8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

August 10, 2020

Date of Report

(Date of earliest event reported)

 Cornerstone OnDemand, Inc.

(Exact name of registrant as specified in its charter)

Commission File Number 001-35098

Delaware	13-4068197
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1601 Cloverfield Blvd.

Suite 620 South

Santa Monica, CA 90404

(Address of principal executive offices, including zip code)

(310) 752-0200

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	CSOD	Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐	Emerging growth company
☐	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02 Results of Operations and Financial Condition.

On August 10, 2020, Cornerstone OnDemand, Inc. issued a press release reporting results for the fiscal quarter ended June 30, 2020. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information set forth under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

The attached press release includes a discussion of certain non-GAAP financial measures as well as a reconciliation of such non-GAAP financial measures to the corresponding GAAP financial measures.

Item 9.01 Financial Statements and Exhibits.

(d)  Exhibits.

Exhibit No.	Description
99.1	Press Release dated August 10, 2020.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Cornerstone OnDemand, Inc.

/s/ Brian L. Swartz

Brian L. Swartz

Chief Financial Officer

Date: August 10, 2020

EX-99.1

Cornerstone OnDemand Announces Second Quarter 2020 Financial Results

SANTA MONICA, Calif. – August 10, 2020 – People development solution provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results¹ for its second quarter ended June 30, 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 below discussion includes Saba's results for the post-acquisition period.

Second Quarter 2020 Results:

•Revenue for the second quarter of 2020 was $184.4 million. This represents a 30.0% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 9.2% (approximately one percentage point higher on a constant currency basis).

•Subscription revenue for the second quarter of 2020 was $177.2 million. This represents a 33.7% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 13.4% (approximately one percentage point higher on a constant currency basis).

•Operating loss for the second quarter of 2020 was $22.4 million, yielding a margin of (12.1)%, compared to operating loss of $3.6 million and margin of (2.5)% in the same period of the prior year.

•Non-GAAP operating income for the second quarter of 2020 was $39.9 million, yielding a margin of 21.6%, compared to non-GAAP operating income of $16.6 million and margin of 11.7% in the same period of the prior year.

•Net loss for the second quarter of 2020 was $12.0 million, or $(0.19) diluted net loss per share, compared to net loss of $8.8 million and $(0.15) diluted net loss per share in the same period of the prior year.

•Non-GAAP net income for the second quarter of 2020 was $27.2 million, or $0.40 diluted net income per share, compared to non-GAAP net income of $12.4 million and $0.19 diluted net income per share in the same period of the prior year.

•Unlevered free cash flow for the second quarter of 2020 was $15.4 million, yielding a margin of 8.4%, compared to unlevered free cash flow of $9.5 million and a margin of 6.7%, in the same period of the prior year. Unlevered free cash flow for the second quarter of 2020 includes approximately $17.7 million of restructuring and acquisition-related cash outflows.

"Q2 was one of the most important quarters in Cornerstone history, as the acquisition of Saba was completed and we began operating as one integrated company, while delivering strong results," said Phil Saunders, chief executive officer. "We are now embarking on a brand new chapter in Cornerstone, and we've already started the transformation from a great company into a great business."

Recent Highlights:

•After 20 years as founder and chief executive officer, Adam Miller became co-chair of the Company's board of directors. The board appointed Phil Saunders, the former chief executive officer of Saba Software, to serve as the Company’s new chief executive officer.

•On July 17, 2020, the Company announced that chief financial officer Brian Swartz will leave the Company to pursue another opportunity effective August 14, 2020. Trish Coughlin, chief accounting officer, will serve as interim chief financial officer while the search for a new chief financial officer is conducted.

"We are pleased with the solid financial results in Q2 and believe the Company is well positioned for the transformation that Phil and the leadership team plan to drive," said Brian Swartz, chief financial officer. "Trish Coughlin, our incoming interim chief financial officer, is a seasoned finance executive and will be a great addition to the executive leadership team."

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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 third quarter ending September 30, 2020, the Company provides the following outlook:

•Revenue between $187.0 million and $189.0 million.

