Cornerstone OnDemand Announces Third Quarter 2012 Financial Results

Cornerstone OnDemand Announces Third Quarter 2012 Financial Results

  • Q3 Bookings of $42.7 million, up 78% year-over-year1
  • Record quarterly revenue of $30.8 million, up 54% year-over-year
  • Record quarterly gross profit of $21.6 million, up 48% year-over-year
  • Ended the quarter with over 1,100 clients and approximately 10.3 million users3

SANTA MONICA, Calif.--(BUSINESS WIRE)-- Learning and talent management software provider Cornerstone OnDemand, Inc. (NAS: CSOD) today announced results for its quarter ended September 30, 2012.


Revenue for the third quarter of 2012 was $30.8 million, representing a 54% increase compared to the same period in 2011. Revenue for the first nine months of 2012 was $81.5 million, an increase of 53% compared to gross revenue for the same period in 2011.2

Gross profit for the third quarter of 2012 was $21.6 million, representing a 48% year-over-year increase compared to the same period in 2011. Gross profit for the first nine months of 2012 was $57.6 million, an increase of 51% compared to the same period in 2011, based on gross revenue.2

Bookings, which Cornerstone defines as gross revenue plus the change in deferred revenue for the period, were $42.7 million for the third quarter of 2012, representing a 78% increase compared to the same period in 2011.1 Bookings for the first nine months of 2012 were $98.2 million, representing a 66% increase compared to the same period in 2011.1 Deferred revenue at September 30, 2012 was $72.6 million, which was 82% higher than the balance at September 30, 2011, and 20% higher than the balance at June 30, 2012.

Cornerstone ended the quarter with over 1,100 clients and approximately 10.3 million users, representing 57% and 44% year-over-year growth of Cornerstone's client base and users, respectively.3

"The third quarter was another exceptional quarter for Cornerstone OnDemand, and a continuation of what has been an outstanding year of growth for the company," said Adam Miller, Cornerstone's President and CEO. "We believe our bookings performance demonstrates that the recent wave of consolidation in talent management has improved our competitive positioning. With our commitment to the ongoing innovation and expansion of our product suite, we believe we will continue to strengthen our position as a leading talent management partner to organizations of all sizes."

Cornerstone's net loss for the third quarter of 2012 was $7.6 million, or a $0.15 net loss per share.

Due to purchase accounting rules applicable to the acquisition we completed during the second quarter of 2012, Cornerstone recorded an adjustment of $1.6 million to reduce to fair value the balance of deferred revenue attributable to contracts assumed from Sonar Limited. This fair value adjustment has the impact of reducing the amount of revenue attributable to contracts assumed from Sonar Limited by $0.4 million for the quarter ended September 30, 2012 and $1.1 million for the first nine months of 2012. Non-GAAP revenue for the quarter ended September 30, 2012, which excludes the $0.4 million reduction, was $31.2 million, representing a 56% increase compared to the same period in 2011.1 Non-GAAP revenue from the acquisition date through September 30, 2012, excluding the $1.1 million reduction, was $82.6 million, representing a 56% increase compared to the same period in 2011.1

Non-GAAP net loss for the third quarter of 2012 was $3.6 million, or a $0.07 net loss per share, and non-GAAP net loss for the first nine months of 2012 was $13.1 million, or $0.26 net loss per share. Non-GAAP net loss is based on non-GAAP revenue and excludes, for the periods in which they are present, stock-based compensation and employer-related payroll taxes, amortization of intangible assets, acquisition costs, amortization of debt discount and issuance costs, early debt retirement expense, change in the fair value of preferred stock warrant liabilities, adjustments to taxes related to acquisition adjustments, and accretion related to preferred stock.1

At September 30, 2012, Cornerstone's total cash and cash equivalents were $64.5 million and accounts receivable were $45.2 million, yielding a total of $109.7 million.

     
1   Non-GAAP revenue, bookings, non-GAAP net cash used in operating activities, non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross profit, and non-GAAP gross margin are non-GAAP financial measures. Please see the discussion in the section "Non-GAAP Financial Measures" and the reconciliations at the end of this release.
 
2 Gross revenue in the first nine months of 2011 excludes the impact of a non-cash reduction of revenue related to a common stock warrant issued to ADP of $2.5 million. Net revenue and net loss for the nine months of 2011 was impacted by this non-cash reduction of revenue.
 
3 Includes contracted clients and active users of any combination of our four integrated cloud-based solutions, consisting of recruiting, learning, performance, and extended enterprise as of the end of the period. Our client and user counts exclude our Cornerstone Small Business Solution, or "CSB".
 

Quarterly Conference Call

Cornerstone OnDemand will host a conference call to discuss its third quarter 2012 results at 2:00 p.m. PST (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://investors.cornerstoneondemand.com/events.cfm. The live call can be accessed by dialing (888) 357-3694 (U.S.) or (973) 890-8276 (outside the U.S.) and referencing passcode: 65175817. A replay of the call will also be available at http://investors.cornerstoneondemand.com/events.cfm or via telephone until 11:59 p.m. PST on November 16, 2012 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 65175817.

