Form 10-Q
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Cornerstone OnDemand, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
13-4068197
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
|
Registrant’s telephone number, including area code:
(310) 752-0200
|
Large accelerated filer
|
x
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Accelerated filer
|
¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
Class
|
Outstanding as of August 2, 2013
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Common Stock
|
51,410,400
|
|
|
Page No.
|
|
|
|
|
||
|
||
|
||
|
||
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||
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|
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ITEM 1.
|
Condensed Consolidated Financial Statements
|
|
June 30,
2013 |
|
December 31, 2012
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
290,264
|
|
|
$
|
76,442
|
|
Accounts receivable, net
|
44,136
|
|
|
47,528
|
|
||
Deferred commissions
|
10,881
|
|
|
9,354
|
|
||
Prepaid expenses and other current assets
|
11,280
|
|
|
8,249
|
|
||
Total current assets
|
356,561
|
|
|
141,573
|
|
||
Capitalized software development costs, net
|
8,814
|
|
|
7,007
|
|
||
Property and equipment, net
|
11,557
|
|
|
7,947
|
|
||
Intangible assets, net
|
5,758
|
|
|
6,887
|
|
||
Goodwill
|
8,193
|
|
|
8,193
|
|
||
Other assets, net
|
6,312
|
|
|
227
|
|
||
Total Assets
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$
|
397,195
|
|
|
$
|
171,834
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
11,052
|
|
|
$
|
4,849
|
|
Accrued expenses
|
13,522
|
|
|
14,986
|
|
||
Deferred revenue, current portion
|
92,399
|
|
|
87,759
|
|
||
Capital lease obligations, current portion
|
1,300
|
|
|
1,643
|
|
||
Debt, current portion
|
496
|
|
|
916
|
|
||
Other liabilities
|
3,653
|
|
|
3,885
|
|
||
Total current liabilities
|
122,422
|
|
|
114,038
|
|
||
Convertible notes, net
|
214,529
|
|
|
—
|
|
||
Other liabilities, non-current
|
3,395
|
|
|
3,592
|
|
||
Deferred revenue, net of current portion
|
2,641
|
|
|
4,493
|
|
||
Capital lease obligations, net of current portion
|
583
|
|
|
1,227
|
|
||
Other long-term debt, net of current portion
|
678
|
|
|
1,836
|
|
||
Total liabilities
|
344,248
|
|
|
125,186
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
||||
Common stock, $0.0001 par value; 1,000,000 shares authorized, 51,358 and 50,689 shares issued and outstanding at June 30, 2013 and December 31, 2012
|
5
|
|
|
5
|
|
||
Additional paid-in capital
|
266,965
|
|
|
242,767
|
|
||
Accumulated deficit
|
(214,658
|
)
|
|
(196,041
|
)
|
||
Accumulated other comprehensive income (loss)
|
635
|
|
|
(83
|
)
|
||
Total stockholders’ equity
|
52,947
|
|
|
46,648
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
397,195
|
|
|
$
|
171,834
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Revenue
|
$
|
44,346
|
|
|
$
|
26,718
|
|
|
$
|
82,003
|
|
|
$
|
50,720
|
|
Cost of revenue
|
13,164
|
|
|
7,890
|
|
|
24,416
|
|
|
14,734
|
|
||||
Gross profit
|
31,182
|
|
|
18,828
|
|
|
57,587
|
|
|
35,986
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
26,274
|
|
|
17,422
|
|
|
49,284
|
|
|
33,659
|
|
||||
Research and development
|
5,232
|
|
|
3,431
|
|
|
9,651
|
|
|
6,524
|
|
||||
General and administrative
|
7,530
|
|
|
5,792
|
|
|
16,096
|
|
|
11,746
|
|
||||
Amortization of certain acquired intangible assets
|
251
|
|
|
237
|
|
|
502
|
|
|
237
|
|
||||
Total operating expenses
|
39,287
|
|
|
26,882
|
|
|
75,533
|
|
|
52,166
|
|
||||
Loss from operations
|
(8,105
|
)
|
|
(8,054
|
)
|
|
(17,946
|
)
|
|
(16,180
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(505
|
)
|
|
(94
|
)
|
|
(584
|
)
|
|
(237
|
)
|
||||
Other, net
|
(209
|
)
|
|
(420
|
)
|
|
(222
|
)
|
|
(181
|
)
|
||||
Other income (expense), net
|
(714
|
)
|
|
(514
|
)
|
|
(806
|
)
|
|
(418
|
)
|
||||
Loss before income tax benefit
|
(8,819
|
)
|
|
(8,568
|
)
|
|
(18,752
|
)
|
|
(16,598
|
)
|
||||
Income tax benefit
|
136
|
|
|
334
|
|
|
135
|
|
|
252
|
|
||||
Net loss
|
$
|
(8,683
|
)
|
|
$
|
(8,234
|
)
|
|
$
|
(18,617
|
)
|
|
$
|
(16,346
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.17
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.33
|
)
|
Weighted average common shares outstanding, basic and diluted
|
51,153
|
|
|
49,763
|
|
|
51,031
|
|
|
49,573
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net loss
|
$
|
(8,683
|
)
|
|
$
|
(8,234
|
)
|
|
$
|
(18,617
|
)
|
|
$
|
(16,346
|
)
|
Foreign currency translation adjustment, net of tax
|
5
|
|
|
158
|
|
|
718
|
|
|
2
|
|
||||
Total comprehensive loss
|
$
|
(8,678
|
)
|
|
$
|
(8,076
|
)
|
|
$
|
(17,899
