ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-4068197
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.0001 per share
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Nasdaq Stock Market LLC
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(Nasdaq Global Select Market)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Page No.
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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Item 1.
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Business
|
•
|
Our Recruiting suite helps organizations to attract, hire, and onboard the right employees;
|
•
|
Our Learning suite provides robust, modern learning management software designed to scale with the organization. Cornerstone Learning comprehensively supports compliance, knowledge sharing, and employee-driven development training to close skills gaps. Our content offering delivers fresh, modern content, fueling employee curiosity and inspiring growth;
|
•
|
Our Performance suite provides tools to manage goal setting, performance reviews, competency assessments, development plans, continuous feedback, compensation management and succession planning; and
|
•
|
Our HR suite provides an aggregated view of all employee data with workforce planning, self-service management, and compliance reporting capabilities resulting in more accurate data.
|
•
|
Comprehensive Functionality.
Our platform provides a comprehensive approach to human capital management by offering products to address all stages of the employee lifecycle: recruiting, onboarding, learning, performance, succession, compensation, enterprise social collaboration and HR administration processes. Employees use our platform throughout their careers to engage in performance processes such as goal management, performance reviews, continuous feedback, competency assessments and compensatory reviews; to complete job-specific and compliance-related training; to evaluate potential career changes, development plans or succession processes; and to connect and collaborate with co-workers by leveraging enterprise social networking tools. Employee managers and HR managers use our platform to perform their human capital administrative responsibilities effectively throughout their employees’ careers. We believe our comprehensive, unified platform enables our clients to align their human capital management processes and practices with their broader strategic goals.
|
•
|
Flexible and Highly Configurable.
Our platform offers substantial configurability that allows our clients to match the use of our software with their specific business processes and workflows. We also provide web services to facilitate the importing and exporting of data to and from other client systems, such as enterprise resource planning and human resource information system platforms. Our clients can configure various features, functions and work flows in our platform by business unit, division, department, region, location, job position, pay grade, cost center, or self-defined organizational unit. Our clients are able to adjust features to configure specific processes, such as performance review workflows or training approvals, to match their existing or desired practices. This high level of configurability means that custom coding projects generally are not required to meet the diverse needs of our clients.
|
•
|
Easy-to-Use, Personalized User Interface.
Our platform employs an intuitive user interface and may be personalized for the end user, typically based on position, division, pay grade, location, manager and particular use of the solution. This ease of use limits the need for end-user training, which we believe increases user adoption rates and usage.
|
•
|
Software-as-a-Service Solution Lowers the Total Cost of Ownership and Speeds Delivery.
Our platform is accessible through a standard web browser and does not require the large investments in implementation time, personnel, hardware and consulting that are typical of hosted or on-premise solutions. With a single code base to maintain, we are able to release improved functionality on a quarterly basis. This is a more rapid pace than most hosted or on-premise solution providers can afford to deliver.
|
•
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Scalable to Meet the Needs of Organizations.
Our platform has been used by Fortune 100 companies since 2001. While the complex needs of these global corporations required us to build a solution that can scale to support large, geographically-distributed employee bases, our platform is capable of supporting deployments of various sizes. Today we service 40 multi-national corporations with over 150,000 active users each. Our largest deployment is for over 600,000 users.
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•
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Insights and Predictive Analysis.
Our platform leverages technology powered by a highly refined machine learning system for human capital management. We also offer a large network of shared talent data. This enables leaders to answer critical questions about how to better hire, manage, retain, and reward talent with dashboards that can be drilled down to individual employees. Enhanced by additional Cornerstone suite usage, these insights allow organizations to manage their human capital proactively and be strategic with initiatives that affect thousands of employees across many groups and locations.
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•
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Continued Innovation through Collaborative Product Development.
We work collaboratively with our clients on an ongoing basis to develop almost every part of our platform. The vast majority of our thousands of software features were designed using feedback from existing and prospective clients based on their specific functional requests.
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•
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Focus on Data Privacy.
We have designed our platform to meet certain rigorous industry and jurisdictional security standards and to help assure clients that their sensitive data is protected across the system. We ensure high levels of security by logically segregating each client’s data from the data of other clients and by enforcing a consistent approach to roles and rights within the system. These restrictions limit system access to only those individuals authorized by our clients. We also employ multiple standard technologies, protocols and processes to monitor, test and certify the security of our infrastructure continuously.
|
•
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Focus on Client Success, Retention and Growth.
We believe focusing on our clients’ success will lead to our own success. We have developed a Client Success Framework that governs our operating model. Since 2002, we have averaged annual gross dollar retention rates of approximately
95%
. We strive to maintain our strong retention rates by continuing to provide our clients with high levels of service, support and increasing functionality.
|
•
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Sell Additional Products to Existing Clients.
We believe there is a significant growth opportunity in selling additional functionality to our existing clients. Many clients have added functionality subsequent to their initial deployments as they recognize the benefits of our unified platform. As a result, approximately
71%
of our clients today utilize two or more products and approximately
41%
utilize three or more products. With our expanding product portfolio functionality, we believe significant upsell opportunity remains within our existing client base.
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•
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Invest in Direct Sales in North America.
We believe that the market for human capital management is large and remains significantly underpenetrated. In particular, Recruiting and Content provide an opportunity to increase our recurring sales to both new and existing clients. Additionally, we believe the Small and Medium-sized Business (SMB) market represents a very large and underpenetrated opportunity.
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•
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Significantly Grow Our International Operation.
We believe a substantial opportunity exists to continue to grow sales of our platform internationally. We intend to grow our Europe, Middle-East and Africa ("EMEA") and Asia-Pacific and Japan ("APJ") operations. As of
December 31, 2018
, we had
827
clients in EMEA and
198
clients in APJ.
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•
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Grow Our Cornerstone Content Anytime Sales.
We believe there is a significant market opportunity for developing employees throughout their careers with modern, fresh e-learning content. Our Content Anytime subscription offering provides access to industry leading content which we believe will increase user engagement on our platform. Our content partners for Content Anytime include industry leaders as well as regional, functional and vertically-focused online training providers. In addition, we have agreements with providers of specific competency models for use by our clients directly in our human capital management platform. We intend to enter into additional license agreements to continue providing the best content available for our clients.
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•
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Expand the Ecosystem.
During 2018, we migrated a sizable portion of our implementation services to our partners. We have also expanded in recent years our relationships with various third-party consulting firms to deliver the successful implementation of our platform and to optimize our clients’ use of our platform during the terms of their engagements. Our partner strategy and experience includes certifications and curricula developed to ensure successful delivery by our partners and continued high client satisfaction. We believe we have a significant opportunity to leverage these third-parties interested in building or expanding their businesses to increase our market penetration.
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•
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Client Executives who interact with executive-level sponsors and human resources executives at a client and are focused on the overall relationship, including sales to existing clients;
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•
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Client Success Managers who work directly with executive-level sponsors and human resources executives at our clients to maximize the value of their investment in our human capital management platform; and
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•
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Product Specialists who interact with client administrators and are focused on features and functions of our human capital management platform.
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•
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Demand Generation.
Our demand generation activities include lead generation through email and direct mail campaigns, participation in industry events, securing event speaking opportunities and online marketing, including both SEM and organic SEO online marketing.
