for the post-acquisition period.

First Quarter 2021 Results:

  • Revenue for the first quarter of 2021 was $209.3 million. This represents a 39.4% increase compared to the same period of the prior year.

  • Subscription revenue for the first quarter of 2021 was $200.6 million. This represents a 38.9% increase compared to the same period of the prior year.

  • Income (loss) from operations for the first quarter of 2021 was $9.1 million, yielding a margin of 4.3%, compared to income (loss) from operations of $(2.7) million and a margin of (1.8)% in the same period of the prior year.

  • Non-GAAP operating income for the first quarter of 2021 was $59.2 million, yielding a non-GAAP operating margin of 28.3%, compared to non-GAAP operating income of $24.9 million and a non-GAAP operating margin of 16.6% in the same period of the prior year.

  • Net loss for the first quarter of 2021 was $(12.5) million, or $(0.19) diluted net loss per share, compared to net loss of $(13.8) million, or $(0.22) diluted net loss per share, in the same period of the prior year.

  • Non-GAAP net income for the first quarter of 2021 was $48.4 million, or $0.70 non-GAAP diluted net income per share, compared to non-GAAP net income of $15.0 million, or $0.23 non-GAAP diluted net income per share, in the same period of the prior year.

  • Unlevered free cash flow for the first quarter of 2021 was $88.4 million, yielding a margin of 42.3%, compared to unlevered free cash flow of $6.3 million and a margin of 4.2% in the same period of the prior year. Unlevered free cash flow for the first quarter of 2021 includes approximately $7.8 million of restructuring and acquisition-related cash outflows.

"I’m very pleased with a solid first quarter and a strong start to Cornerstone’s fiscal year 2021, despite these unprecedented times," said Phil Saunders, Chief Executive Officer. "We have continued to execute on our transformation roadmap, and while we believe we have an aggressive roadmap to implement this year, we remain confident in our ability to unlock growth and earnings power within the business."

Recent Highlights:

  • The Company announced its Strategic Leader position in the Fosway 9-Grid for Learning Systems for 2021, retaining its leading position for the eighth year in a row.

  • Cornerstone mobilized internal executive talent to drive innovation for its content business and align international leadership to better support customers worldwide. Heidi Spirgi transitioned into the role of Chief Strategy and Growth Officer, Theresa Damato was named the Company’s Chief Marketing Officer, and Vincent Belliveau was appointed Chief International Officer.

"We are proud of our first quarter business and operational accomplishments, and the resulting financial performance," said Chirag Shah, Chief Financial Officer. "We are raising our profitability estimates for 2021 to reflect our positive business trends and the strong start to the year."

Financial Outlook:

The following outlook2 is based on information available as of the date of this press release and is subject to change in the future.

For the second quarter ending June 30, 2021, the Company provides the following outlook:

  • Revenue between $208.0 million and $210.0 million.

  • Subscription revenue between $203.0 million and $205.0 million.

  • Non-GAAP operating income between $49.0 million and $51.0 million.

For the year ending December 31, 2021, the Company provides the following outlook:

  • Revenue between $851.0 million and $859.0 million.

  • Subscription revenue between $827.0 million and $835.0 million.

  • Annual recurring revenue between $868.0 million and $878.0 million.

  • Non-GAAP operating income between $215.0 million and $222.0 million.

  • Unlevered free cash flow between $208.0 million and $216.0 million. Captured in this is approximately $50.0 million in non-recurring cash outflows for restructuring and integration activities related to the Saba acquisition.

The revenue, subscription revenue, and non-GAAP operating income numbers above are impacted by a deferred revenue write-down related to purchase accounting. For more information, refer to the Company’s investor relations presentation.

The Company has not reconciled the guidance for non-GAAP operating income or unlevered free cash flow to the corresponding GAAP measures because it does not provide guidance for such GAAP measures and would not be able to present the reconciling items between such GAAP and non-GAAP measures without unreasonable efforts. For example, stock-based compensation expense is excluded from the Company’s non-GAAP operating income as the quantification requires additional unknown inputs such as the number of shares granted and market prices that are not ascertainable.