About Cornerstone OnDemand

Cornerstone OnDemand is a leading global provider of comprehensive learning and talent management solutions. We enable organizations to meet the challenges they face in empowering their people and maximizing the productivity of their human capital. Our integrated software-as-a-service (SaaS) solution consists of the Cornerstone Recruiting Cloud, the Cornerstone Performance Cloud, the Cornerstone Learning Cloud and the Cornerstone Extended Enterprise Cloud. Our clients use our solution to source and recruit top talent, develop employees throughout their careers, engage employees effectively, improve business execution, cultivate future leaders, and integrate with their external networks of customers, vendors and distributors. We currently empower approximately 10.3 million users across 186 countries and in 38 languages. www.csod.com

Note: Cornerstone® and Cornerstone OnDemand® are registered trademarks of Cornerstone OnDemand Inc.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Cornerstone OnDemand's future financial performance, market growth, the demand for and benefits from the use of Cornerstone OnDemand's solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon Cornerstone OnDemand's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Cornerstone OnDemand's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Cornerstone OnDemand disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from Cornerstone OnDemand's current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new clients; the extent to which clients renew their subscriptions for our solution; 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; 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; increased demands on our infrastructure and costs associated with operating as a public company; 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 is included in Cornerstone OnDemand's reports filed with the SEC, including its Form 10-K filed with the SEC on March 6, 2012, and subsequent reports filed with the SEC, including its Form 10-Q filed on August 14, 2012.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Cornerstone OnDemand has provided in this release certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include (i) non-GAAP revenue, which is defined as gross revenue plus revenue not recognized in the period due to the impact of purchase accounting rules on deferred revenue acquired through acquisitions, (ii) bookings, which are defined as gross revenue plus the change in deferred revenue for the period, (iii) non-GAAP net cash used in operating activities, which excludes acquisition and acquisition-related costs and employer-related taxes from stock-based compensation, (iv) non-GAAP net loss and non-GAAP net loss per share, which are based on non-GAAP revenue and exclude, for the periods in which they are present, stock-based compensation and employer-related payroll taxes, amortization of intangible assets, acquisition costs, adjustments to taxes related to acquisition adjustments, amortization of debt discount and issuance costs, early debt retirement expense, change in the fair value of preferred stock warrant liabilities, and accretion related to preferred stock, and (v) non-GAAP gross profit and non-GAAP gross margin, which are calculated based on non-GAAP revenue and exclude stock-based compensation and amortization of certain intangible assets reflected in cost of revenue.

Cornerstone OnDemand's management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating Cornerstone OnDemand's ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items Cornerstone excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures has been provided in the tables included as part of this press release.

         
 

Cornerstone OnDemand, Inc.

 
CONSOLIDATED BALANCE SHEETS
 

(in thousands)

 

(unaudited)

 
September 30, 2012 December 31, 2011
Assets
Cash and cash equivalents $ 64,492 $ 85,409
Accounts receivable, net 45,157 34,110
Deferred commissions 4,223 3,537
Prepaid expenses and other current assets, net   7,132     3,789  
Total current assets 121,004 126,845
 
Capitalized software development, net 6,259 4,106
Property and equipment, net 6,171 3,663
Intangible assets, net 7,443 609
Goodwill 8,193 -
Other assets, net   207     139  
Total Assets $ 149,277   $ 135,362  
 
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 6,465 $ 3,834
Accrued expenses 9,771 8,039
Deferred revenue, current portion 69,001 52,338
Capital lease obligations, current portion 1,438 1,617
Debt, current portion 630 265
Other liabilities   3,016     996  
Total current liabilities 90,321 67,089
 
Other liabilities, non-current 3,776 806
Deferred revenue, net of current portion 3,621 3,542

Capital lease obligations, net of current portion

1,279 1,056
Long-term debt, net of current portion   1,025     409  
Total liabilities 100,022 72,902
 
Stockholders' Equity
Common stock 5 5
Additional paid-in capital 237,953 226,916
Accumulated deficit (188,624 ) (164,651 )
Accumulated other comprehensive (loss) income   (79 )   190  
Total stockholders' equity   49,255     62,460  
Total Liabilities and Stockholders' Equity $ 149,277   $ 135,362  
 
 

Cornerstone OnDemand, Inc.

 
CONSOLIDATED STATEMENTS OF OPERATIONS
 

(in thousands, except per share data)

 

(unaudited)

           

Three Months Ended
September 30,

Nine Months Ended
September 30,

  2012     2011     2012     2011  
 
Gross revenue $ 30,768 $ 20,019 $ 81,488 $ 53,136

Common stock warrant charge1

  -     -     -     (2,500 )
Net revenue 30,768 20,019 81,488 50,636

Cost of revenue2, 3

  9,135     5,371     23,869     14,903  
Gross profit 21,633 14,648 57,619 35,733
 
Operating expenses:

Sales and marketing2

18,624 11,531 52,283 32,244

Research and development2

4,101 2,670 10,625 7,608

General and administrative2

6,600 3,439 18,346 10,577
Amortization of certain acquired intangible assets   251     -     488     -  
Total operating expenses   29,576     17,640     81,742     50,429  
Loss from operations (7,943 ) (2,992 ) (24,123 ) (14,696 )
Other income (expense):
Interest expense (121 ) (35 ) (358 ) (782 )
Change in fair value of preferred stock warrant liabilities - - - (42,559 )
Withdrawn secondary offering expense - (555 ) - (555 )
Other, net   139     (643 )   (42 )   (220 )
Other income (expense), net   18     (1,233 )   (400 )   (44,116 )
Loss before income tax benefit (provision) for income taxes (7,925 ) (4,225 ) (24,523 ) (58,812 )
Income tax benefit (provision)   298     (52 )   550     (132 )
Net loss (7,627 ) (4,277 ) (23,973 ) (58,944 )
Accretion of redeemable preferred stock   -     -     -     (5,208 )
Net loss attributable to common stockholders $ (7,627 ) $ (4,277 ) $ (23,973 ) $ (64,152 )
Net loss per share attributable to common stockholders, basic and diluted $ (0.15 ) $ (0.09 ) $ (0.48 ) $

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