Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2020 Financial Results
SANTA MONICA, Calif.–(BUSINESS WIRE)–People development solutions provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its fourth quarter and fiscal year ended December 31, 2020. 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.
Fourth Quarter 2020 Results:
- Revenue for the fourth quarter of 2020 was $206.9 million. This represents a 38.3% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 4.7%.
- Subscription revenue for the fourth quarter of 2020 was $197.9 million. This represents a 39.6% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 7.3%.
- (Loss) income from operations for the fourth quarter of 2020 was $(4.8) million, yielding a margin of (2.3)%, compared to (loss) income from operations of $10.6 million and margin of 7.1% in the same period of the prior year.
- Non-GAAP operating income for the fourth quarter of 2020 was $52.1 million, yielding a non-GAAP operating margin of 25.2%, compared to non-GAAP operating income of $28.3 million and a non-GAAP operating margin of 18.9% in the same period of the prior year.
- Net income for the fourth quarter of 2020 was $1.6 million, or $0.02 diluted net income per share, compared to net income of $9.4 million and $0.15 diluted net income per share in the same period of the prior year.
- Non-GAAP net income for the fourth quarter of 2020 was $44.0 million, or $0.64 non-GAAP diluted net income per share, compared to non-GAAP net income of $28.3 million and $0.43 non-GAAP diluted net income per share in the same period of the prior year.
- Unlevered free cash flow for the fourth quarter of 2020 was $36.4 million, yielding a margin of 17.6%, compared to unlevered free cash flow of $54.7 million and a margin of 36.6%, in the same period of the prior year. Unlevered free cash flow for the fourth quarter of 2020 includes approximately $11.2 million of restructuring and acquisition-related cash outflows.
Fiscal Year 2020 Results:
- Revenue for the full year of 2020 was $740.9 million. This represents a 28.5% increase compared to the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 6.5%.
- Subscription revenue for the full year of 2020 was $705.2 million. This represents a 29.9% increase compared to the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 9.4%.
- (Loss) income from operations for the full year of 2020 was $(31.6) million, yielding a margin of (4.3)%, compared to (loss) income from operations of $11.9 million and margin of 2.1% in the prior year.
- Non-GAAP operating income for the full year of 2020 was $163.5 million, yielding a non-GAAP operating margin of 22.1%, compared to non-GAAP operating income of $88.8 million and a non-GAAP operating margin of 15.4% in the prior year.
- Net loss for the full year of 2020 was $(40.0) million, or $(0.63) diluted net loss per share, compared to net loss of $(4.1) million and $(0.07) diluted net loss per share in the prior year.
- Non-GAAP net income for the full year of 2020 was $121.4 million, or $1.78 non-GAAP diluted net income per share, compared to non-GAAP net income of $77.0 million and $1.17 non-GAAP diluted net income per share in the prior year.
- Unlevered free cash flow for the full year of 2020 was $113.9 million, yielding a margin of 15.4%, compared to unlevered free cash flow of $90.2 million and a margin of 15.6%, in the prior year. Unlevered free cash flow for the full year of 2020 includes approximately $47.4 million of restructuring and acquisition-related cash outflows.
“I’m very pleased with our fourth quarter and full year 2020 results, which show operational and financial strength,” said Phil Saunders, Chief Executive Officer. “While we have a long roadmap of execution ahead of us, I believe we are starting to unlock the growth and earnings power of this company.”
Recent Highlights:
- The Company announced the appointment of Chirag Shah as Chief Financial Officer.
- The Company appointed two new members to the board of directors: Felicia Alvaro, former Chief Financial Officer and Treasurer for Ultimate Software, and Nancy Altobello, former Global Vice Chair of Talent for Ernst & Young.
- The Company announced the formation of the Cornerstone Innovation lab for AI, a new center of excellence within the Company composed of data scientists and machine learning experts who specialize in innovating practical and ethical ways to apply AI technology to the workplace.
“Our financial results represent a strong finish to 2020, and I am proud of our accomplishments as a team,” said Chirag Shah, Chief Financial Officer. “After a year in which we completed a major acquisition, navigated a pandemic, transitioned leadership, and initiated significant internal transformation, we believe our fourth quarter performance is indicative of the strength of this company’s opportunity, and we are confident that the steps taken over the past year will position us for sustained long-term success.”
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 first quarter ending March 31, 2021, the Company provides the following outlook:
- Revenue between $203.0 million and $205.0 million.
- Subscription revenue between $198.0 million and $200.0 million.
- Non-GAAP operating income between $44.0 million and $46.0 million.
For the year ending December 31, 2021, the Company provides the following outlook:
- Revenue between $847.0 million and $857.0 million.
- Subscription revenue between $825.0 million and $835.0 million.
- Annual recurring revenue between $868.0 million and $878.0 million.
- Non-GAAP operating income between $205.0 million and $212.0 million.
- Unlevered free cash flow between $195.0 million and $205.0 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.