1 Non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow, and unlevered free cash flow margin are non-GAAP financial measures. See the discussion in the section titled "Non-GAAP Financial Measures and Other Key Metrics" and the reconciliations at the end of this press release.

2 In order to translate the financial outlook for entities reporting in GBP and EUR to USD, the following exchange rates have been applied:

Exchange rate applied to revenue for the second quarter of 2021

$1.37 USD per GBP

Exchange rate applied to revenue and annual recurring revenue for fiscal 2021

$1.37 USD per GBP

Exchange rate applied to revenue for the second quarter of 2021

$1.19 USD per EUR

Exchange rate applied to revenue and annual recurring revenue for fiscal 2021

$1.19 USD per EUR

Quarterly Conference Call

Cornerstone will host a conference call to discuss its first quarter 2021 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 website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (US) or (484) 653-6763 (outside the US). 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 5:00 p.m. PT (8:00 p.m. ET) on May 13, 2021 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US).

Featured Presentation

An accompanying featured presentation will be available at https://investors.cornerstoneondemand.com/investors/overview/default.aspx.

About Cornerstone

Cornerstone is a premier people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise, and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management, and holistic employee data management and insights, Cornerstone’s people development solutions are used by over 6,000 customers of all sizes, spanning more than 75 million users across over 180 countries and nearly 50 languages. Learn more at www.cornerstoneondemand.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, but not limited to, statements regarding the expected performance of our business, our future financial and operating performance, including our non-GAAP guidance, strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, general business conditions, our ability to execute our strategies and business plans, the ongoing integration of Saba into our business, our ability to execute our transformation roadmap, anticipated synergies from our acquisition of Saba, and our expectations regarding certain financial measures including revenue, subscription revenue, annual recurring revenue, non-GAAP operating income, unlevered free cash flow, capital expenditures, and operating margins. Any forward-looking statements contained in this press release or the quarterly conference call are based upon our historical performance and our current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our 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 customers; the extent to which customers renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing customers 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 customers; allowing our implementation subcontractors to contract directly with customers for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and people development provider for organizations of all sizes; changes in the proportion of our customer base that is composed 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 opportunities; our ability to maintain stable and consistent quota attainment rates; continued strong demand for learning and people development in Europe, the Middle East, Africa, Asia-Pacific, and Japan; the timing and success of efforts to increase operational efficiency and cost containment; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; the impact of foreign exchange rates; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; problems caused by security breaches; costs and reputational harm that could result from defects in our solutions; the success of our strategic relationships with third parties; the loss of any of our key employees and our ability to locate qualified replacements; failure to protect our intellectual property; acts of terrorism or other vandalism, war, natural disasters, or the ongoing COVID-19 pandemic; changes in current tax or accounting rules; legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products; the failure to achieve expected synergies and efficiencies of operations between us and Saba; our ability to successfully integrate Saba’s market opportunities, technology, products, personnel, and operations and to execute our transformation roadmap; and unanticipated costs or liabilities related to businesses that we acquire. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2020.

Non-GAAP Financial Measures and Other Key Metrics

To supplement its consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures and other key metrics. These non-GAAP financial measures and other key metrics include:

(i) non-GAAP cost of revenue, which is defined as cost of revenue less stock-based compensation and amortization of intangible assets;

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

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

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

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

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

(vi) non-GAAP net income and non-GAAP diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, acquisition-related and integration expenses, restructuring expenses, accretion of debt discount and amortization of debt issuance costs, discrete tax items, fair value adjustments on strategic investments, and excludes the impacts of unamortized stock-based compensation expense in applying the treasury method for determining the non-GAAP weighted average number of dilutive shares outstanding;

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

(viii) non-GAAP operating income and non-GAAP operating income margin, which are defined as income or loss from operations excluding stock-based compensation, amortization of intangible assets, acquisition-related and integration expenses, and restructuring expenses;

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

(x) non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and amortization of intangible assets attributable to the corresponding GAAP financial measures.