•Subscription revenue between $181.0 million and $183.0 million.

For the fourth quarter ending December 31, 2020, the Company provides the following outlook:

•Revenue between $193.0 million and $196.0 million.

•Subscription revenue between $186.0 million and $189.0 million.

For the year ending December 31, 2020, the Company provides the following outlook:

•Revenue between $715.0 million and $720.0 million.

•Subscription revenue between $689.0 million and $694.0 million.

•Non-GAAP operating income between $129.0 million and $133.0 million.

•Unlevered free cash flow between $105.0 million and $115.0 million. Included in this is approximately $60.0 million of restructuring and acquisition-related cash outflows.

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 non-GAAP operating income, the Company excludes stock-based compensation expense, which is impacted by the number of shares issued and the market price, both of which are uncertain. The actual amount of stock-based compensation expense in the third quarter ending September 30, 2020, the fourth quarter ending December 31, 2020, and the year ending December 31, 2020 will have a significant impact on the Company’s GAAP operating margin.

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. Refer to the discussion in the section titled "Non-GAAP Financial Measures" and the reconciliations of each non-GAAP financial measure to its most comparable GAAP financial measure at the end of this press release.
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 to revenue for the third quarter, fourth quarter, and full year of 2020:
	$1.31 USD per GBP
	$1.18 USD per EUR

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Quarterly Conference Call

Cornerstone will host a conference call to discuss its second quarter 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: 9499743. 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 August 17, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 9499743 and Web PIN: 1726.

Featured Presentation

An accompanyingfeatured presentationwill 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 approximately 6,300 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.

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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 GAAP and 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, the integration of Saba into our business, anticipated synergies from our acquisition of Saba, the expected departure of our chief financial officer and anticipated service of our chief accounting officer as interim 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 the Company and Saba; the ability of the Company and Saba to successfully integrate their respective 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 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 include:

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

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

(iii)unlevered free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest;

(iv)unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue;

(v)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, accretion of debt discount and amortization of debt issuance costs, unrealized fair value adjustment on strategic investments, restructuring costs, acquisition-related costs, discrete tax items, 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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(vi)non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue;

(vii)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, restructuring costs, and acquisition-related costs;

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

(ix)non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and 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 and 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.

•Accretion of debt discount and amortization of debt issuance costs. The Company recognizes the effective interest expense on its debt and amortizes the issuance costs over the applicable term of such debt. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are 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.

•Fair value adjustment 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.

•Acquisition-related costs. The Company excludes costs related to acquisitions 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 costs provides investors with a supplemental view of the Company’s operational performance.

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

•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.

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)

(unaudited)

	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	136,492	$	215,907
Short-term investments	—		201,579
Accounts receivable, net	166,644		131,105
Deferred commissions, current portion	36,299		33,215
Prepaid expenses and other current assets	36,464		30,512
Total current assets	375,899		612,318
Capitalized software development costs, net	51,088		50,023
Property and equipment, net	38,562		36,526
Operating right-of-use assets	83,527		72,944
Deferred commissions, net of current portion	71,826		74,563
Long-term investments	9,170		60,192
Intangible assets, net	480,572		9,440
Goodwill	961,602		47,453
Deferred tax assets	6,865		1,045
Other assets	10,183		1,597
Total assets	$	2,089,294	$	966,101
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	19,955	$	3,803
Accrued expenses	94,265		78,075
Deferred revenue, current portion	362,356		339,522
Operating lease liabilities, current portion	15,051		7,235
Debt, current portion	7,535		—
Other liabilities	15,824		11,015
Total current liabilities	514,986		439,650
Debt, net of current portion	1,224,818		293,174
Deferred revenue, net of current portion	7,639		6,945
Operating lease liabilities, net of current portion	72,266		67,195
Deferred tax liabilities	22,785		—
Other liabilities, non-current	5,260		655
Total liabilities	1,847,754		807,619
Stockholders’ equity:
Common stock, $0.0001 par value	6		6
Additional paid-in capital	788,150		682,717
Accumulated deficit	(550,442)		(524,680)
Accumulated other comprehensive income	3,826		439
Total stockholders’ equity	241,540		158,482
Total liabilities and stockholders’ equity	$	2,089,294	$	966,101