|
)
|
|
$
|
(16,344
|
)
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2013
|
|
2012
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(18,617
|
)
|
|
$
|
(16,346
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
4,447
|
|
|
2,977
|
|
||
Accretion of debt discount and amortization of debt issuance costs
|
286
|
|
|
78
|
|
||
Unrealized foreign exchange loss
|
566
|
|
|
175
|
|
||
Stock-based compensation expense
|
8,346
|
|
|
4,981
|
|
||
Deferred income taxes
|
(378
|
)
|
|
(361
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
2,484
|
|
|
2,032
|
|
||
Deferred commissions
|
(1,810
|
)
|
|
(219
|
)
|
||
Prepaid expenses and other assets
|
(3,215
|
)
|
|
(586
|
)
|
||
Accounts payable
|
3,917
|
|
|
612
|
|
||
Accrued expenses
|
(1,448
|
)
|
|
(409
|
)
|
||
Deferred revenue
|
4,238
|
|
|
4,293
|
|
||
Other liabilities
|
70
|
|
|
413
|
|
||
Net cash used in operating activities
|
(1,114
|
)
|
|
(2,360
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(2,377
|
)
|
|
(188
|
)
|
||
Capitalized software costs
|
(3,414
|
)
|
|
(2,462
|
)
|
||
Cash paid for acquisition, net of cash acquired
|
—
|
|
|
(12,428
|
)
|
||
Net cash used in investing activities
|
(5,791
|
)
|
|
(15,078
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of convertible notes, net
|
246,043
|
|
|
—
|
|
||
Payments for convertible note hedges
|
(49,537
|
)
|
|
—
|
|
||
Proceeds from the issuance of warrants
|
23,225
|
|
|
—
|
|
||
Proceeds from issuance of debt
|
1,914
|
|
|
—
|
|
||
Repayment of debt
|
(3,776
|
)
|
|
(996
|
)
|
||
Principal payments under capital lease obligations
|
(987
|
)
|
|
(929
|
)
|
||
Proceeds from stock option and warrant exercises
|
4,140
|
|
|
1,041
|
|
||
Net cash provided by (used in) financing activities
|
221,022
|
|
|
(884
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(295
|
)
|
|
(119
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
213,822
|
|
|
(18,441
|
)
|
||
Cash and cash equivalents at beginning of period
|
76,442
|
|
|
85,409
|
|
||
Cash and cash equivalents at end of period
|
$
|
290,264
|
|
|
$
|
66,968
|
|
Supplemental cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
162
|
|
|
$
|
163
|
|
Cash paid for income taxes
|
$
|
384
|
|
|
$
|
41
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Assets acquired under capital leases and other financing arrangements
|
$
|
88
|
|
|
$
|
2,852
|
|
Common stock issued for business acquisition
|
$
|
—
|
|
|
$
|
335
|
|
Capitalized assets financed by accounts payable
|
$
|
2,980
|
|
|
$
|
140
|
|
Capitalized stock-based compensation
|
$
|
413
|
|
|
$
|
219
|
|
Deferred offering costs included in accrued expenses
|
$
|
379
|
|
|
$
|
—
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2013
|
|
2012
|
||||
|
Actual
|
|
Pro Forma
|
||||
Revenues
|
$
|
82,003
|
|
|
$
|
51,723
|
|
Net loss
|
$
|
(18,617
|
)
|
|
$
|
(16,028
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net loss
|
$
|
(8,683
|
)
|
|
$
|
(8,234
|
)
|
|
$
|
(18,617
|
)
|
|
$
|
(16,346
|
)
|
Weighted-average shares of common stock outstanding
|
51,153
|
|
|
49,763
|
|
|
51,031
|
|
|
49,573
|
|
||||
Net loss per share – basic and diluted
|
$
|
(0.17
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.33
|
)
|
|
June 30,
|
||||
|
2013
|
|
2012
|
||
Options to purchase common stock and restricted stock units
|
7,099
|
|
|
6,830
|
|
Convertible notes
|
4,682
|
|
|
—
|
|
Common stock warrants
|
4,682
|
|
|
99
|
|
Shares issued for purchase consideration held in escrow
|
—
|
|
|
16
|
|
Common stock subject to repurchase right
|
—
|
|
|
20
|
|
Other restricted common stock
|
22
|
|
|
31
|
|
Total shares excluded from net loss per share
|
16,485
|
|
|
6,996
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Developed technology
|
$
|
3,800
|
|
|
$
|
(1,174
|
)
|
|
$
|
2,626
|
|
|
$
|
3,800
|
|
|
$
|
(700
|
)
|
|
$
|
3,100
|
|
Customer relationships
|
2,400
|
|
|
(742
|
)
|
|
1,658
|
|
|
2,400
|
|
|
(441
|
)
|
|
1,959
|
|
||||||
Domains/trademarks/tradenames
|
320
|
|
|
(198
|
)
|
|
122
|
|
|
320
|
|
|
(118
|
)
|
|
202
|
|
||||||
Software license rights
|
1,654
|
|
|
(610
|
)
|
|
1,044
|
|
|
1,654
|
|
|
(459
|
)
|
|
1,195
|
|
||||||
Non-compete agreements
|
610
|
|
|
(302
|
)
|
|
308
|
|
|
610
|
|
|
(179
|
)
|
|
431
|
|
||||||
Total
|
$
|
8,784
|
|
|
$
|
(3,026
|
)
|
|
$
|
5,758
|
|
|
$
|
8,784
|
|
|
$
|
(1,897
|
)
|
|
$
|
6,887
|
|
2013
|
$
|
1,134
|
|
2014
|
2,078
|
|
|
2015
|
1,840
|
|
|
2016
|
554
|
|
|
2017
|
145
|
|
|
Thereafter
|
7
|
|
|
Total
|
$
|
5,758
|
|
•
|
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
|
•
|
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
•
|
Level 3 – Unobservable inputs.