The Company’s management uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Company’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures and key metrics to help investors understand the operational performance of their businesses. In addition, the Company believes that the following non-GAAP adjustments are useful to management and investors for the following reasons:

  • Stock-based compensation. The Company excludes stock-based compensation expense because it is non-cash in nature, and management believes that its exclusion provides additional insight into the Company’s operational performance and also provides a useful comparison of the Company’s operating results to prior periods and its peer companies. Additionally, determining the fair value of certain stock-based awards involves a high degree of judgment and estimation. The expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of such awards.

  • Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because the expense is a non-cash item and management believes that its exclusion provides meaningful supplemental information regarding the Company’s operational performance and allows for a useful comparison of its operating results to prior periods and its peer companies.

  • Acquisition-related and integration. The Company excludes expenses related to acquisitions and integration because the expenses are discrete to specific acquisitions and are not necessarily indicative of its continuing operations. The Company believes that the exclusion of these expenses provides investors with a supplemental view of the Company’s operational performance.

  • Restructuring. The Company excludes expenses related to restructuring because the expense is not indicative of its continuing operations. The Company believes that the exclusion of these expenses provides investors with a supplemental view of the Company’s operational performance.

  • Accretion of debt discount and amortization of debt issuance costs. The Company recognizes effective interest expense on its debt. The difference between the effective interest expense and the contractual interest expense, which is composed of accretion of debt discount and amortization of debt issuance costs, is excluded from management’s assessment of the Company’s operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. In addition, the exclusion of these items provides a useful comparison of the Company’s operating results to prior periods and its peer companies.

  • Discrete tax items. The Company excludes discrete income tax charges or benefits that are not expected to recur because the items are not indicative of continuing operations. The Company believes that the exclusion of these items provides investors with a supplemental view of the Company’s operational performance.

  • Fair value adjustments on strategic investments. The Company views the increase or decrease in the fair value of its strategic investments as not indicative of operational performance during any particular period and believes that the exclusion of these gains or losses provides investors with a supplemental view of the Company’s operational performance.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For the periods presented, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the tables included as part of this press release.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

March 31, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents

$

128,862

$

153,151

Accounts receivable, net

137,191

221,461

Deferred commissions, current portion

45,587

45,786

Prepaid expenses and other current assets

35,615

30,615

Total current assets

347,255

451,013

Capitalized software development costs, net

51,559

50,812

Property and equipment, net

27,982

32,271

Operating right-of-use assets

69,470

74,419

Deferred commissions, net of current portion

88,132

89,698

Long-term investments

1,750

8,565

Intangible assets, net

412,343

436,290

Goodwill

961,593

961,322

Deferred tax assets

19,152

19,169

Other assets

12,246

11,010

Total assets

$

1,991,482

$

2,134,569

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable, accrued expenses, and other current liabilities

$

104,496

$

129,908

Deferred revenue, current portion

425,988

446,886

Operating lease liabilities, current portion

12,866

10,830

Debt, current portion

10,047

10,047

Total current liabilities

553,397

597,671

Debt, net of current portion

1,077,714

1,176,239

Deferred revenue, net of current portion

3,002

5,184

Operating lease liabilities, net of current portion

61,563

65,911

Deferred tax liabilities

7,854

11,936

Other liabilities, non-current

5,315

8,754

Total liabilities

1,708,845

1,865,695

Stockholders’ equity:

Common stock, $0.0001 par value

7

6

Additional paid-in capital

860,980

835,069

Accumulated deficit

(577,114

)

(564,662

)

Accumulated other comprehensive loss

(1,236

)

(1,539

)

Total stockholders’ equity

282,637

268,874

Total liabilities and stockholders’ equity

$

1,991,482

$

2,134,569

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

March 31,

2021

2020

Revenue

$

209,273

$

150,136

Cost of revenue 1,2

60,536

41,924

Gross profit

148,737

108,212

Operating expenses:

Sales and marketing 1,2

69,735

55,330

Research and development 1

30,770

24,085

General and administrative 1,2

31,562

24,725

Acquisition-related and integration

1,530

6,811

Restructuring1

6,089

Total operating expenses

139,686

110,951

Income (loss) from operations

9,051

(2,739

)

Other income (expense):

Interest expense

(18,770

)

(5,501

)

Other, net

(4,904

)

(5,364

)