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•
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Corporate Marketing.
We market to our clients by leveraging product marketing, client success stories, thought leadership content and brand awareness advertising campaigns. Additionally, we host regional client user group meetings and we also co-market with our strategic distributors, including joint press announcements and demand generation activities.
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•
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Marketing Communications.
We undertake media relations, corporate communications, industry analyst relations activities, client advocacy and social media outreach.
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•
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the level of integration of our product offerings within our human capital management platform;
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•
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the breadth and depth of our product functionality;
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•
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the flexibility and configurability of our product offerings to meet the changing content and workflow requirements of our clients’ business units;
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•
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the quality of our service and focus on client success;
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•
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our ability to provide scalability and flexibility for large and complex global deployments; and
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•
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the ease of use of our product offerings and overall user experience.
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•
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changes in billing terms and collection cycles in client agreements;
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•
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the extent to which new clients are attracted to our products to satisfy their human capital management needs;
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•
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the timing and rate at which we sign agreements with new clients;
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•
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our access to service providers and partners when we outsource client service projects;
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•
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our ability to manage the quality and completion of the client implementations performed by partners;
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•
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the timing and duration of our client implementations, which is often outside of our direct control;
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•
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our ability to provide, or partner with effective partners to provide, resources for client implementations and consulting projects;
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•
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the extent to which we retain existing clients and satisfy their requirements;
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•
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the extent to which existing clients renew their subscriptions to our products and the timing of those renewals;
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•
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the extent to which existing clients purchase or discontinue the use of additional products and add or decrease the number of users;
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•
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the extent to which our clients request enhancements to underlying features and functionality of our products and the timing of our delivery of these enhancements to our clients;
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•
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the addition or loss of large clients, including through acquisitions or consolidations;
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•
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the number and size of new clients, as well as the number and size of renewal clients in a particular period;
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•
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the mix of clients among large, mid-sized and small organizations;
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•
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changes in our pricing policies or those of our competitors;
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•
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seasonal factors affecting demand for our products or potential clients’ purchasing decisions;
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•
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the financial condition and creditworthiness of our clients;
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•
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the amount and timing of our operating expenses, including those related to the maintenance, expansion and restructuring of our business, operations and infrastructure;
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•
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changes in the operational efficiency of our business;
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•
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the timing and success of our new product and service introductions;
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•
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the timing of expenses of the development of new products and technologies, including enhancements to our products;
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•
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our ability to exploit Big Data to drive increased demand for our products;
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•
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continued strong demand for human capital management in the U.S. and globally;
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•
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our ability to successfully integrate our operations with those of recently acquired privately-held companies;
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•
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the success of current and new competitive products and services by our competitors;
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•
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other changes in the competitive dynamics of our industry, including consolidation among competitors, clients or strategic partners;
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•
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our ability to manage our existing business and future growth, including in terms of additional headcount, additional clients, incremental users and new geographic regions;
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•
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expenses related to our network and data centers and the expansion of such networks and data centers;
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•
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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;
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•
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equity issuances, including as consideration in acquisitions or due to the conversion of our outstanding convertible notes due 2021;
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•
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business disruptions, costs and future events related to shareholder activism;
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legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products;
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fluctuations in foreign currency exchange rates, including any fluctuation caused by uncertainties relating to the United Kingdom's vote in favor of exiting the European Union (often referred to as “Brexit”);
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•
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general economic, industry and market conditions; and
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•
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various factors related to disruptions in our SaaS hosting network infrastructure, defects in our products, privacy and data security and exchange rate fluctuations, each of which is described elsewhere in these risk factors.
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•
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human error;
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•
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security breaches;
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•
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telecommunications outages from third-party providers;
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•
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computer viruses;
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•
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acts of terrorism, sabotage or other intentional acts of vandalism, including cyber attacks;
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•
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unforeseen interruption or damages experienced in moving hardware to a new location;
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•
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fire, earthquake, flood and other natural disasters; and
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•
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power loss.
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•
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lost or delayed market acceptance and sales of our products;
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•
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early termination of client agreements or loss of clients;
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credits or refunds to clients;
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•
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product liability suits against us;
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diversion of development resources;
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injury to our reputation; and
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•
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increased maintenance and warranty costs.
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•
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the need to educate potential clients about the uses and benefits of our products;
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the relatively long duration of the commitment clients make in their agreements with us;
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•
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the discretionary nature of potential clients’ purchasing and budget cycles and decisions;
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the competitive nature of potential clients’ evaluation and purchasing processes;
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•
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the lengthy purchasing approval processes of potential clients;
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the evolving functionality demands of potential clients;
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fluctuations in the human capital management needs of potential clients; and
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announcements or planned introductions of new products by us or our competitors.
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unanticipated costs or liabilities associated with the acquisition;
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incurrence of acquisition-related costs;
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•
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diversion of management’s attention from other business concerns;
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•
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harm to our existing relationships with partners, distributors and clients, including as a result of competing in the markets in which such parties operate;
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the potential loss of key employees and clients;
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exposure to claims and disputes by third parties, including intellectual property claims and disputes;
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•
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the use of resources that are needed in other parts of our business; and
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•
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the use of substantial portions of our available cash to consummate the acquisition.
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•
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unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;
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differing labor regulations;
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regulations relating to data security and the unauthorized use of, or access to, commercial and personal information;
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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;
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greater difficulty in supporting and localizing our products;
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unrest and/or changes in a specific country’s or region’s social, political, legal or economic conditions;
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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;
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currency exchange rate fluctuations, including any fluctuations caused by uncertainties relating to Brexit;
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limited or unfavorable intellectual property protection; and
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restrictions on repatriation of earnings.
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•
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Selling to governmental entities can be more competitive, expensive and time-consuming than selling to private entities, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale;
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Government certification requirements may change, or we may lose one or more government certifications, such as FedRAMP, and in doing so restrict our ability to sell into the government sector until we have attained revised certificates;
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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;
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Government demand and payment for our products 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 products; and
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Government contracts are generally subject to audits and investigations, which we have limited experience with, potentially resulting in 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.
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•
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our operating performance and the performance of other similar companies;
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the financial or non-financial metric projections we provide to the public, including the failure of the projections to meet the expectations of securities analysts or investors, and any changes in these projections or our failure to meet or exceed these projections;
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the overall performance of the equity markets;
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developments with respect to intellectual property rights;
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publication of unfavorable research reports about us or our industry or withdrawal of research coverage by securities analysts;
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speculation in the press or investment community;
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the size of our public float;
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natural disasters or terrorist acts;
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actual or perceived data security incidents that we or our service providers may suffer;
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announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments; and
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global economic, legal and regulatory factors unrelated to our performance.