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||
Cash equivalents
|
$
|
271,251
|
|
|
$
|
271,251
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
51,521
|
|
|
$
|
51,521
|
|
|
$
|
—
|
|
|
$
|
—
|
|
•
|
during any calendar quarter after September 30, 2013, if the last reported sale price of common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130%
of the conversion price on each applicable trading day;
|
•
|
during the
five
business day period after any
five
consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of that five consecutive trading day period was less than
98%
of the product of the last reported sale price of common stock and the conversion rate on each such trading day; or
|
•
|
upon the occurrence of specified corporate events as defined in the Indenture.
|
Principal amount
|
$
|
253,000
|
|
Unamortized debt discount
|
(38,471
|
)
|
|
Net carrying value
|
$
|
214,529
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding, December 31, 2012
|
6,610
|
|
|
$
|
12.49
|
|
|
8.2
|
|
$
|
112,899
|
|
Granted
|
875
|
|
|
35.21
|
|
|
|
|
|
|||
Exercised
|
(647
|
)
|
|
6.39
|
|
|
|
|
|
|||
Forfeited
|
(180
|
)
|
|
23.85
|
|
|
|
|
|
|||
Outstanding, June 30, 2013
|
6,658
|
|
|
$
|
15.76
|
|
|
8.0
|
|
$
|
183,399
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Exercisable at June 30, 2013
|
2,932
|
|
|
$
|
8.71
|
|
|
7.2
|
|
$
|
101,430
|
|
Vested and expected to vest at June 30, 2013
|
6,552
|
|
|
15.67
|
|
|
8.0
|
|
181,041
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cost of revenue
|
$
|
472
|
|
|
$
|
520
|
|
|
$
|
900
|
|
|
$
|
1,011
|
|
Sales and marketing expense
|
1,964
|
|
|
648
|
|
|
3,648
|
|
|
1,126
|
|
||||
Research and development expense
|
428
|
|
|
196
|
|
|
751
|
|
|
340
|
|
||||
General and administrative expense
|
1,483
|
|
|
1,118
|
|
|
3,047
|
|
|
2,504
|
|
||||
Total
|
$
|
4,347
|
|
|
$
|
2,482
|
|
|
$
|
8,346
|
|
|
$
|
4,981
|
|
ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
our ability to attract new clients;
|
•
|
the timing and rate at which we enter into agreements for our solutions with new clients;
|
•
|
the timing and duration of our client implementations, which is often outside of our direct control, and our ability to provide resources for client implementations and consulting projects;
|
•
|
the extent to which our existing clients renew their subscriptions for our solutions and the timing of those renewals;
|
•
|
the extent to which our existing clients purchase additional clouds or add incremental users;
|
•
|
the extent to which our clients request enhancements to underlying features and functionality of our solutions and the timing for us to deliver the enhancements to our clients;
|
•
|
changes in the mix of our sales between new and existing clients;
|
•
|
changes to the proportion of our client base that is comprised of enterprise or mid-sized organizations;
|
•
|
seasonal factors affecting the demand for our solutions;
|
•
|
the timing of our client implementations;
|
•
|
our ability to manage growth, including in terms of new clients, additional users and new geographies;
|
•
|
the timing and success of competitive solutions offered by our competitors;
|
•
|
changes in our pricing policies and those of our competitors; and
|
•
|
general economic and market conditions.
|
•
|
Revenues.
We generally recognize subscription revenue over the contract period, and as a result of our revenue recognition policy and the seasonality of when we enter into new client agreements, revenue from client agreements signed in the current period may not be fully reflected in the current period. As a result, revenue increases period over period are primarily from contracts that existed prior to the beginning of that period.
|
•
|
Bookings
. Under our revenue recognition policy, we generally recognize subscription revenue from our client agreements ratably over the terms of those agreements. For this reason, the major portion of our revenue for a period will be from client agreements signed in prior periods rather than from new business activity during
|
•
|
Number of clients
. We believe that our ability to expand our client base is an indicator of our market penetration and the growth of our business as we continue to invest in our direct sales teams and distributors. Our client count includes contracted clients for any combination of the four integrated clouds for our core solution as of the end of the period and excludes clients of our CSB and Cornerstone for Salesforce solutions.
|
•
|
Number of users.
Since our clients generally pay fees based on the number of users of our solutions within their organizations, we believe the total number of users is an indicator of the growth of our business. Our user count includes active users for our core solution and excludes users of our CSB and Cornerstone for Salesforce solutions.
|
•
|
Subscriptions to Our Solutions.
Clients pay subscription fees for access to our solutions for a specified period of time, typically three years for our core solution or monthly, annually, or three-year periods for our CSB and Cornerstone for Salesforce solutions. Fees are based on a number of factors, including the number of users having access to a solution. We generally recognize revenue from subscriptions ratably over the term of the agreements.
|
•
|
Consulting Services.
We offer our clients assistance in implementing our solutions and optimizing their use. Consulting services include application configuration, system integration, business process re-engineering, change management and training services. Services are billed either on a time-and-material or a fixed-fee basis. These services are generally purchased as part of a subscription arrangement and are typically performed within the first several months of the arrangement. Clients may also purchase consulting services at any other time. Our consulting services are performed by us directly or by third-party service providers we engage. Clients may also choose to perform these services themselves or engage their own third-party service providers. We generally recognize revenue from fixed fee consulting services using the proportional performance method over the period the services are performed and as time is incurred for time-and-material arrangements.
|
•
|
E-learning Content.
We resell third-party on-line training content, which we refer to as e-learning content, to our clients. We also host other e-learning content provided by our clients. We generally recognize revenue from the resale of e-learning content as it is delivered and recognize revenue from hosting as the hosting services are provided.
|
•
|
Sales and Marketing.
Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing staff, including salaries, benefits, bonuses, stock-based compensation and commissions; costs of marketing and promotional events, corporate communications, online marketing, product marketing and other brand-building activities; and allocated overhead.
|
•
|
Research and Development.
Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses and stock-based compensation; the cost of certain third-party service providers; and allocated overhead. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.
|
•
|
General and Administrative.
General and administrative expenses consist primarily of personnel and related expenses for administrative, legal, finance and human resource staffs, including salaries, benefits, bonuses and stock-based compensation; professional fees; insurance premiums; other corporate expenses; and allocated overhead. We expect our general and administrative expenses to increase as we continue to expand our operations.
|
•
|
Amortization of Certain Acquired Intangible Assets.
Amortization of certain acquired intangibles consists of amortization of Sonar acquisition-related intangibles including customer relationships, non-compete agreements, patents, trade names and trademarks. We also record amortization of developed technology and software license rights in cost of revenues.
|
•
|
Interest Expense.