Other expense, net

(23,674

)

(10,865

)

Loss before income tax provision

(14,623

)

(13,604

)

Income tax benefit (provision)

2,171

(171

)

Net loss

$

(12,452

)

$

(13,775

)

Net loss per share, basic and diluted

$

(0.19

)

$

(0.22

)

Weighted average common shares outstanding, basic and diluted

65,397

61,631

1 Includes stock-based compensation as follows:

Three Months Ended

March 31,

2021

2020

Cost of revenue

$

2,056

$

2,701

Sales and marketing

6,297

8,584

Research and development

4,055

4,800

General and administrative

5,873

7,085

Restructuring

1,201

Total

$

19,482

$

23,170

2 Includes amortization of intangible assets as follows:

Three Months Ended

March 31,

2021

2020

Cost of revenue

$

9,490

$

1,663

Sales and marketing

14,182

83

General and administrative

603

Total

$

24,275

$

1,746

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

March 31,

2021

2020

Cash flows from operating activities

Net loss

$

(12,452

)

$

(13,775

)

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

Depreciation and amortization

36,800

11,964

Accretion of debt discount and amortization of debt issuance costs

4,184

1,090

Net foreign currency and other loss

4,928

5,179

Stock-based compensation expense

19,482

23,170

Deferred income taxes

(4,203

)

Bad debt (recoveries) expense

(306

)

447

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

81,394

35,516

Deferred commissions

2,248

582

Prepaid expenses and other assets

(6,488

)

(6,550

)

Accounts payable, accrued expenses, and other current liabilities

(28,338

)

(18,135

)

Deferred revenue

(21,515

)

(35,557

)

Other liabilities, non-current

2,377

2,057

Net cash provided by operating activities

78,111

5,988

Cash flows from investing activities

Purchases of marketable investments

(20,419

)

Maturities and sales of investments

272,173

Capital expenditures

(943

)

(971

)

Capitalized software costs

(7,721

)

(7,389

)

Cash paid for acquisitions, net of cash acquired

(18,639

)

Net cash (used in) provided by investing activities

(8,664

)

224,755

Cash flows from financing activities

Repayment of debt

(102,512

)

Proceeds from employee stock plans

7,511

10,130

Net cash (used in) provided by financing activities

(95,001

)

10,130

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

1,187

(626

)

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

(24,367

)

240,247

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

155,854

215,907

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

$

131,487

$

456,154

Supplemental cash flow data

Cash paid for interest

$

18,976

$

8,625

Cash paid for income taxes

2,674

955

Non-cash investing and financing activities:

Capitalized stock-based compensation

1,278

2,190

1 Below is a reconciliation of cash, cash equivalents, and restricted cash:

As of March 31,

2021

2020

Cash and cash equivalents

$

128,862

$

456,154

Restricted cash included in prepaid expenses and other current assets

396

Restricted cash included in other assets

2,229

Total cash, cash equivalents, and restricted cash

$

131,487

$

456,154

Cornerstone OnDemand, Inc.

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

(in thousands)

(unaudited)

Three Months Ended

March 31,

2021

2020

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

Revenue

$

209,273

$

150,136

Cost of revenue

60,536

41,924

Gross profit

$

148,737

$

108,212

Gross margin

71.1

%

72.1

%

Cost of revenue

$

60,536

$

41,924

Adjustments to cost of revenue:

Stock-based compensation1

(2,056

)

(2,138

)

Amortization of intangible assets

(9,490

)

(1,663

)

Total adjustments to cost of revenue

(11,546

)

(3,801

)

Non-GAAP cost of revenue

48,990

38,123

Non-GAAP gross profit

$

160,283

$

112,013

Non-GAAP gross margin

76.6

%

74.6

%

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

Income (loss) from operations

$

9,051

$

(2,739

)

Operating margin

4.3

%

(1.8

)%

Adjustments to income (loss) from operations:

Stock-based compensation1, 3

18,281

19,109

Amortization of intangible assets

24,275

1,746

Acquisition-related and integration2

1,530

6,811

Restructuring3

6,089

Total adjustments to income (loss) from operations

50,175

27,666

Non-GAAP operating income

$

59,226

$

24,927

Non-GAAP operating margin

28.3

%

16.6

%

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the three months ended March 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

Three Months Ended

March 31,

2020

Cost of revenue

$

2,138

Sales and marketing

7,674

Research and development

3,386

General and administrative

5,911

Total

$

19,109

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

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

Cornerstone OnDemand, Inc.