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•
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authorize “blank check” preferred stock, which could be issued by the board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
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create a classified board of directors whose members serve staggered three-year terms, until the 2021 annual meeting of stockholders, at which point all directors will be elected for a one-year term;
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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;
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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;
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provide that our directors may be removed only for cause until the 2021 annual meeting of stockholders when all directors may be removed either with or without cause;
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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;
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specify that no stockholder is permitted to cumulate votes at any election of directors; and
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require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosure
|
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
Fiscal 2018
|
|
Fiscal 2017
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
First quarter
|
$
|
45.66
|
|
|
$
|
35.09
|
|
|
$
|
43.75
|
|
|
$
|
38.36
|
|
Second quarter
|
53.18
|
|
|
38.79
|
|
|
39.51
|
|
|
35.31
|
|
||||
Third quarter
|
58.18
|
|
|
47.97
|
|
|
41.14
|
|
|
33.82
|
|
||||
Fourth quarter
|
55.65
|
|
|
46.17
|
|
|
40.90
|
|
|
34.17
|
|
|
December
31, 2013 |
|
December
31, 2014 |
|
December
31, 2015 |
|
December
31, 2016 |
|
December
31, 2017 |
|
December
31, 2018
|
||||||||||||
Cornerstone OnDemand
|
$
|
100.00
|
|
|
$
|
66.03
|
|
|
$
|
64.77
|
|
|
$
|
79.37
|
|
|
$
|
66.27
|
|
|
$
|
94.60
|
|
Nasdaq Global Market Index
|
$
|
100.00
|
|
|
$
|
106.01
|
|
|
$
|
106.00
|
|
|
$
|
101.91
|
|
|
$
|
127.16
|
|
|
$
|
118.96
|
|
Nasdaq Computer & Data Processing Index
|
$
|
100.00
|
|
|
$
|
119.88
|
|
|
$
|
127.36
|
|
|
$
|
142.99
|
|
|
$
|
198.42
|
|
|
$
|
191.11
|
|
|
Total Number of Shares Repurchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (1)
|
||||||
January 1-31, 2018
|
219
|
|
|
$
|
36.53
|
|
|
219
|
|
|
$
|
69,413
|
|
February 1-28, 2018
|
161
|
|
|
38.93
|
|
|
161
|
|
|
63,138
|
|
||
March 1-31, 2018
|
44
|
|
|
40.32
|
|
|
44
|
|
|
61,376
|
|
||
April 1-30, 2018
|
100
|
|
|
39.67
|
|
|
100
|
|
|
57,389
|
|
||
May 1-31, 2018
|
212
|
|
|
48.46
|
|
|
212
|
|
|
47,113
|
|
||
June 1-30, 2018
|
131
|
|
|
49.11
|
|
|
131
|
|
|
40,658
|
|
||
July 1-31, 2018
|
43
|
|
|
47.15
|
|
|
43
|
|
|
38,648
|
|
||
August 1-31, 2018
|
216
|
|
|
54.78
|
|
|
216
|
|
|
26,818
|
|
||
September 1-30, 2018
|
41
|
|
|
55.71
|
|
|
41
|
|
|
24,515
|
|
||
October 1-31, 2018
|
307
|
|
|
51.62
|
|
|
307
|
|
|
8,648
|
|
||
November 1-30, 2018
|
177
|
|
|
48.81
|
|
|
177
|
|
|
—
|
|
||
December 1-31, 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
|
1,651
|
|
|
$
|
46.85
|
|
|
1,651
|
|
|
|
|
(1
|
)
|
In November 2017, our board of directors authorized a $100.0 million share repurchase program of our common stock. The share repurchase program was completed as of December 31, 2018.
|
Item 6.
|
Selected Financial Data
|
|
Years Ended December 31,
|
||||||||||||||||||
|
2018 *
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
|
$
|
339,651
|
|
|
$
|
263,568
|
|
Cost of revenue
|
144,349
|
|
|
142,867
|
|
|
135,752
|
|
|
109,864
|
|
|
77,684
|
|
|||||
Gross profit
|
393,542
|
|
|
339,118
|
|
|
287,372
|
|
|
229,787
|
|
|
185,884
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales and marketing
|
224,635
|
|
|
240,271
|
|
|
225,781
|
|
|
207,626
|
|
|
163,380
|
|
|||||
Research and development
|
76,981
|
|
|
61,975
|
|
|
46,977
|
|
|
40,991
|
|
|
30,618
|
|
|||||
General and administrative
|
90,749
|
|
|
84,589
|
|
|
70,956
|
|
|
49,877
|
|
|
41,802
|
|
|||||
Restructuring
|
8,946
|
|
|
1,539
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total operating expenses
|
401,311
|
|
|
388,374
|
|
|
343,714
|
|
|
298,494
|
|
|
235,800
|
|
|||||
Loss from operations
|
(7,769
|
)
|
|
(49,256
|
)
|
|
(56,342
|
)
|
|
(68,707
|
)
|
|
(49,916
|
)
|
|||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income (expense) and other income (expense), net
|
(23,478
|
)
|
|
(10,333
|
)
|
|
(9,288
|
)
|
|
(15,628
|
)
|
|
(14,128
|
)
|
|||||
Loss before provision for income taxes
|
(31,247
|
)
|
|
(59,589
|
)
|
|
(65,630
|
)
|
|
(84,335
|
)
|
|
(64,044
|
)
|
|||||
Income tax (provision)
|
(2,595
|
)
|
|
(1,746
|
)
|
|
(1,207
|
)
|
|
(1,181
|
)
|
|
(855
|
)
|
|||||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
|
$
|
(85,516
|
)
|
|
$
|
(64,899
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.58
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.20
|
)
|
|
$
|
(1.58
|
)
|
|
$
|
(1.22
|
)
|
Weighted average common shares outstanding, basic and diluted
|
58,159
|
|
|
57,262
|
|
|
55,595
|
|
|
54,171
|
|
|
53,267
|
|
|
At December 31,
|
||||||||||||||||||
|
2018 *
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
183,596
|
|
|
$
|
393,576
|
|
|
$
|
83,300
|
|
|
$
|
107,691
|
|
|
$
|
166,557
|
|
Short-term and long-term investments
|
205,982
|
|
|
266,500
|
|
|
259,837
|
|
|
201,088
|
|
|
170,044
|
|
|||||
Property and equipment, net
|
77,254
|
|
|
20,817
|
|
|
23,962
|
|
|
27,021
|
|
|
21,424
|
|
|||||
Working capital, excluding deferred revenue, current portion
1
|
485,138
|
|
|
449,874
|
|
|
419,408
|
|
|
334,664
|
|
|
356,553
|
|
|||||
Total assets
|
807,156
|
|
|
967,190
|
|
|
623,629
|
|
|
561,545
|
|
|
505,655
|
|
|||||
Deferred revenue, current and non-current portion
|
325,801
|
|
|
326,163
|
|
|
282,332
|
|
|
252,139
|
|
|
191,336
|
|
|||||
Debt, current portion and non-current portion
|
288,967
|
|
|
533,193
|
|
|
238,432
|
|
|
232,583
|
|
|
225,445
|
|
|||||
Capital lease obligations, current portion and non-current portion
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
236
|
|
|||||
Facility financing obligation, current portion and non-current portion
|
46,100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total stockholders’ equity
|
55,907
|
|
|
22,120
|
|
|
26,963
|
|
|
7,822
|
|
|
35,502
|
|
1
|
|
Working capital is defined as total current assets minus total current liabilities.