Interest expense consists primarily of interest expense from borrowings under our credit facility, our promissory notes and convertible debt; capital lease payments; accretion of debt discount; and amortization of debt issuance costs. We recognize accretion of debt discount and amortization of interest costs using the effective interest method. We expect our interest expense to increase significantly from accretion of debt discount, amortization of deferred financing costs and schedule interest costs as a result of our June 2013 issuance of $253 million of convertible notes.
|
•
|
Other, Net.
Other, net consists of income and expense associated with fluctuations in foreign currency exchange rates and other non-operating expenses. We expect interest income (expense) and other income (expense) to vary depending on the movement in foreign currency exchange rates and the related impact on our foreign exchange gain (loss) and the nature of various non-operating expenses.
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Revenue
|
$
|
44,346
|
|
|
$
|
26,718
|
|
|
$
|
82,003
|
|
|
$
|
50,720
|
|
Cost of revenue
|
13,164
|
|
|
7,890
|
|
|
24,416
|
|
|
14,734
|
|
||||
Gross profit
|
31,182
|
|
|
18,828
|
|
|
57,587
|
|
|
35,986
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
26,274
|
|
|
17,422
|
|
|
49,284
|
|
|
33,659
|
|
||||
Research and development
|
5,232
|
|
|
3,431
|
|
|
9,651
|
|
|
6,524
|
|
||||
General and administrative
|
7,530
|
|
|
5,792
|
|
|
16,096
|
|
|
11,746
|
|
||||
Amortization of acquired intangibles
|
251
|
|
|
237
|
|
|
502
|
|
|
237
|
|
||||
Total operating expenses
|
39,287
|
|
|
26,882
|
|
|
75,533
|
|
|
52,166
|
|
||||
Loss from operations
|
(8,105
|
)
|
|
(8,054
|
)
|
|
(17,946
|
)
|
|
(16,180
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest income (expense)
|
(505
|
)
|
|
(94
|
)
|
|
(584
|
)
|
|
(237
|
)
|
||||
Other, net
|
(209
|
)
|
|
(420
|
)
|
|
(222
|
)
|
|
(181
|
)
|
||||
Loss before income tax benefit
|
(8,819
|
)
|
|
(8,568
|
)
|
|
(18,752
|
)
|
|
(16,598
|
)
|
||||
Income tax benefit
|
136
|
|
|
334
|
|
|
135
|
|
|
252
|
|
||||
Net loss
|
$
|
(8,683
|
)
|
|
$
|
(8,234
|
)
|
|
$
|
(18,617
|
)
|
|
$
|
(16,346
|
)
|
|
At or For Three Months Ended
June 30,
|
|
At or For Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Revenue (in thousands)
|
$
|
44,346
|
|
|
$
|
26,718
|
|
|
$
|
82,003
|
|
|
$
|
50,720
|
|
Bookings (in thousands)
|
$
|
48,852
|
|
|
$
|
31,534
|
|
|
$
|
84,791
|
|
|
$
|
55,493
|
|
Number of clients
|
1,411
|
|
|
1,001
|
|
|
1,411
|
|
|
1,001
|
|
||||
Number of users (in thousands)
|
12,259
|
|
|
9,404
|
|
|
12,259
|
|
|
9,404
|
|
|
Deferred
Revenue
Balance
|
|
Three Months Ended
June 30, 2013
|
||||
Revenue
|
|
|
$
|
44,346
|
|
||
Deferred revenue at March 31, 2013
|
$
|
90,534
|
|
|
|
||
Deferred revenue at June 30, 2013
|
95,040
|
|
|
|
|||
Change in deferred revenue
|
|
|
|
4,506
|
|
||
Bookings
|
|
|
$
|
48,852
|
|
||
|
Deferred
Revenue
Balance
|
|
Three Months Ended
June 30, 2012
|
||||
Revenue
|
|
|
$
|
26,718
|
|
||
Deferred revenue at March 31, 2012
|
$
|
55,837
|
|
|
|
||
Deferred revenue at June 30, 2012
|
60,653
|
|
|
|
|||
Change in deferred revenue
|
|
|
|
4,816
|
|
||
Bookings
|
|
|
$
|
31,534
|
|
|
Deferred
Revenue
Balance
|
|
Six Months Ended
June 30, 2013
|
||||
Revenue
|
|
|
$
|
82,003
|
|
||
Deferred revenue at December 31, 2012
|
$
|
92,252
|
|
|
|
||
Deferred revenue at June 30, 2013
|
95,040
|
|
|
|
|||
Change in deferred revenue
|
|
|
2,788
|
|
|||
Bookings
|
|
|
$
|
84,791
|
|
||
|
Deferred
Revenue
Balance
|
|
Six Months Ended
June 30, 2012
|
||||
Revenue
|
|
|
$
|
50,720
|
|
||
Deferred revenue at December 31, 2011
|
$
|
55,880
|
|
|
|
||
Deferred revenue at June 30, 2012
|
60,653
|
|
|
|
|||
Change in deferred revenue
|
|
|
4,773
|
|
|||
Bookings
|
|
|
$
|
55,493
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
13,164
|
|
|
$
|
7,890
|
|
|
$
|
24,416
|
|
|
$
|
14,734
|
|
Gross profit
|
$
|
31,182
|
|
|
$
|
18,828
|
|
|
$
|
57,587
|
|
|
$
|
35,986
|
|
Gross margin
|
70
|
%
|
|
71
|
%
|
|
70
|
%
|
|
71
|
%
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Sales and marketing
|
$
|
26,274
|
|
|
$
|
17,422
|
|
|
$
|
49,284
|
|
|
$
|
33,659
|
|
Percent of revenue
|
59
|
%
|
|
65
|
%
|
|
60
|
%
|
|
66
|
%
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Research and development
|
$
|
5,232
|
|
|
$
|
3,431
|
|
|
$
|
9,651
|
|
|
$
|
6,524
|
|
Percent of revenue
|
12
|
%
|
|
13
|
%
|
|
12
|
%
|
|
13
|
%
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
General and administrative
|
$
|
7,530
|
|
|
$
|
5,792
|
|
|
$
|
16,096
|
|
|
$
|
11,746
|
|
Percent of revenue
|
17
|
%
|
|
22
|
%
|
|
20
|
%
|
|
23
|
%
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Amortization of certain acquired intangible assets
|
$
|
251
|
|
|
$
|
237
|
|
|
$
|
502
|
|
|
$
|
237
|
|
2013
|
$
|
1,134
|
|
2014
|
2,078
|
|
|
2015
|
1,840
|
|
|
2016
|
554
|
|
|
2017
|
145
|
|
|
Thereafter
|
7
|
|
|
Total
|
$
|
5,758
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Interest expense
|
$
|
(505
|
)
|
|
$
|
(94
|
)
|
|
(584
|
)
|
|
(237
|
)
|
||
Other, net
|
(209
|
)
|
|
(420
|
)
|
|
(222
|
)
|
|
(181
|
)
|
||||
Total
|
$
|
(714
|
)
|
|
$
|
(514
|
)
|
|
$
|
(806
|
)
|
|
$
|
(418
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
Net cash used in operating activities
|
$
|
(1,114
|
)
|
|
$
|
(2,360
|
)
|
Net cash used in investing activities
|
(5,791
|
)
|
|
(15,078
|
)
|
||
Net cash provided by (used in) financing activities
|
221,022
|
|
|
(884
|
)
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risks
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