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

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

March 31,

2021

2020

Net loss

$

(12,452

)

$

(13,775

)

Adjustments to net loss

Stock-based compensation1, 3

18,281

19,109

Amortization of intangible assets

24,275

1,746

Acquisition-related and integration2

1,530

6,811

Restructuring3

6,089

Accretion of debt discount and amortization of debt issuance costs4

4,184

1,090

Income tax benefit

(365

)

Fair value adjustment on strategic investments5

6,862

Total adjustments to net loss

60,856

28,756

Non-GAAP net income

$

48,404

$

14,981

Non-GAAP basic net income per share

$

0.74

$

0.24

Non-GAAP diluted net income per share

$

0.70

$

0.23

Weighted-average common shares outstanding, basic

65,397

61,631

Non-GAAP weighted-average common shares outstanding, diluted

69,576

66,188

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the three months ended March 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

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

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

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

5 A write-down of approximately $6.9 million was recognized during the three months ended March 31, 2021 related to a strategic investment.

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO UNLEVERED FREE CASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN

(A Non-GAAP Financial Measure)

(in thousands)

(unaudited)

Three Months Ended

March 31,

2021

2020

Reconciliation of unlevered free cash flow:

Net cash provided by operating activities

$

78,111

$

5,988

Capital expenditures

(943

)

(971

)

Capitalized software costs

(7,721

)

(7,389

)

Cash paid for interest

18,976

8,625

Unlevered free cash flow

$

88,423

$

6,253

Unlevered free cash flow margin

42.3

%

4.2

%

Cornerstone OnDemand, Inc.
TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS
(unaudited)

The following metrics are intended as a supplement to the financial statements found in this press release and other information furnished to or filed with the SEC. In the event of discrepancies between amounts in these tables and the Company’s historical disclosures or financial statements, readers should rely on the Company’s filings with the SEC and financial statements in the Company’s most recent earnings press release.

The Company intends to periodically review and refine the definition, methodology, and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material.

FY 2020

FY 2021

Q1'20

Q2'20

Q3'20

Q4'20

Q1’21

...

FY18

FY19

FY20

SELECTED METRICS:

Number of customers1

3,522

6,308

6,229

6,157

6,084

3,333

...

3,508

6,157

% y/y

4.6

%

84.3

%

80.8

%

75.5

%

72.7

%

2.6

%

5.3

%

75.5

%

% q/q

0.4

%

79.1

%

(1.3

)%

(1.2

)%

(1.2

)

n/a

n/a

n/a

Number of employees

1,975

3,184

3,027

2,919

2,818

1,953

1,993

2,919

% y/y

(2.1

)%

56.5

%

52.4

%

46.5

%

42.7

%

3.3

%

2.0

%

46.5

%

% q/q

(0.9

)%

61.2

%

(4.9

)%

(3.6

)%

(3.5

)

n/a

n/a

n/a

Net annual dollar retention rate2

n/a

n/a

n/a

n/a

n/a

105.7

%

104.6

%

95.1

%

Annual recurring revenue (in thousands)

n/a

n/a

n/a

n/a

n/a

510,000

575,000

840,000

Net cash provided by operating activities (in thousands)

5,988

22,774

33,147

35,025

78,111

90,253

115,549

96,934

Unlevered free cash flow (in thousands)

6,253

15,394

55,929

36,356

88,423

63,471

90,203

113,932

Unlevered free cash flow margin

4.2

%

8.4

%

28.0

%

17.6

%

42.3

%

11.8

%

15.6

%

15.4

%

FINANCIAL DATA (in thousands, except percentages):