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Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	184,358	$	141,860	$	334,494	$	281,977
Cost of revenue 1,2	58,000		40,187		99,924		73,882
Gross profit	126,358		101,673		234,570		208,095
Operating expenses:
Sales and marketing 1,2	64,942		58,691		120,272		113,196
Research and development 1	28,338		24,337		52,423		52,083
General and administrative 1,2	25,620		22,239		50,345		45,179
Acquisition-related costs	20,093		—		26,904		—
Restructuring1	9,733		—		9,733		—
Total operating expenses	148,726		105,267		259,677		210,458
Loss from operations	(22,368)		(3,594)		(25,107)		(2,363)
Other expense:
Interest expense	(18,219)		(5,378)		(23,720)		(10,744)
Other, net	(514)		1,081		(5,878)		2,474
Other expense, net	(18,733)		(4,297)		(29,598)		(8,270)
Loss before income tax provision	(41,101)		(7,891)		(54,705)		(10,633)
Income tax benefit (provision)3	29,114		(914)		28,943		(1,636)
Net loss	$	(11,987)	$	(8,805)	$	(25,762)	$	(12,269)
Net loss per share, basic and diluted	$	(0.19)	$	(0.15)	$	(0.41)	$	(0.21)
Weighted average common shares outstanding, basic and diluted	63,593		59,715		62,612		59,430

1 Includes stock-based compensation as follows:
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	2,122	$	1,786	$	4,823	$	2,922
Sales and marketing	5,628		6,809		14,212		12,856
Research and development	2,724		4,319		7,524		8,515
General and administrative	3,421		6,237		10,506		11,903
Restructuring	208		—		208		—
Total	$	14,103	$	19,151	$	37,273	$	36,196

2 Includes amortization of intangible assets as follows:
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	7,396	$	1,047	$	9,059	$	2,333
Sales and marketing	10,679		—		10,762		—
General and administrative	453		—		453		—
Total	$	18,528	$	1,047	$	20,274	$	2,333
3 Includes a discrete income tax benefit of approximately $26.7 million during the three and six months ended June 30, 2020 related to release of valuation allowance against previously reserved deferred tax assets.

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Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cash flows from operating activities
Net loss	$	(11,987)	$	(8,805)	$	(25,762)	$	(12,269)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	31,195		9,176		43,159		20,034
Accretion of debt discount and amortization of debt issuance costs	3,597		1,516		4,687		2,543
Amortization (accretion) of purchased investment premium or discount, net	—		(509)		41		(725)
Net foreign currency and other loss	2,405		821		7,990		1,115
Stock-based compensation expense	14,103		19,151		37,273		36,196
Deferred income taxes	(30,636)		—		(30,636)		—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(14,182)		(11,081)		21,334		21,874
Deferred commissions	(3,786)		(4,456)		(3,204)		(8,730)
Prepaid expenses and other assets	15,870		3,313		9,320		6,954
Accounts payable	3,275		4,387		3,798		1,606
Accrued expenses	20,572		13,568		2,493		(9,719)
Deferred revenue	(7,354)		(8,615)		(42,911)		(32,574)
Other liabilities	(298)		2,717		1,180		2,172
Net cash provided by operating activities	22,774		21,183		28,762		28,477
Cash flows from investing activities
Purchases of marketable investments	—		(82)		(20,419)		(82)
Maturities and sales of investments	—		27,095		272,173		197,774
Capital expenditures	(1,304)		(5,031)		(2,275)		(9,274)
Capitalized software costs	(6,135)		(6,728)		(13,524)		(14,127)
Cash paid for acquisitions, net of cash acquired	(1,279,533)		—		(1,298,172)		—
Net cash (used in) provided by investing activities	(1,286,972)		15,254		(1,062,217)		174,291
Cash flows from financing activities
Proceeds from term loan debt, net of discount	979,582		—		979,582		—
Payments of debt issuance and modification costs	(30,268)		—		(30,268)		—
Proceeds from employee stock plans	2,497		7,371		12,627		14,211
Payment of tax withholdings for employee stock plans	—		(5,469)		—		(5,469)
Net cash provided by financing activities	951,811		1,902		961,941		8,742
Effect of exchange rate changes on cash, cash equivalents, and restricted cash1	(2,162)		(248)		(2,788)		—
Net (decrease) increase in cash, cash equivalents, and restricted cash1	(314,549)		38,091		(74,302)		211,510
Cash, cash equivalents, and restricted cash at beginning of period1	456,154		357,015		215,907		183,596
Cash, cash equivalents, and restricted cash at end of period1	$	141,605	$	395,106	$	141,605	$	395,106
Supplemental cash flow data
Cash paid for interest	$	59	$	46	$	8,684	$	8,731
Cash paid for income taxes	1,588		580		2,543		970
Non-cash investing and financing activities:
Assets acquired under capital leases and other financing arrangements	$	—	$	1,702	$	—	$	1,702
Capitalized assets financed by accounts payable and accrued expenses	275		2,728		275		2,728
Capitalized stock-based compensation	1,925		1,361		4,115		2,113
Issuance of common stock for partial consideration for acquisition	32,889		—		32,889		—
Increase in debt discount as a result of modification of Convertible Notes	18,598		—		18,598		—