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Our Recruiting suite helps organizations to attract, hire, and onboard the right employees;
|
•
|
Our Learning suite provides robust, modern learning management software designed to scale with the organization. Cornerstone Learning comprehensively supports compliance, knowledge sharing, and employee-driven development training to close skills gaps. Our content offering delivers fresh, modern content, fueling employee curiosity and inspiring growth;
|
•
|
Our Performance suite provides tools to manage goal setting, performance reviews, competency assessments, development plans, continuous feedback, compensation management and succession planning; and
|
•
|
Our HR suite provides an aggregated view of all employee data with workforce planning, self-service management, and compliance reporting capabilities resulting in more accurate data.
|
•
|
Focus on Client Success, Retention and Growth.
We believe focusing on our clients’ success will lead to our own success. We have developed a Client Success Framework that governs our operating model. Since 2002, we have averaged annual gross dollar retention rates of approximately
95%
. We strive to maintain our strong retention rates by continuing to provide our clients with high levels of service, support and increasing functionality.
|
•
|
Sell Additional Products to Existing Clients.
We believe there is a significant growth opportunity in selling additional functionality to our existing clients. Many clients have added functionality subsequent to their initial deployments as they recognize the benefits of our unified platform. As a result, approximately
71%
of our clients today utilize two or more products and approximately
41%
utilize three or more products. With our expanding product portfolio functionality, we believe significant upsell opportunity remains within our existing client base.
|
•
|
Invest in Direct Sales in North America.
We believe that the market for human capital management is large and remains significantly underpenetrated. In particular, Recruiting and Content provides an opportunity to increase our recurring sales to both new and existing clients. Additionally, the Small and Medium-sized Business (SMB) market represent a very large and underpenetrated opportunity.
|
•
|
Significantly Grow Our International Operation.
We believe a substantial opportunity exists to continue to grow sales of our platform internationally. We intend to grow our Europe, Middle-East and Africa ("EMEA") and Asia-Pacific and Japan ("APJ") operations. As of
December 31, 2018
, we had
827
clients in EMEA and
198
clients in APJ.
|
•
|
Grow Our Cornerstone Content Anytime Sales.
We believe there is a significant market opportunity for developing employees throughout their careers with modern, fresh e-learning content. Our Content Anytime subscription offering provides access to industry leading content which we believe will increase user engagement on our platform. Our content partners for Content Anytime include industry leaders as well as regional, functional and vertically-focused online training providers. In addition, we have agreements with providers of specific competency models for use by our clients directly in our human capital management platform. We intend to enter into additional license agreements to continue providing the best content available for our clients.
|
•
|
Expand the Ecosystem.
During 2018, we migrated a sizable portion of our implementation services to our partners. We have also expanded in recent years our relationships with various third-party consulting firms to deliver the successful implementation of our platform and to optimize our clients’ use of our platform during the terms of their engagements. Our partner strategy and experience includes certifications and curricula developed to ensure successful delivery by our partners and continued high client satisfaction. We believe we have a significant opportunity to leverage these third-parties interested in building or expanding their businesses to increase our market penetration.
|
•
|
Revenue.
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.
|
•
|
Subscription revenue.
Revenue from subscriptions to our human capital management platform and related support sold on a recurring basis.
|
•
|
Annual recurring revenue.
In order to assess our business performance with a metric that reflects a subscription-based business model, we track annual recurring revenue, which is another financial metric we define as the annualized recurring value of all active contracts at the end of a reporting period.
|
•
|
Unlevered free cash flow.
We define unlevered free cash flow, a non-GAAP financial measure, as cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest. We present this metric because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet.
|
•
|
Annual dollar retention rate
. We define annual dollar retention rate as the implied monthly recurring revenue under client agreements at the end of a fiscal year, divided by the implied monthly recurring revenue, for that same client base, at the beginning of the fiscal year and includes incremental sales up to but not exceeding the original renewal amount to the existing client base. This ratio does not reflect implied monthly recurring revenue for new clients added between the end of the prior fiscal year and the end of the current fiscal year. We define implied monthly recurring revenue as the total amount of minimum recurring revenue to which we have a contractual right under each of our client agreements over the entire term of the agreement, but excluding non-recurring support, consulting and maintenance fees, divided by the number of months in the term of the agreement. Implied monthly recurring revenue is substantially comprised of subscriptions to our enterprise human capital management platform. This ratio excludes the implied monthly recurring revenue from clients of our Cornerstone for Salesforce, Cornerstone PiiQ, Grovo Learning, Inc. and Workpop Inc. products. We believe that our annual dollar retention rate is an important metric to measure the long-term value of client agreements and our ability to retain our clients.
|
•
|
Constant currency results
. We present 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. Due to our legal and operating structure, our international revenues are favorably impacted as the U.S. dollar weakens relative to the British pound and euro, and unfavorably impacted as the U.S. dollar strengthens relative to the British pound and euro. We believe the presentation of results on a constant currency basis in addition to reported results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our core operating results. To present this information, current period results for entities reporting in British pounds and euros are translated into U.S. dollars at the prior period exchange rates as opposed to the actual exchange rates in effect for the current period. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP.
|
•
|
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 our enterprise human capital management platform as of the end of the period and excludes clients of our Cornerstone for Salesforce, PiiQ, Grovo Learning, Inc. and Workpop Inc. products. In
2018
, our number of clients grew
9%
.
|
•
|
Subscriptions to Our Products and Other Offerings on a Recurring Basis.
Clients pay subscription fees for access to our enterprise human capital management platform, other products and support on a recurring basis. Fees are based on a number of factors, including the number of products purchased, which may include e-learning content, and the number of users having access to a product. We generally recognize revenue from subscriptions ratably over the term of the agreements beginning on the date the subscription service is made available to the client. Subscription agreements are typically three years, billed annually in advance, and non-cancelable, with payment due within 30 days of the invoice date.
|
•
|
Professional Services and Other.
We offer our clients and implementation partners assistance in implementing our products and optimizing their use. Professional services include application configuration, system integration, business process re-engineering, change management and training services. Services are generally billed upfront on a fixed fee basis and to a lesser degree on a time-and-material 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 professional services at any other time. We generally recognize revenue from fixed fee professional services contracts as services are performed based on the proportion performed to date relative to the total expected services to be performed. Revenue associated with time-and-material contracts are recorded as such time and materials are incurred.
|
•
|
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 staff, including salaries, benefits, bonuses and stock-based compensation; professional fees; insurance premiums; other corporate expenses; and allocated overhead. Over time we expect our general and administrative expenses to decrease as a percentage of revenue.
|
•
|
Restructuring.
Restructuring consists of stock-based compensation, payroll-related costs, such as severance, outplacement costs and continuing healthcare coverage, associated with employee terminations.
|
•
|
Interest Income
. Interest income consists primarily of interest income from investment securities partially offset by amortization of investment premiums. We expect interest income to vary depending on the level of our investments in marketable securities, which include corporate bonds, agency bonds, U.S. treasury securities and commercial paper.
|
•
|
Interest Expense.
Interest expense consists primarily of interest expense from our convertible notes, accretion of debt discount and amortization of debt issuance costs.
|
•
|
Other, Net.