Revenue

150,136

184,358

199,498

206,924

209,273

537.891

576,523

740,916

Subscription revenue

144,421

177,217

185,643

197,878

200,584

473.052

542,968

705,159

% y/y growth

10.0

%

33.7

%

35.1

%

39.6

%

38.9

%

n/a

14.8

%

29.9

%

Subscription revenue % of total revenue

96.2

%

96.1

%

93.1

%

95.6

%

95.8

%

87.9

%

94.2

%

95.2

%

Income (loss) from operations

(2,739

)

(22,368

)

(1,618

)

(4,826

)

9,051

(7.769

)

11,933

(31,551

)

MARGIN DATA:

Gross margin

72.1

%

68.5

%

67.7

%

69.8

%

71.1

%

73.2

%

74.1

%

69.4

%

Sales and marketing % of revenue

36.9

%

35.2

%

36.0

%

35.5

%

33.3

%

41.8

%

39.5

%

35.8

%

Research and development % of revenue

16.0

%

15.4

%

14.9

%

14.9

%

14.7

%

14.3

%

17.5

%

15.2

%

General and administrative % of revenue

16.5

%

13.8

%

14.5

%

15.2

%

15.1

%

16.7

%

15.0

%

14.9

%

Acquisition-related and integration % of revenue

4.5

%

10.9

%

2.4

%

2.7

%

0.7

%

0.2

%

5.0

%

Restructuring % of revenue

5.3

%

0.7

%

3.9

%

2.9

%

1.7

%

2.6

%

Operating margin

(1.8

)%

(12.1

)%

(0.8

)%

(2.3

)%

4.3

%

(1.4

)%

2.1

%

(4.3

)%

NON-GAAP MARGIN DATA:

Non-GAAP gross margin

74.6

%

73.7

%

73.5

%

75.2

%

76.6

%

74.1

%

76.0

%

74.2

%

Non-GAAP sales and marketing % of revenue

31.7

%

26.4

%

25.3

%

25.4

%

23.5

%

37.2

%

34.7

%

26.9

%

Non-GAAP research and development % of revenue

13.8

%

13.9

%

12.7

%

12.3

%

12.8

%

12.1

%

14.8

%

13.1

%

Non-GAAP general and administrative % of revenue

12.5

%

11.8

%

12.1

%

12.3

%

12.0

%

13.2

%

11.1

%

12.2

%

Non-GAAP operating margin

16.6

%

21.6

%

23.4

%

25.2

%

28.3

%

11.8

%

15.4

%

22.1

%

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

18.7

%

17.2

%

16.1

%

15.6

%

16.5

%

16.8

%

19.1

%

16.8

%

FOREIGN EXCHANGE RATES:

GBP to USD average period rate

1.28

1.26

1.29

1.32

1.38

1.34

1.28

1.29

GBP to USD end of period spot rate

1.23

1.23

1.28

1.37

1.38

1.27

1.32

1.37

EUR to USD average period rate

1.10

1.11

1.17

1.19

1.21

1.18

1.12

1.14

EUR to USD end of period spot rate

1.10

1.12

1.17

1.23

1.17

1.14

1.12

1.23

1 During the second quarter of 2020, we adjusted our method of determining customer count to exclude customers that are sold through resellers that share one tenant or instance of our product. The numbers included here reflect this change. We continue to exclude customers from our Cornerstone for Salesforce, PiiQ, Grovo, Workpop, and Clustree products from our customer count metrics.

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

FY 2020

FY 2021

Q1'20

Q2'20

Q3'20

Q4'20

Q1’21

FY18

FY19

FY20

NON-GAAP RECONCILIATIONS FOR SELECTED METRICS

(in thousands, except percentages):

Net cash provided by operating activities

5,988

22,774

33,147

35,025

78,111

90,253

115,549

96,934

Capital expenditures

(971

)

(1,304

)

(635

)

(2,875

)

(943

)

(14,895

)

(18,034

)

(5,785

)

Capitalized software costs

(7,389

)

(6,135

)

(6,772

)

(6,779

)

(7,721

)

(25,515

)

(24,668

)

(27,075

)