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

	As of June 30,
	2020		2019
Cash and cash equivalents	$	136,492	$	395,106
Restricted cash included in other assets, net	1,276		—
Restricted cash included in prepaid expenses and other current assets	3,837		—
Total cash, cash equivalents, and restricted cash	$	141,605	$	395,106

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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, LOSS FROM OPERATIONS TO NON-GAAP OPERATING INCOME, AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME MARGIN

(in thousands)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Reconciliation of cost of revenue, gross profit, and gross margin:
Revenue	$	184,358		$	141,860		$	334,494		$	281,977
Cost of revenue	58,000			40,187			99,924			73,882
Gross profit	$	126,358		$	101,673		$	234,570		$	208,095
Gross margin	68.5		%	71.7		%	70.1		%	73.8		%
Cost of revenue	$	58,000		$	40,187		$	99,924		$	73,882
Adjustments to cost of revenue:
Stock-based compensation1	(2,122)			(1,786)			(4,260)			(2,922)
Amortization of intangible assets	(7,396)			(1,047)			(9,059)			(2,333)
Total adjustments to cost of revenue	(9,518)			(2,833)			(13,319)			(5,255)
Non-GAAP cost of revenue	48,482			37,354			86,605			68,627
Non-GAAP gross profit	$	135,876		$	104,506		$	247,889		$	213,350
Non-GAAP gross margin	73.7		%	73.7		%	74.1		%	75.7		%
Reconciliation of loss from operations and operating margin:
Loss from operations	$	(22,368)		$	(3,594)		$	(25,107)		$	(2,363)
Operating margin	(12.1)		%	(2.5)		%	(7.5)		%	(0.8)		%
Adjustments to loss from operations:
Stock-based compensation1, 3	13,895			19,151			33,004			36,196
Amortization of intangible assets	18,528			1,047			20,274			2,333
Acquisition-related costs2	20,093			—			26,904			—
Restructuring3	9,733			—			9,733			—
Total adjustments to loss from operations	62,249			20,198			89,915			38,529
Non-GAAP operating income	$	39,881		$	16,604		$	64,808		$	36,166
Non-GAAP operating income margin	21.6		%	11.7		%	19.4		%	12.8		%

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the six months ended June 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. There is no such difference for the three months ended June 30, 2020.
	Six Months Ended
	June 30,
	2020
Cost of revenue	$	4,260
Sales and marketing	13,302
Research and development	6,110
General and administrative	9,332
Total	$	33,004
2 Costs 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, and due diligence costs.
3 Stock-based compensation related to restructuring is presented in the restructuring line item.