Other, net consists of income and expense associated with fluctuations in foreign currency exchange rates, fair value adjustments to strategic investments and other non-operating expenses. We expect other income (expense) to vary depending on the movement in foreign currency exchange rates and the related impact on our foreign exchange gain (loss).
|
|
Year Ended
December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
Cost of revenue
|
144,349
|
|
|
142,867
|
|
|
135,752
|
|
|||
Gross profit
|
393,542
|
|
|
339,118
|
|
|
287,372
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Sales and marketing
|
224,635
|
|
|
240,271
|
|
|
225,781
|
|
|||
Research and development
|
76,981
|
|
|
61,975
|
|
|
46,977
|
|
|||
General and administrative
|
90,749
|
|
|
84,589
|
|
|
70,956
|
|
|||
Restructuring
|
8,946
|
|
|
1,539
|
|
|
—
|
|
|||
Total operating expenses
|
401,311
|
|
|
388,374
|
|
|
343,714
|
|
|||
Loss from operations
|
(7,769
|
)
|
|
(49,256
|
)
|
|
(56,342
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
7,796
|
|
|
2,951
|
|
|
1,702
|
|
|||
Interest expense
|
(28,176
|
)
|
|
(14,762
|
)
|
|
(12,924
|
)
|
|||
Other, net
|
(3,098
|
)
|
|
1,478
|
|
|
1,934
|
|
|||
Other income (expense), net
|
(23,478
|
)
|
|
(10,333
|
)
|
|
(9,288
|
)
|
|||
Loss before income tax provision
|
(31,247
|
)
|
|
(59,589
|
)
|
|
(65,630
|
)
|
|||
Income tax provision
|
(2,595
|
)
|
|
(1,746
|
)
|
|
(1,207
|
)
|
|||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
|
Year Ended
December 31, |
|||||||
|
2018 *
|
|
2017
|
|
2016
|
|||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of revenue
|
26.8
|
%
|
|
29.6
|
%
|
|
32.1
|
%
|
Gross profit
|
73.2
|
%
|
|
70.4
|
%
|
|
67.9
|
%
|
Operating expenses:
|
|
|
|
|
|
|||
Sales and marketing
|
41.8
|
%
|
|
49.9
|
%
|
|
53.4
|
%
|
Research and development
|
14.3
|
%
|
|
12.9
|
%
|
|
11.1
|
%
|
General and administrative
|
16.9
|
%
|
|
17.6
|
%
|
|
16.8
|
%
|
Restructuring
|
1.7
|
%
|
|
0.3
|
%
|
|
—
|
%
|
Total operating expenses
|
74.6
|
%
|
|
80.6
|
%
|
|
81.2
|
%
|
Loss from operations
|
(1.4
|
)%
|
|
(10.2
|
)%
|
|
(13.3
|
)%
|
Other income (expense):
|
|
|
|
|
|
|||
Interest income
|
1.4
|
%
|
|
0.6
|
%
|
|
0.4
|
%
|
Interest expense
|
(5.2
|
)%
|
|
(3.1
|
)%
|
|
(3.1
|
)%
|
Other, net
|
(0.6
|
)%
|
|
0.3
|
%
|
|
0.5
|
%
|
Loss before income tax provision
|
(5.8
|
)%
|
|
(12.4
|
)%
|
|
(15.5
|
)%
|
Income tax provision
|
(0.5
|
)%
|
|
(0.4
|
)%
|
|
(0.3
|
)%
|
Net loss
|
(6.3
|
)%
|
|
(12.7
|
)%
|
|
(15.8
|
)%
|
|
At or For Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Revenue (in thousands)
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
Subscription revenue (in thousands)
|
$
|
473,052
|
|
|
$
|
396,764
|
|
|
$
|
339,756
|
|
Annual recurring revenue (in thousands)
|
$
|
510,000
|
|
|
$
|
439,000
|
|
|
n/a
|
|
|
Unlevered free cash flow (in thousands)
|
$
|
63,471
|
|
|
$
|
43,680
|
|
|
$
|
16,411
|
|
Annual dollar retention rate
|
92.8
|
%
|
|
93.5
|
%
|
|
95.1
|
%
|
|||
Number of clients
|
3,535
|
|
|
3,250
|
|
|
2,918
|
|
|
At or For Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Subscription revenue
|
$
|
473,052
|
|
|
$
|
396,764
|
|
|
$
|
339,756
|
|
Percentage of subscription revenue to total revenue
|
87.9
|
%
|
|
82.3
|
%
|
|
80.3
|
%
|
|||
Professional services revenue
|
$
|
64,839
|
|
|
$
|
85,221
|
|
|
$
|
83,368
|
|
Percentage of professional services to total revenue
|
12.1
|
%
|
|
17.7
|
%
|
|
19.7
|
%
|
|||
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
|
At or For Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Revenue for United States
|
$
|
343,206
|
|
|
$
|
313,729
|
|
|
$
|
284,657
|
|
Percentage of total revenue for United States
|
63.8
|
%
|
|
65.1
|
%
|
|
67.3
|
%
|
|||
Revenue for all other countries
|
$
|
194,685
|
|
|
$
|
168,256
|
|
|
$
|
138,467
|
|
Percentage of total revenue for all other countries
|
36.2
|
%
|
|
34.9
|
%
|
|
32.7
|
%
|
|||
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
|
Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Cost of revenue
|
$
|
144,349
|
|
|
$
|
142,867
|
|
|
$
|
135,752
|
|
Gross profit
|
$
|
393,542
|
|
|
$
|
339,118
|
|
|
$
|
287,372
|
|
Gross margin
|
73.2
|
%
|
|
70.4
|
%
|
|
67.9
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Sales and marketing
|
$
|
224,635
|
|
|
$
|
240,271
|
|
|
$
|
225,781
|
|
Percent of revenue
|
41.8
|
%
|
|
49.9
|
%
|
|
53.3
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Research and development
|
$
|
76,981
|
|
|
$
|
61,975
|
|
|
$
|
46,977
|
|
Percent of revenue
|
14.3
|
%
|
|
12.9
|
%
|
|
11.1
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
General and administrative
|
$
|
90,749
|
|
|
$
|
84,589
|
|
|
$
|
70,956
|
|
Percent of revenue
|
16.9
|
%
|
|
17.6
|
%
|
|
16.8
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Restructuring
|
$
|
8,946
|
|
|
$
|
1,539
|
|
|
$
|
—
|
|
Percent of revenue
|
1.7
|
%
|
|
0.3
|
%
|
|
—
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Interest income
|
$
|
7,796
|
|
|
$
|
2,951
|
|
|
$
|
1,702
|
|
Interest expense
|
(28,176
|
)
|
|
(14,762
|
)
|
|
(12,924
|
)
|
|||
Other, net
|
(3,098
|
)
|
|
1,478
|
|
|
1,934
|
|
|||
Other income (expense), net
|
$
|
(23,478
|
)
|
|
$
|
(10,333
|
)
|
|
$
|
(9,288
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Income tax provision
|
$
|
(2,595
|
)
|
|
$
|
(1,746
|
)
|
|
$
|
(1,207
|
)
|
|
Year Ended
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by operating activities
|
$
|
90,253
|
|
|
$
|
67,510
|
|
|
$
|
35,252
|
|
Net cash used in investing activities
|
(20,876
|
)
|
|
(36,666
|
)
|
|
(81,638
|
)
|
|||
Net cash (used in) provided by financing activities
|
(278,016
|
)
|
|
276,852
|
|
|
23,515
|
|
Period
|
|
# of Shares Repurchased
|
|