•
|
the need to educate potential clients about the uses and benefits of our solutions;
|
•
|
the relatively long duration of the commitment clients make in their agreements with us;
|
•
|
the discretionary nature of potential clients’ purchasing and budget cycles and decisions;
|
•
|
the competitive nature of potential clients’ evaluation and purchasing processes;
|
•
|
evolving functionality demands of potential clients;
|
•
|
fluctuations in the talent management needs of potential clients;
|
•
|
announcements or planned introductions of new products by us or our competitors; and
|
•
|
lengthy purchasing approval processes of potential clients.
|
•
|
changes in billing cycles and the size of advance payments relative to overall contract value in client agreements;
|
•
|
the extent to which new clients are attracted to our solutions to satisfy their talent management needs;
|
•
|
the timing and rate at which we sign agreements with new clients;
|
•
|
our access to service providers when we outsource client service projects and our ability to manage the quality and completion of the related client implementations;
|
•
|
the timing and duration of our client implementations, which is often outside of our direct control, and our ability to provide resources for client implementations and consulting projects;
|
•
|
the extent to which we retain existing clients and satisfy their requirements;
|
•
|
the extent to which existing clients renew their subscriptions to our solutions and the timing of those renewals;
|
•
|
the extent to which existing clients purchase or discontinue the use of additional solutions and add or decrease the number of users;
|
•
|
the extent to which our clients request enhancements to underlying features and functionality of our solutions and the timing for us to deliver the enhancements to our clients;
|
•
|
the addition or loss of large clients, including through acquisitions or consolidations;
|
•
|
the number and size of new clients, as well as the number and size of renewal clients in a particular period;
|
•
|
the mix of clients between small, mid-sized and large organizations;
|
•
|
changes in our pricing policies or those of our competitors;
|
•
|
seasonal factors affecting demand for our solutions or potential clients’ purchasing decisions;
|
•
|
the financial condition and creditworthiness of our clients;
|
•
|
the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;
|
•
|
the timing and success of new product and service introductions by us;
|
•
|
the timing of expenses related to the development of new products and technologies, including enhancements to our solutions;
|
•
|
the timing and success of current and new competitive products and services by our competitors;
|
•
|
other changes in the competitive dynamics of our industry, including consolidation among competitors, clients or strategic partners;
|
•
|
our ability to manage our existing business and future growth, including in terms of additional clients, incremental users and new geographic regions;
|
•
|
expenses related to our data centers and the expansion of such data centers;
|
•
|
the effects of, and expenses associated with, acquisitions of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions;
|
•
|
general economic, industry and market conditions; and
|
•
|
various factors related to disruptions in our SaaS hosting network infrastructure, defects in our solutions, privacy and data security, and exchange rate fluctuations, each of which is described elsewhere in these risk factors.
|
•
|
unanticipated costs or liabilities associated with the acquisition;
|
•
|
incurrence of acquisition-related costs;
|
•
|
diversion of management’s attention from other business concerns;
|
•
|
harm to our existing relationships with distributors and clients as a result of the acquisition;
|
•
|
the potential loss of key employees;
|
•
|
the use of resources that are needed in other parts of our business; and
|
•
|
the use of substantial portions of our available cash to consummate the acquisition.
|
•
|
human error;
|
•
|
security breaches;
|
•
|
telecommunications outages from third-party providers;
|
•
|
computer viruses;
|
•
|
acts of terrorism, sabotage or other intentional acts of vandalism, including cyber attacks;
|
•
|
unforeseen interruption or damages experienced in moving hardware to a new location;
|
•
|
fire, earthquake, flood and other natural disasters; and
|
•
|
power loss.
|
•
|
lost or delayed market acceptance and sales of our solutions;
|
•
|
early termination of client agreements or loss of clients;
|
•
|
credits or refunds to clients;
|
•
|
product liability suits against us;
|
•
|
diversion of development resources;
|
•
|
injury to our reputation; and
|
•
|
increased maintenance and warranty costs.
|
•
|
unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;
|
•
|
differing labor regulations;
|
•
|
regulations relating to data security and the unauthorized use of, or access to, commercial and personal information;
|
•
|
potential penalties or other adverse consequences for violations of anti-corruption, anti-bribery and other similar laws and regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act.
|
•
|
greater difficulty in supporting and localizing our products;
|
•
|
changes in a specific country’s or region’s political or economic conditions;
|
•
|
challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, controls, policies, benefits and compliance programs;
|
•
|
limited or unfavorable intellectual property protection; and
|
•
|
restrictions on repatriation of earnings.