10

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net loss	$	(11,987)	$	(8,805)	$	(25,762)	$	(12,269)
Adjustments to net loss
Stock-based compensation1, 3	13,895		19,151		33,004		36,196
Amortization of intangible assets	18,528		1,047		20,274		2,333
Acquisition-related costs2	20,093		—		26,904		—
Restructuring3	9,733		—		9,733		—
Accretion of debt discount and amortization of debt issuance costs4	3,597		1,043		4,687		2,069
Income tax benefit5	(26,659)		—		(26,659)		—
Total adjustments to net loss	39,187		21,241		67,943		40,598
Non-GAAP net income	$	27,200	$	12,436	$	42,181	$	28,329
Non-GAAP basic net income per share	$	0.43	$	0.21	$	0.67	$	0.48
Non-GAAP diluted net income per share	$	0.40	$	0.19	$	0.62	$	0.43
Weighted-average common shares outstanding, basic	63,593		59,715		62,612		59,430
Non-GAAP weighted-average common shares outstanding, diluted	68,314		65,767		67,841		65,297

1	The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the six months ended June 30, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020. There is no such difference for the three months ended June 30, 2020.
2	Costs 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, and due diligence costs.
3	Stock-based compensation related to restructuring is presented in the restructuring line item.
4	Debt discount accretion and debt issuance cost amortization has 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	As described above, this adjustment is a discrete income tax benefit of approximately $26.7 million during both the three and six months ended June 30, 2020 related to release of valuation allowance against previously reserved deferred tax assets.

11

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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Reconciliation of unlevered free cash flow:
Net cash provided by operating activities	$	22,774		$	21,183		$	28,762		$	28,477
Capital expenditures	(1,304)			(5,031)			(2,275)			(9,274)
Capitalized software costs	(6,135)			(6,728)			(13,524)			(14,127)
Cash paid for interest	59			46			8,684			8,731
Unlevered free cash flow	$	15,394		$	9,470		$	21,647		$	13,807
Unlevered free cash flow margin	8.4		%	6.7		%	6.5		%	4.9		%