Average Price per Share
|
|
Total Expenditures
|
|||||
November 8, 2017 - December 31, 2017
|
|
635
|
|
|
$
|
35.55
|
|
|
$
|
22,599
|
|
January 1, 2018 - March 31, 2018
|
|
423
|
|
|
$
|
37.84
|
|
|
16,024
|
|
|
April 1, 2018 - June 30, 2018
|
|
444
|
|
|
$
|
46.66
|
|
|
20,718
|
|
|
July 1, 2018 - September 30, 2018
|
|
300
|
|
|
$
|
53.82
|
|
|
16,143
|
|
|
October 1, 2018 - December 31, 2018
|
|
484
|
|
|
$
|
50.59
|
|
|
24,516
|
|
|
Subtotal
|
|
2,286
|
|
|
$
|
43.71
|
|
|
$
|
100,000
|
|
|
|
|
Payments Due by Period
|
||||||||||||||||
|
Total
|
|
Less than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than 5 Years
|
||||||||||
Long-term debt obligations including interest
|
$
|
351,750
|
|
|
$
|
17,250
|
|
|
$
|
334,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating lease obligations
(1)
|
87,509
|
|
|
11,576
|
|
|
28,439
|
|
|
29,533
|
|
|
17,961
|
|
|||||
Software subscription and other contractual obligations
|
29,450
|
|
|
17,834
|
|
|
8,802
|
|
|
2,814
|
|
|
—
|
|
|||||
|
$
|
468,709
|
|
|
$
|
46,660
|
|
|
$
|
371,741
|
|
|
$
|
32,347
|
|
|
$
|
17,961
|
|
1)
|
Identification of the contract, or contracts, with a customer
|
2)
|
Identification of all performance obligations in the contract
|
3)
|
Determination of the transaction price
|
4)
|
Allocation of the transaction price to the performance obligations in the contract
|
5)
|
Recognition of revenue as we satisfy a performance obligation
|
|
For the Years Ended December 31,
|
|||||
|
2018
|
|
2017
|
|
2016
|
|
Risk-free interest rate
|
n/a
|
|
n/a
|
|
1.4
|
%
|
Expected term (in years)
|
n/a
|
|
n/a
|
|
5.8
|
|
Estimated dividend yield
|
n/a
|
|
n/a
|
|
—
|
%
|
Estimated volatility
|
n/a
|
|
n/a
|
|
48.8
|
%
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
|
|
PAGE
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
183,596
|
|
|
$
|
393,576
|
|
Short-term investments
|
204,732
|
|
|
169,551
|
|
||
Accounts receivable, net
|
125,300
|
|
|
154,428
|
|
||
Deferred commissions, current portion
|
24,467
|
|
|
42,806
|
|
||
Prepaid expenses and other current assets
|
34,940
|
|
|
21,754
|
|
||
Total current assets
|
573,035
|
|
|
782,115
|
|
||
Capitalized software development costs, net
|
45,416
|
|
|
37,431
|
|
||
Deferred commissions, net of current portion
|
45,444
|
|
|
—
|
|
||
Property and equipment, net
|
77,254
|
|
|
20,817
|
|
||
Long-term investments
|
1,250
|
|
|
96,949
|
|
||
Intangible assets, net
|
13,867
|
|
|
—
|
|
||
Goodwill
|
47,453
|
|
|
25,894
|
|
||
Other assets, net
|
3,437
|
|
|
3,984
|
|
||
Total Assets
|
$
|
807,156
|
|
|
$
|
967,190
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
11,921
|
|
|
$
|
17,637
|
|
Accrued expenses
|
68,331
|
|
|
57,528
|
|
||
Deferred revenue, current portion
|
312,526
|
|
|
311,997
|
|
||
Convertible notes, net
|
—
|
|
|
248,025
|
|
||
Other liabilities
|
7,645
|
|
|
9,051
|
|
||
Total current liabilities
|
400,423
|
|
|
644,238
|
|
||
Convertible notes, net
|
288,967
|
|
|
285,168
|
|
||
Other liabilities, non-current
|
2,484
|
|
|
1,498
|
|
||
Deferred revenue, net of current portion
|
13,275
|
|
|
14,166
|
|
||
Facility financing obligation
|
46,100
|
|
|
—
|
|
||
Total liabilities
|
751,249
|
|
|
945,070
|
|
||
Commitments and contingencies (Note 16)
|
|
|
|
|
|
||
Stockholders’ Equity:
|
|
|
|
||||
Common stock, $0.0001 par value; 1,000,000 shares authorized, 58,886 and 57,512 shares issued and outstanding at December 31, 2018 and 2017, respectively
|
6
|
|
|
6
|
|
||
Additional paid-in capital
|
585,387
|
|
|
536,951
|
|
||
Accumulated deficit
|
(529,962
|
)
|
|
(515,054
|
)
|
||
Accumulated other comprehensive income
|
476
|
|
|
217
|
|
||
Total stockholders’ equity
|
55,907
|
|
|
22,120
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
807,156
|
|
|
$
|
967,190
|
|
|
Years Ended
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
Cost of revenue
|
144,349
|
|
|
142,867
|
|
|
135,752
|
|
|||
Gross profit
|
393,542
|
|
|
339,118
|
|
|
287,372
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Sales and marketing
|
224,635
|
|
|
240,271
|
|
|
225,781
|
|
|||
Research and development
|
76,981
|
|
|
61,975
|
|
|
46,977
|
|
|||
General and administrative
|
90,749
|
|
|
84,589
|
|
|
70,956
|
|
|||
Restructuring
|
8,946
|
|
|
1,539
|
|
|
—
|
|
|||
Total operating expenses
|
401,311
|
|
|
388,374
|
|
|
343,714
|
|
|||
Loss from operations
|
(7,769
|
)
|
|
(49,256
|
)
|
|
(56,342
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
7,796
|
|
|
2,951
|
|
|
1,702
|
|
|||
Interest expense
|
(28,176
|
)
|
|
(14,762
|
)
|
|
(12,924
|
)
|
|||
Other, net
|
(3,098
|
)
|
|
1,478
|
|
|
1,934
|
|
|||
Other income (expense), net
|
(23,478
|
)
|
|
(10,333
|
)
|
|
(9,288
|
)
|
|||
Loss before income tax provision
|
(31,247
|
)
|
|
(59,589
|
)
|
|
(65,630
|
)
|
|||
Income tax provision
|
(2,595
|
)
|
|
(1,746
|
)
|
|
(1,207
|
)
|
|||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.58
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.20
|
)
|
Weighted average common shares outstanding, basic and diluted
|
58,159
|
|
|
57,262
|
|
|
55,595
|
|
|
Years Ended
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(210
|
)
|
|
(3,795
|
)
|
|
3,748
|
|
|||
Net change in unrealized gains (losses) on investments
|
469
|
|
|
(434
|
)
|
|
88
|
|
|||
Other comprehensive income (loss), net of tax
|
259
|
|
|
(4,229
|
)
|
|
3,836
|
|
|||
Total comprehensive loss
|
$
|
(33,583
|
)
|
|
$
|
(65,564
|
)
|
|
$
|
(63,001
|
)
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
(Deficit)
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
|
Shares
|
|
Par
Value
|
|
||||||||||||||||||
Balance as of December 31, 2015
|
54,704
|
|
|
$
|
5
|
|
|
$
|
394,089
|
|
|
$
|
(386,882
|
)
|
|
$
|
610
|
|
|
$
|
7,822
|
|