|
•
|
Selling to governmental entities can be more competitive, expensive and time consuming than selling to private entities;
|
•
|
Governmental entities may have significant leverage in negotiations, thereby enabling such entities to demand contract terms that differ from what we generally agree to in our standard agreements, including, for example, most favored nation clauses and terms allowing contract termination for convenience;
|
•
|
Government demand and payment for our solutions may be influenced by public sector budgetary cycles and funding authorizations, with funding reductions or delays having an adverse impact on public sector demand for our solutions; and
|
•
|
Government contracts are generally subject to audits and investigations, which we have no experience with, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
|
•
|
our operating performance and the performance of other similar companies;
|
•
|
the overall performance of the equity markets;
|
•
|
developments with respect to intellectual property rights;
|
•
|
publication of unfavorable research reports about us or our industry or withdrawal of research coverage by securities analysts;
|
•
|
speculation in the press or investment community;
|
•
|
the size of our public float;
|
•
|
natural disasters or terrorist acts;
|
•
|
announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments; and
|
•
|
global economic, legal and regulatory factors unrelated to our performance.
|
•
|
authorize “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
|
•
|
create a classified board of directors whose members serve staggered three-year terms;
|
•
|
specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of the board, the chief executive officer or the president;
|
•
|
establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
|
•
|
provide that our directors may be removed only for cause;
|
•
|
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
|
•
|
specify that no stockholder is permitted to cumulate votes at any election of directors; and
|
•
|
require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 3.
|
Defaults Upon Senior Securities
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 5.
|
Other Information
|
ITEM 6.
|
Exhibits
|
Cornerstone OnDemand, Inc.
|
(Registrant)
|
|
/s/ Adam L. Miller
|
Adam L. Miller
|
President and Chief Executive Officer
|
*
|
Indicates a management contract or compensatory plan or arrangement.
|
†
|
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Cornerstone OnDemand, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
|
††
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these sections.
|
EMPLOYEE NAME:
|
Dave Carter
|
PLAN TYPE:
|
Sales Manager
|
EFFECTIVE DATE:
|
1/1/2013
|
TERM:
|
Effective Date through 12/31/13
|
1)
|
Definitions.
|
a)
|
“
Territory
” means the territory assigned by your manager.
|
b)
|
“
Approved Contract
” means a written agreement, amendment, addendum, and/or statement of work with approved pricing between Cornerstone and a customer headquartered in the Territory for Cornerstone software and/or services, duly executed on behalf of Cornerstone by its CEO or an authorized designee during the Term.
|
c)
|
“
Phased Approved Contract
” means an Approved Contract where the start date for some of the software, recurring services, and/or users purchased when the Approved Contract was originally executed falls after Year 1 of the Approved Contract (e.g., Performance Cloud starts in Year 2; 10,000 users are committed for Years 2 and 3, but only 3,000 are committed for Year 1; etc.).
Accordingly, for Phased Approved Contracts, “Year 1” will not always coincide with Year 1 of the Approved Contract.
Example 1
: Client ABC contracts for the Learning Cloud for $100,000/year, beginning in Year 1 of the Approved Contract, and the Performance Cloud for $100,000/year, beginning in Year 2 of the Approved Contract. Here, the Learning Cloud fee is first invoiced in Year 1 of the Approved Contract, but the Performance Cloud is
first invoiced
in Year
2
of the Approved Contract.
Example 2
: Client ABC commits to 1,000 users for $40,000 in Year 1, and 1,400 users for $55,000 in Years 2 and 3. Though $40,000 is first invoiced in the first year of the Approved Contract, the incremental $15,000 is
first invoiced
in Year
2
of the Approved Contract.
|
d)
|
“
Revenue
” means the fee(s) in an Approved Contract contractually committed at the time of its execution.
|
e)
|
“
Software Revenue
” means Revenue attributable to software subscriptions, course registrations, content delivery and/or language packs.
|
f)
|
“
Service Revenue
” means Revenue attributable to: (1) professional services (i.e., implementation services, business consulting, technical consulting and educational services); (2) e-learning content sales, less royalties and/or fees for content payable to third-party content vendors; or (3) other value-add services (e.g., outsourced administration, solution optimization, and premier support).
|
g)
|
“
Recurring Service Revenue
” means Service Revenue which is charged on an annually recurring basis.
|
h)
|
“
One-time Service Revenue
” means Service Revenue which is not charged on an annually recurring basis.
|
i)
|
“
Year
” means, with respect to a given Revenue stream (i.e., Revenue for Learning), the later of: (i) the year to which the Revenue is attributable; and (ii) the year in which the Revenue is invoiced.
|
j)
|
“
Commission Month
” means, with respect to an Approved Contract, one calendar month following the month in which the Approved Contract was executed.
|
k)
|
“
Contingency
” means, with respect to an Approved Contract: (i) a material customization (e.g., product enhancement, etc.) which may impair or delay revenue recognition; (ii) a customer right to terminate the Approved Contract for convenience and/or a failure to deliver a material customization.
|
l)
|
“
Commission
” means incentive compensation relating to procurement of an Approved Contract, calculated as a percentage of applicable Revenue.
|
m)
|
“
Quota
” means the following amount of combined Year 1 Software Revenue and Service Revenue across all Approved Contracts procured by you and/or your team:
|
2)
|
Earned Commissions
.
|
a.
|
There is a valid Approved Contract in place.
|
b.
|
Any and all Contingencies affecting the period(s) for which you are claiming a Commission have cleared, unless Cornerstone in its sole discretion has waived this requirement for the particular Approved Contract.
|
c.
|
You and/or a member of your team were primarily responsible for procuring the Approved Contract covering the period(s) for which you are claiming a Commission (i.e., if you procured an Approved Contract for one year, but were not responsible for procuring renewal of that Approved Contract, you will not be eligible for Commissions for any renewal periods).
|
d.