Cash paid for interest

8,625

59

30,189

10,985

18,976

13,628

17,356

49,858

Unlevered free cash flow

6,253

15,394

55,929

36,356

88,423

63,471

90,203

113,932

Unlevered free cash flow margin

4.2

%

8.4

%

28.0

%

17.6

%

42.3

%

11.8

%

15.6

%

15.4

%

Gross margin

72.1

%

68.5

%

67.7

%

69.8

%

71.1

%

73.2

%

74.1

%

69.4

%

Stock-based compensation

1.4

%

1.2

%

1.1

%

0.9

%

1.0

%

0.7

%

1.1

%

1.0

%

Amortization of intangible assets

1.1

%

4.0

%

4.7

%

4.5

%

4.5

%

0.2

%

0.8

%

3.8

%

Non-GAAP gross margin

74.6

%

73.7

%

73.5

%

75.2

%

76.6

%

74.1

%

76.0

%

74.2

%

Sales and marketing % of revenue

36.9

%

35.2

%

36.0

%

35.5

%

33.3

%

41.8

%

39.5

%

35.8

%

Stock-based compensation

(5.1

)

%

(3.0

)

%

(3.5

)

%

(3.3

)

%

(3.1

)

%

(4.6

)

%

(4.8

)

%

(3.6

)

%

Amortization of intangible assets

(0.1

)

%

(5.8

)

%

(7.2

)

%

(6.8

)

%

(6.7

)

%

%

%

(5.3

)

%

Non-GAAP sales and marketing % of revenue

31.7

%

26.4

%

25.3

%

25.4

%

23.5

%

37.2

%

34.7

%

26.9

%

Research and development % of revenue

16.0

%

15.4

%

14.9

%

14.9

%

14.7

%

14.3

%

17.5

%

15.2

%

Stock-based compensation

(2.2

)

%

(1.5

)

%

(2.2

)

%

(2.6

)

%

(1.9

)

%

(2.2

)

%

(2.7

)

%

(2.1

)

%

Non-GAAP research and development % of revenue

13.8

%

13.9

%

12.7

%

12.3

%

12.8

%

12.1

%

14.8

%

13.1

%

General and administrative % of revenue

16.5

%

13.8

%

14.5

%

15.2

%

15.1

%

16.7

%

15.0

%

14.9

%

Stock-based compensation

(4.0

)

%

(1.8

)

%

(2.1

)

%

(2.6

)

%

(2.8

)

%

(3.5

)

%

(3.9

)

%

(2.5

)

%

Amortization of intangible assets

%

(0.2

)

%

(0.3

)

%

(0.3

)

%

(0.3

)

%

%

%

(0.2

)

%

Non-GAAP general and administrative % of revenue

12.5

%

11.8

%

12.1

%

12.3

%

12.0

%

13.2

%

11.1

%

12.2

%

Operating margin

(1.8

)

%

(12.1

)

%

(0.8

)

%

(2.3

)

%

4.3

%

(1.4

)

%

2.1

%

(4.3

)

%

Stock-based compensation

12.7

%

7.4

%

8.9

%

9.3

%

8.8

%

11.1

%

12.5

%

9.5

%

Amortization of intangible assets

1.2

%

10.1

%

12.2

%

11.6

%

11.6

%

0.2

%

0.8

%

9.3

%

Acquisition-related and integration

4.5

%

10.9

%

2.4

%

2.7

%

0.7

%

0.2

%

%

5.0

%

Restructuring

%

5.3

%

0.7

%

3.9

%

2.9

%

1.7

%

%

2.6

%

Non-GAAP operating margin

16.6

%

21.6

%

23.4

%

25.2

%

28.3

%

11.8

%

15.4

%

22.1

%

Research and development plus capitalized software % of revenue

20.9

%

18.7

%

18.3

%

18.2

%

18.4

%

19.0

%

21.8

%

18.9

%

Stock-based compensation

(2.2

)

%

(1.5

)

%

(2.2

)

%

(2.6

)

%

(1.9

)

%

(2.2

)

%

(2.7

)

%

(2.1

)

%

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

18.7

%

17.2

%

16.1

%

15.6

%

16.5

%

16.8

%

19.1

%

16.8

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210506006131/en/

Contacts

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

Media Contact:
Deaira Irons
Phone: +1 (310) 752-0164
dirons@csod.com