Issuance of common stock upon the exercise of options
|
978
|
|
|
1
|
|
|
18,904
|
|
|
—
|
|
|
—
|
|
|
18,905
|
|
|||||
Vesting of restricted stock units
|
699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Shares issued under employee stock purchase plan
|
135
|
|
|
—
|
|
|
4,286
|
|
|
—
|
|
|
—
|
|
|
4,286
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
58,951
|
|
|
—
|
|
|
—
|
|
|
58,951
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,837
|
)
|
|
—
|
|
|
(66,837
|
)
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,836
|
|
|
3,836
|
|
|||||
Balance as of December 31, 2016
|
56,516
|
|
|
$
|
6
|
|
|
$
|
476,230
|
|
|
$
|
(453,719
|
)
|
|
$
|
4,446
|
|
|
$
|
26,963
|
|
Issuance of common stock upon the exercise of options
|
414
|
|
|
—
|
|
|
6,777
|
|
|
—
|
|
|
—
|
|
|
6,777
|
|
|||||
Vesting of restricted stock units
|
1,035
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Shares issued under employee stock purchase plan
|
182
|
|
|
—
|
|
|
5,621
|
|
|
—
|
|
|
—
|
|
|
5,621
|
|
|||||
Repurchase of common stock
|
(635
|
)
|
|
—
|
|
|
(22,599
|
)
|
|
|
|
|
|
(22,599
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
70,922
|
|
|
—
|
|
|
—
|
|
|
70,922
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(61,335
|
)
|
|
—
|
|
|
(61,335
|
)
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,229
|
)
|
|
(4,229
|
)
|
|||||
Balance as of December 31, 2017
|
57,512
|
|
|
$
|
6
|
|
|
$
|
536,951
|
|
|
$
|
(515,054
|
)
|
|
$
|
217
|
|
|
$
|
22,120
|
|
Issuance of common stock upon the exercise of options
|
1,474
|
|
|
—
|
|
|
47,816
|
|
|
—
|
|
|
—
|
|
|
47,816
|
|
|||||
Vesting of restricted stock units
|
1,370
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Shares issued under employee stock purchase plan
|
181
|
|
|
—
|
|
|
6,422
|
|
|
—
|
|
|
—
|
|
|
6,422
|
|
|||||
Repurchase of common stock
|
(1,651
|
)
|
|
—
|
|
|
(77,401
|
)
|
|
—
|
|
|
—
|
|
|
(77,401
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
71,599
|
|
|
—
|
|
|
—
|
|
|
71,599
|
|
|||||
Cumulative effect of accounting change
|
—
|
|
|
—
|
|
|
—
|
|
|
18,934
|
|
|
—
|
|
|
18,934
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,842
|
)
|
|
—
|
|
|
(33,842
|
)
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
259
|
|
|
259
|
|
|||||
Balance as of December 31, 2018
|
58,886
|
|
|
$
|
6
|
|
|
$
|
585,387
|
|
|
$
|
(529,962
|
)
|
|
$
|
476
|
|
|
$
|
55,907
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
35,260
|
|
|
35,377
|
|
|
32,392
|
|
|||
Accretion of debt discount and amortization of debt issuance costs
|
8,929
|
|
|
9,833
|
|
|
9,130
|
|
|||
Purchased investment premium, net of amortization
|
(160
|
)
|
|
1,135
|
|
|
240
|
|
|||
Net foreign currency gain
|
(440
|
)
|
|
(2,461
|
)
|
|
(7
|
)
|
|||
Stock-based compensation expense
|
66,557
|
|
|
65,924
|
|
|
54,699
|
|
|||
Write-off of capitalized software
|
—
|
|
|
1,339
|
|
|
—
|
|
|||
Deferred income taxes
|
123
|
|
|
52
|
|
|
(736
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
27,199
|
|
|
(14,317
|
)
|
|
(38,092
|
)
|
|||
Deferred commissions
|
(15,316
|
)
|
|
(5,249
|
)
|
|
(2,543
|
)
|
|||
Prepaid expenses and other assets
|
(11,443
|
)
|
|
(2,704
|
)
|
|
(3,623
|
)
|
|||
Accounts payable
|
(5,496
|
)
|
|
(6,820
|
)
|
|
5,939
|
|
|||
Accrued expenses
|
9,291
|
|
|
8,530
|
|
|
3,727
|
|
|||
Deferred revenue
|
10,803
|
|
|
35,829
|
|
|
43,379
|
|
|||
Other liabilities
|
(1,212
|
)
|
|
2,377
|
|
|
(2,416
|
)
|
|||
Net cash provided by operating activities
|
90,253
|
|
|
67,510
|
|
|
35,252
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of investments
|
(125,109
|
)
|
|
(323,413
|
)
|
|
(210,534
|
)
|
|||
Maturities of investments
|
185,733
|
|
|
314,418
|
|
|
151,533
|
|
|||
Capital expenditures
|
(14,895
|
)
|
|
(7,100
|
)
|
|
(6,228
|
)
|
|||
Capitalized software costs
|
(25,515
|
)
|
|
(20,571
|
)
|
|
(16,409
|
)
|
|||
Cash paid for acquisition, net of cash acquired
|
(41,090
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(20,876
|
)
|
|
(36,666
|
)
|
|
(81,638
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Payments of debt issuance costs and proceeds from convertible notes
|
(152
|
)
|
|
285,077
|
|
|
—
|
|
|||
Repayment of debt
|
(253,000
|
)
|
|
—
|
|
|
—
|
|
|||
Principal payments under capital lease obligations
|
—
|
|
|
—
|
|
|
(33
|
)
|
|||
Proceeds from employee stock plans
|
54,402
|
|
|
12,509
|
|
|
23,548
|
|
|||
Repurchases of common stock
|
(79,266
|
)
|
|
(20,734
|
)
|
|
—
|
|
|||
Net cash (used in) provided by financing activities
|
(278,016
|
)
|
|
276,852
|
|
|
23,515
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(1,341
|
)
|
|
2,580
|
|
|
(1,520
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(209,980
|
)
|
|
310,276
|
|
|
(24,391
|
)
|
|||
Cash and cash equivalents at beginning of period
|
393,576
|
|
|
83,300
|
|
|
107,691
|
|
|||
Cash and cash equivalents at end of period
|
$
|
183,596
|
|
|
$
|
393,576
|
|
|
$
|
83,300
|
|
Supplemental cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
13,628
|
|
|
$
|
3,841
|
|
|
$
|
3,796
|
|
Cash paid for income taxes
|
1,859
|
|
|
2,243
|
|
|
2,334
|
|
|||
Proceeds from employee stock plans received in advance of stock issuance
|
642
|
|
|
575
|
|
|
489
|
|
|||
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Assets acquired under capital leases and other financing arrangements
|
$
|
47,070
|
|
|
$
|
3,467
|
|
|
$
|
—
|
|
Capitalized assets financed by accounts payable and accrued expenses
|
1,566
|
|
|
1,829
|
|
|
2,080
|
|
|||
Capitalized stock-based compensation
|
5,042
|
|
|
4,998
|
|
|
4,252
|
|
|||
Deferred debt issuance costs included in accrued expenses
|
—
|
|
|
152
|
|
|
—
|
|
|||
Unsettled share repurchase in other liabilities
|
—
|
|
|
1,866
|
|
|
—
|
|
1.