|
You are employed by Cornerstone on the Payment Date (defined below) or applicable Payment Date anniversary.
|
3)
|
Payment of Commissions
.
|
4)
|
Commission Rates
.
|
a)
|
Regular Commission Rates
. Regular Commissions are as follows:
|
i)
|
One-time Service Revenue:
0.5%
|
ii)
|
Recurring Service Revenue:
|
iii)
|
Software Revenue:
|
b)
|
Accelerated Commission Rates
. Accelerated Commissions will apply to Team Approved Contract amounts exceeding one hundred percent (100%) of your total Quota in all categories during the Term. For the categories listed below, accelerated Commissions replace regular Commissions. Accelerated Commissions are as follows:
|
i)
|
One-time Service Revenue:
1%
|
ii)
|
Year 1 Recurring Service Revenue:
1%
|
iii)
|
Year 1 Software Revenue:
1.2%
|
5)
|
Bonus
.
|
If you achieve the following Quota milestone by the following date:
|
You will be eligible for a bonus of:
|
$5,000
|
|
$23,490,000 by June 30, 2013
|
$5,000
|
$37,120,000 by September 30, 2013
|
$5,000
|
$57,000,000 by December 31, 2013
|
$5,000
|
6)
|
Termination of Your Employment
.
|
a)
|
If you are an at-will employee, nothing contained in this document in any way changes or limits the “at-will” nature of the employment relationship between Cornerstone and you.
|
b)
|
In the event that your employment with Cornerstone terminates, you will only be paid for Earned Commissions on or prior to the date of your termination or transfer.
|
7)
|
Miscellaneous
.
|
a)
|
Nothing in this document obligates Cornerstone to enter into any Approved Contracts or other agreements with any customer or otherwise.
|
b)
|
You are expected to follow the official Cornerstone pricing guidelines, which are subject to change from time to time at Cornerstone's sole discretion.
|
c)
|
The Plan supersedes any prior written or verbal discussions, agreements or understandings with respect to the bonuses, commissions and similar items of compensation for sales made during the Term.
|
d)
|
In the event that any provision or any portion of any provision hereof becomes or is declared by a court or administrative agency of competent jurisdiction to be illegal, unenforceable, or void, this Plan shall continue in full force and effect without said provision or portion of provision.
|
e)
|
The law governing the Plan, as well as venue for any action, shall be the state where the employee is employed.
|
f)
|
Notwithstanding anything to the contrary herein, all calculations regarding Quota, Revenue and Commissions are subject at all times to applicable conflict, teaming, and referral rules, which shall be made available to you online (link to be provided).
|
EMPLOYEE NAME:
|
Vincent Belliveau
|
PLAN TYPE:
|
Sales Manager
|
EFFECTIVE DATE:
|
1/1/2013
|
TERM:
|
Effective Date through 12/31/13
|
1)
|
Definitions.
|
a)
|
“
Portfolio
” or “
Territory
” means the territory and/or accounts assigned to you by your manager.
|
b)
|
“
Contract
” means a written agreement, amendment, addendum, and/or statement of work with approved pricing between Cornerstone and a customer in your Portfolio for Cornerstone software and/or services, duly executed on behalf of Cornerstone by its CEO or an authorized designee.
|
c)
|
“
Approved Contract
” means a Contract executed during the Term.
|
d)
|
“
Prior Contract
” means a Contract, including any applicable amendments and addenda thereto, executed prior to the Term and renewed by an Approved Contract.
|
e)
|
“
Phased Approved Contract
” means an Approved Contract where the start date for some of the software, recurring services, and/or users purchased when the Approved Contract was originally executed falls after Year 1 of the Approved Contract (e.g., Performance Cloud starts in Year 2; 10,000 users are committed for Years 2 and 3, but only 3,000 are committed for Year 1; etc.).
Accordingly, for Phased Approved Contracts, “Year 1” will not always coincide with Year 1 of the Approved Contract.
Example 1
: Client ABC contracts for the Learning Cloud for €100,000/year, beginning in Year 1 of the Approved Contract, and the Performance Cloud for €100,000/year, beginning in Year 2 of the Approved Contract. Here, the Learning Cloud fee is first invoiced in Year 1 of the Approved Contract, but the Performance Cloud is
first invoiced
in Year
2
of the Approved Contract.
Example 2
: Client ABC commits to 1,000 users for €40,000 in Year 1, and 1,400 users for €55,000 in Years 2 and 3. Though €40,000 is first invoiced in the first year of the Approved Contract, the incremental €15,000 is
first invoiced
in Year
2
of the Approved Contract.
|
f)
|
“
Revenue
” means the fee(s) in an Approved Contract contractually committed at the time of its execution.
|
g)
|
“
Software Revenue
” means Revenue attributable to software subscriptions, course registrations, content delivery and/or language packs.
|
h)
|
“
Service Revenue
” means Revenue attributable to: (1) professional services (i.e., implementation services, business consulting, technical consulting and educational services); (2) e-learning content sales, less royalties and/or fees for content payable to third-party content vendors; or (3) other value-add services (e.g., outsourced administration, solution optimization, and premier support).
|
i)
|
“
Recurring Service Revenue
” means Service Revenue which is charged on an annually recurring basis.
|
j)
|
“
One-time Service Revenue
” means Service Revenue which is not charged on an annually recurring basis.
|
a)
|
“
Annual Contract Value
” of a Contract means all Revenue (except One-time Service Revenue), divided by the term (in years or partial years).
|
b)
|
“
Baseline Revenue
” of an Approved Contract means an amount equal to the Annual Contract Value (or, in the case of e-learning content sales, the Content Value) of the corresponding Prior Contract. Where there is no Prior Contract, Baseline Revenue is zero.
|
c)
|
“
Incremental Revenue
” of an Approved Contract means its Annual Contract Value minus Baseline Revenue.
|
d)
|
“
Year
” means, with respect to a given Revenue stream (i.e., Revenue for Learning), the later of: (i) the year to which the Revenue is attributable; and (ii) the year in which the Revenue is invoiced.