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1 Financial measures presented on a constant currency basis, 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. |
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2 In order to translate the financial outlook for entities reporting in GBP to USD and EUR to USD, the following exchange rates have been applied: |
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Exchange rate applied to revenue for the first quarter of 2021 |
$1.37 USD per GBP |
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Exchange rate applied to revenue and annual recurring revenue for fiscal 2021 |
$1.37 USD per GBP |
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Exchange rate applied to revenue for the first quarter of 2021 |
$1.22 USD per EUR |
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Exchange rate applied to annual recurring revenue for fiscal 2021 |
$1.22 USD per EUR |
Quarterly Conference Call
Cornerstone will host a conference call to discuss its fourth quarter and fiscal year 2020 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) and referencing passcode: 6062779. 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 February 23, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 6062779.
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 integration of Saba into our business, anticipated synergies from our acquisition of Saba, the recent departure of our chief financial officer and appointment of a new chief financial officer, and our expectations regarding certain financial measures including subscription revenue, capital expenditures, unlevered free cash flow, recurring revenue growth, 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 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Additional information will also be set forth in 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:
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(i) |
non-GAAP cost of revenue, which is defined as cost of revenue less stock-based compensation and amortization of intangible assets; |
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(ii) |
annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period; |
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(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 year if incremental sales to existing customers exceed the churn in annual recurring revenue from those same customers during the fiscal year. |
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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%. This ratio for 2020 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; |
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(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; |
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(v) |
unlevered free cash flow margin, a non-GAAP financial measure, which is defined as unlevered free cash flow divided by revenue; |
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(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; |
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(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; |
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(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; |
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(ix) |
non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, acquisition-related and integration expenses, and restructuring expenses; and |
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(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 discounts and amortization of 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.
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Cornerstone OnDemand, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) |
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December 31, 2020 |
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December 31, 2019 |
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Assets |
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Current assets: |
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||||||
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Cash and cash equivalents |
$ |
153,151 |
|
|
|
$ |
215,907 |
|
|
|
Short-term investments |
— |
|
|
|
201,579 |
|
|
||
|
Accounts receivable, net |
221,461 |
|
|
|
131,105 |
|
|
||
|
Deferred commissions, current portion |
45,786 |
|
|
|
33,215 |
|
|
||
|
Prepaid expenses and other current assets |
30,615 |
|
|
|
30,512 |
|
|
||
|
Total current assets |
451,013 |
|
|
|
612,318 |
|
|
||
|
Capitalized software development costs, net |
50,812 |
|
|
|
50,023 |
|
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Property and equipment, net |
32,271 |
|
|
|
36,526 |
|
|
||
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Operating right-of-use assets |
74,419 |
|
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|
72,944 |
|
|
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Deferred commissions, net of current portion |
89,698 |
|
|
|
74,563 |
|
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||
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Long-term investments |
8,565 |
|
|
|
60,192 |
|
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Intangible assets, net |
436,290 |
|
|
|
9,440 |
|
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Goodwill |
961,322 |
|
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|
47,453 |
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Deferred tax assets |
19,169 |
|
|
|
1,045 |
|
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Other assets |
11,010 |
|
|
|
1,597 |
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Total assets |
$ |
2,134,569 |
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|
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$ |
966,101 |
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Liabilities and stockholders’ equity |
|
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Current liabilities: |
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Accounts payable |
$ |
1,424 |
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|
|
$ |
3,803 |
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|
|
Accrued expenses |
112,274 |
|
|
|
78,075 |
|
|
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Deferred revenue, current portion |
446,886 |
|
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|
339,522 |
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Operating lease liabilities, current portion |
10,830 |
|
|
|
7,235 |
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Debt, current portion |
10,047 |
|
|
|
— |
|
|
||
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Other liabilities |
16,210 |
|
|
|
11,015 |
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Total current liabilities |
597,671 |
|
|
|
439,650 |
|
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Debt, net of current portion |
1,176,239 |
|
|
|
293,174 |
|
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||
|
Deferred revenue, net of current portion |
5,184 |
|
|
|
6,945 |
|
|
||
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Operating lease liabilities, net of current portion |
65,911 |
|
|
|
67,195 |
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Deferred tax liabilities |
11,936 |
|
|
|
— |
|
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Other liabilities, non-current |
8,754 |
|
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|
655 |
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Total liabilities |
1,865,695 |
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|
807,619 |
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Stockholders’ equity: |
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Common stock, $0.0001 par value |
6 |
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6 |
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Additional paid-in capital |
835,069 |
|
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|
682,717 |
|
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Accumulated deficit |
(564,662 |
) |
|
|
(524,680 |
) |
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Accumulated other comprehensive income |
(1,539 |
) |
|
|
439 |
|
|
||
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Total stockholders’ equity |
268,874 |
|
|
|
158,482 |
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Total liabilities and stockholders’ equity |
$ |
2,134,569 |
|
|
|
$ |
966,101 |
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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