12

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 2019								FY 2020
	Q1'19		Q2'19		Q3'19		Q4'19		Q1'20		Q2'20		FY17		FY18		FY19
SELECTED METRICS:
Number of customers1	3,367		3,423		3,446		3,508		3,522		6,308		3,250		3,333		3,508
% y/y	8.6	%	6.9	%	5.7	%	5.3	%	4.6	%	84.3	%	11.4	%	2.6	%	5.3	%
% q/q	1.0	%	1.7	%	0.7	%	1.8	%	0.4	%	79.1	%	n/a		n/a		n/a
Number of employees	2,017		2,034		1,986		1,993		1,975		3,184		1,891		1,953		1,993
% y/y	10.3	%	9.9	%	5.0	%	2.0	%	(2.1)	%	56.5	%	3.7	%	3.3	%	2.0	%
% q/q	3.3	%	0.8	%	(2.4)	%	0.4	%	(0.9)	%	61.2	%	n/a		n/a		n/a
Annual dollar retention rate	n/a		n/a		n/a		n/a		n/a		n/a		93.5	%	92.8	%	90.3	%
Annual recurring revenue (in thousands)	n/a		n/a		n/a		n/a		n/a		n/a		439,000		510,000		575,000
Net cash provided by operating activities (in thousands)	7,294		21,183		24,478		62,594		5,988		22,774		67,510		90,253		115,549
Unlevered free cash flow (in thousands)	4,337		9,470		21,682		54,714		6,253		15,394		43,680		63,471		90,203
Unlevered free cash flow margin	3.1	%	6.7	%	15.0	%	36.6	%	4.2	%	8.4	%	9.1	%	11.8	%	15.6	%
FINANCIAL DATA (in thousands, except percentages):
Revenue	140,117		141,860		144,952		149,594		150,136		184,358		—		537,891		576,523
Subscription revenue	131,256		132,562		137,446		141,704		144,421		177,217		—		473,052		542,968
% y/y growth	16.0	%	15.5	%	15.7	%	12.2	%	10.0	%	33.7	%	—		—		14.8	%
% y/y growth constant currency2	18.2	%	17.3	%	17.2	%	12.4	%	10.7	%	n/a		—		—		16.2	%
Subscription revenue % of total revenue	93.7	%	93.4	%	94.8	%	94.7	%	96.2	%	96.1	%	—		87.9	%	94.2	%
Income (loss) from operations	1,231		(3,594)		3,713		10,583		(2,739)		(22,368)		—		(7,769)		11,933
MARGIN DATA:
Gross margin	76.0	%	71.7	%	74.4	%	74.5	%	72.1	%	68.5	%	—		73.2	%	74.1	%
Sales and marketing % of revenue	38.9	%	41.4	%	39.9	%	37.9	%	36.9	%	35.2	%	—		41.8	%	39.5	%
Research and development % of revenue	19.8	%	17.2	%	17.7	%	15.6	%	16.0	%	15.4	%	—		14.3	%	17.5	%
General and administrative % of revenue	16.4	%	15.6	%	14.2	%	13.9	%	16.5	%	13.8	%	—		16.7	%	15.0	%
Acquisition-related costs % of revenue	—		—		—		—		4.5	%	10.9	%	—		0.2	%	—
Restructuring % of revenue	—		—		—		—		—		5.3	%	—		1.7	%	—
Operating margin	0.9	%	(2.5)	%	2.6	%	7.1	%	(1.8)	%	(12.1)	%	—		(1.4)	%	2.1	%
NON-GAAP MARGIN DATA:
Non-GAAP gross margin	77.7	%	73.7	%	76.3	%	76.3	%	74.6	%	73.7	%	—		74.1	%	76.0	%
Non-GAAP sales and marketing % of revenue	34.6	%	36.6	%	34.4	%	33.2	%	31.7	%	26.4	%	—		37.2	%	34.7	%
Non-GAAP research and development % of revenue	16.8	%	14.1	%	14.8	%	13.5	%	13.8	%	13.9	%	—		12.1	%	14.8	%
Non-GAAP general and administrative % of revenue	12.3	%	11.3	%	10.3	%	10.6	%	12.5	%	11.8	%	—		13.2	%	11.1	%
Non-GAAP operating margin	14.0	%	11.7	%	16.7	%	18.9	%	16.6	%	21.6	%	—		11.8	%	15.4	%
Non-GAAP research and development plus capitalized software % of revenue	22.1	%	18.8	%	18.0	%	17.4	%	18.7	%	17.2	%	—		16.8	%	19.1	%
FOREIGN EXCHANGE RATES:
GBP to USD average period rate	1.30		1.29		1.23		1.29		1.28		1.23		1.29		1.34		1.28
GBP to USD end of period spot rate	1.30		1.27		1.23		1.32		1.23		1.23		1.35		1.27		1.32
EUR to USD average period rate	1.14		1.12		1.11		1.11		1.10		0.94		1.14		1.18		1.12
EUR to USD end of period spot rate	1.12		1.14		1.09		1.12		1.10		1.12		1.20		1.14		1.12
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 We have historically presented constant currency information, a non-GAAP financial measure, to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency fluctuations. However, due to the acquisition of Saba in the second quarter of 2020, constant currency results on a combined company basis were not presented as the historical comparative period did not include the combined company results for a full quarter.

13

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

14

XML

Cover	Aug. 10, 2020
Cover [Abstract]
Document Type	8-K
Document Period End Date	Aug. 10, 2020
Entity Registrant Name	Cornerstone OnDemand, Inc.
Entity File Number	001-35098
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-4068197
Entity Address, Address Line One	1601 Cloverfield Blvd.
Entity Address, Address Line Two	Suite 620 South
Entity Address, City or Town	Santa Monica
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90404
City Area Code	310
Local Phone Number	752-0200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	CSOD
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0001401680