|
e)
|
“
Commission Month
” means, with respect to an Approved Contract, one calendar month following the month in which the Approved Contract was executed.
|
f)
|
“
Contingency
” means, with respect to an Approved Contract: (i) a material customization (e.g., product enhancement, etc.) which may impair or delay revenue recognition; (ii) a customer right to terminate the Approved Contract for convenience and/or a failure to deliver a material customization.
|
g)
|
“
Commission
” means incentive compensation relating to procurement of an Approved Contract, calculated as a percentage of applicable Revenue.
|
h)
|
“
Quota
” means the following amount of combined Year 1 Software Revenue and Service Revenue across all Approved Contracts, excluding Baseline Revenue, procured by you and/or your team:
|
2)
|
Earned Commissions
.
|
a)
|
There is a valid Approved Contract in place.
|
b)
|
Any and all Contingencies affecting the period(s) for which you are claiming a Commission have cleared, unless Cornerstone in its sole discretion has waived this requirement for the particular Approved Contract.
|
c)
|
You and/or a member of your team were primarily responsible for procuring the Approved Contract covering the period(s) for which you are claiming a Commission (i.e., if you procured an Approved Contract for one year, but were not responsible for procuring renewal of that Approved Contract, you will not be eligible for Commissions for any renewal periods).
|
d)
|
You are employed by Cornerstone on the Payment Date (defined below) or applicable Payment Date anniversary.
|
3)
|
Payment of Commissions
.
|
4)
|
Commission Rates
.
|
a)
|
Regular Commission Rates
. Regular Commissions are as follows:
|
i)
|
One-time Service Revenue:
0.6%
|
ii)
|
Recurring Service Revenue:
|
If the initial term of the Approved Contract is:
|
For a given Recurring Service Revenue amount, your Commission for:
|
|||||
Year 1
|
Year 2
|
Year 3, 4*, and 5*
|
||||
Incremental Revenue is:
|
Baseline Revenue is:
|
Incremental Revenue is:
|
Baseline Revenue is:
|
Incremental Revenue is:
|
Baseline Revenue is:
|
|
3+ years
|
0.6%
|
0.2%
|
0.4%
|
0.125%
|
0.3%
|
0.075%
|
Less than 3 years
|
0.6%
|
0.125%
|
0.4%
|
0.075%
|
0.3%
|
0.05%
|
iii)
|
Software Revenue:
|
If the initial term of the Approved Contract is:
|
For a given Software Revenue amount, your Commission for:
|
|||||
Year 1
|
Year 2
|
Year 3, 4*, and 5*
|
||||
Incremental Revenue is:
|
Baseline Revenue is:
|
Incremental Revenue is:
|
Baseline Revenue is:
|
Incremental Revenue is:
|
Baseline Revenue is:
|
|
3+ years
|
1.25%
|
0.5%
|
0.82%
|
0.275%
|
0.625%
|
0.175%
|
Less than 3 years
|
1.25%
|
0.275%
|
0.82%
|
0.175%
|
0.625%
|
0.1%
|
b)
|
Accelerated Commission Rates
. Accelerated Commissions will apply to Team Approved Contract amounts exceeding one hundred percent (100%) of your total Quota in all categories during the Term. For the categories listed below, accelerated Commissions replace regular Commissions. Accelerated Commissions are as follows:
|
i)
|
One-time Service Revenue:
0.9%
|
ii)
|
Year 1 Recurring Service Revenue:
0.9%
|
iii)
|
Year 1 Software Revenue:
1.875%
|
5)
|
Bonus
.
|
If you achieve the following Quota milestone by the following date:
|
You will be eligible for a bonus of:
|
$12,150,000 by June 30, 2013
|
10,000
|
$19,200,000 by September 30, 2013
|
5,000
|
$30,000,000 by December 31, 2013
|
5,000
|
6)
|
Termination of Your Employment
.
|
a)
|
If you are an at-will employee, nothing contained in this document in any way changes or limits the “at-will” nature of the employment relationship between Cornerstone and you.
|
b)
|
In the event that your employment with Cornerstone terminates, you will only be paid for Earned Commissions on or prior to the date of your termination or transfer.
|
7)
|
Miscellaneous
.
|
a)
|
Nothing in this document obligates Cornerstone to enter into any Approved Contracts or other agreements with any customer or otherwise.
|
b)
|
You are expected to follow the official Cornerstone pricing guidelines, which are subject to change from time to time at Cornerstone's sole discretion.
|
c)
|
The Plan supersedes any prior written or verbal discussions, agreements or understandings with respect to the bonuses, commissions and similar items of compensation for sales made during the Term.
|
d)
|
In the event that any provision or any portion of any provision hereof becomes or is declared by a court or administrative agency of competent jurisdiction to be illegal, unenforceable, or void, this Plan shall continue in full force and effect without said provision or portion of provision.
|
e)
|
The law governing the Plan, as well as venue for any action, shall be the state where the employee is employed.
|
f)
|
Notwithstanding anything to the contrary herein, all calculations regarding Quota, Revenue and Commissions are subject at all times to applicable conflict, teaming, and referral rules, which shall be made available to you online (link to be provided).
|
(b)
|
Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executive's own choice or has elected not to retain legal counsel;
|
(c)
|
Executive understands the terms and consequences of this Agreement and of the releases it contains; and
|
EXECUTIVE
|
[_________], an individual
|
1.
|
|
I have reviewed this Quarterly Report on Form 10-Q of Cornerstone OnDemand, Inc.;
|
2.
|
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Adam L. Miller
|
Adam L. Miller
|
President and Chief Executive Officer
|
1.
|
|
I have reviewed this Quarterly Report on Form 10-Q of Cornerstone OnDemand, Inc.;
|
2.
|
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Perry A. Wallack
|
Perry A. Wallack
|
Chief Financial Officer
|
/s/ Adam L. Miller
|
Adam L. Miller
|
President and Chief Executive Officer
|
/s/ Perry A. Wallack
|
Perry A. Wallack
|
Chief Financial Officer
|