|
ORGANIZATION
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
1)
|
Identification of the contract, or contracts, with a customer
|
2)
|
Identification of all performance obligations in the contract
|
3)
|
Determination of the transaction price
|
4)
|
Allocation of the transaction price to the performance obligations in the contract
|
5)
|
Recognition of revenue as the Company satisfies a performance obligation
|
|
December 31, 2018
|
||||||||||
Consolidated Condensed Balance Sheet
|
As Reported
(ASC 606) |
|
Impacts of Adoption
|
|
Without Adoption
(ASC 605) |
||||||
Assets
|
|
|
|
|
|
||||||
Deferred commissions, current portion
|
$
|
24,467
|
|
|
$
|
30,624
|
|
|
$
|
55,091
|
|
Deferred commissions, non-current
|
45,444
|
|
|
(45,444
|
)
|
|
—
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Accrued expenses
|
68,331
|
|
|
(1,697
|
)
|
|
66,634
|
|
|||
Deferred revenue, current portion
|
312,526
|
|
|
6,751
|
|
|
319,277
|
|
|||
Stockholders’ Equity
|
|
|
|
|
|
||||||
Accumulated deficit
|
(529,962
|
)
|
|
(19,874
|
)
|
|
(549,836
|
)
|
|
Year Ended
|
||||||||||
|
December 31, 2018
|
||||||||||
Consolidated Condensed Statement of Operations
|
As Reported
(ASC 606) |
|
Impacts of Adoption
|
|
Without Adoption
(ASC 605) |
||||||
|
|
|
|
|
|
||||||
Revenue
|
$
|
537,891
|
|
|
$
|
(696
|
)
|
|
$
|
537,195
|
|
Operating expenses:
|
|
|
|
|
|
||||||
Sales and marketing
|
224,635
|
|
|
(992
|
)
|
|
223,643
|
|
|||
Net loss
|
(33,842
|
)
|
|
296
|
|
|
(33,546
|
)
|
|||
Net loss per share, basic and diluted
|
(0.58
|
)
|
|
|
|
(0.58
|
)
|
||||
Weighted average common shares outstanding, basic and diluted
|
58,159
|
|
|
|
|
58,159
|
|
•
|
personnel and related expenses, including stock-based compensation;
|
•
|
expenses for network-related infrastructure and IT support;
|
•
|
delivery of contracted professional services and on-going client support staff;
|
•
|
payments to external service providers contracted to perform implementation services;
|
•
|
depreciation of data centers and amortization of capitalized software costs, developed technology software license rights, content and licensing fees and referral fees.
|
|
For the Years Ended December 31,
|
|||||
|
2018
|
|
2017
|
|
2016
|
|
Risk-free interest rate
|
n/a
|
|
n/a
|
|
1.4
|
%
|
Expected term (in years)
|
n/a
|
|
n/a
|
|
5.8
|
|
Estimated dividend yield
|
n/a
|
|
n/a
|
|
—
|
%
|
Estimated volatility
|
n/a
|
|
n/a
|
|
48.8
|
%
|
|
2018
|
|
2017
|
|
2016
|
||||||
Beginning balance, January 1
|
$
|
7,478
|
|
|
$
|
3,532
|
|
|
$
|
2,578
|
|
Additions and adjustments
|
1,691
|
|
|
7,680
|
|
|
3,165
|
|
|||
Write-offs
|
(6,740
|
)
|
|
(3,734
|
)
|
|
(2,211
|
)
|
|||
Ending balance, December 31
|
$
|
2,429
|
|
|
$
|
7,478
|
|
|
$
|
3,532
|
|
•
|
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that management has 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.
|
•
|
$15.5 million
increase in deferred commissions. Such costs are considered to be costs to obtain a contract under Topic 606, and primarily relate to the execution of software subscription contracts. In addition, upon adoption, these incremental commission costs to obtain a contract are now amortized over a period of benefit, which is generally six years.
|
•
|
$2.7 million
of additional liability offsets the impact to retained earnings from the increase of the deferred commission above. The liability is to accrue commission costs earned but not yet paid.
|
•
|
$6.1 million
reduction in deferred revenue related to additional contract value being allocated to professional services delivered prior to adoption. Previously such amounts were not recognized based on contractual payment limitations. Upon adoption, revenue for professional services is based on the relative standalone selling price without any such limitation.
|
|
Fair Value
|
||
Cash and cash equivalents
|
$
|
115
|
|
Other assets
|
68
|
|
|
Intangible assets - developed technology
|
7,500
|
|
|
Goodwill
|
10,525
|
|
|
Total purchase price
|
$
|
18,208
|
|
|
Fair Value
|
|
Cash and cash equivalents
|
508
|
|
Accounts receivable
|
761
|
|
Property and equipment, net
|
51,967
|
|
Other current and noncurrent assets
|
1,001
|
|
Intangible assets - content library
|
4,700
|
|
Intangible assets - developed technology
|
2,500
|
|
Goodwill
|
11,034
|
|
Facility financing obligation
|
(46,100
|
)
|
Accounts payable, accrued expenses, and other liabilities, current and noncurrent
|
(3,465
|
)
|
Net assets acquired
|
22,906
|
|
4.
|
NET LOSS PER SHARE
|
|
For the Years Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(33,842
|
)
|
|
$
|
(61,335
|
)
|
|
$
|
(66,837
|
)
|
Weighted-average shares of common stock outstanding
|
58,159
|
|
|
57,262
|
|
|
55,595
|
|
|||
Net loss per share — basic and diluted
|
$
|
(0.58
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.20
|
)
|
|
December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Options to purchase common stock, restricted stock units and performance-based restricted stock units
|
9,869
|
|
|
10,143
|
|
|
10,635
|
|
Shares issuable pursuant to employee stock purchase plan
|
97
|
|
|
114
|
|
|
89
|
|
Convertible notes
|
7,143
|
|
|
11,825
|
|
|
4,682
|
|
Common stock warrants
|
936
|
|
|
4,682
|
|
|
4,682
|
|
Total shares excluded from net loss per share
|
18,045
|
|
|
26,764
|
|
|
20,088
|
|
|
December 31, 2018
|
||||||||||||||||||||||
|
Amortized Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash Equivalent
|
|
Investments
|
||||||||||||
Money market funds
|
$
|
129,321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
129,321
|
|
|
$
|
129,321
|
|
|
$
|
—
|
|
Corporate bonds
|
58,115
|
|
|
—
|
|
|
(82
|
)
|
|
58,033
|
|
|
—
|
|
|
58,033
|
|
||||||
U.S. treasury securities
|
138,826
|
|
|
—
|
|
|
(100
|
)
|
|
138,726
|
|
|
—
|
|
|
138,726
|
|
||||||
Commercial paper
|
$
|
7,973
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,973
|
|
|
$
|
—
|
|
|
$
|
7,973
|
|
|
$
|
334,235
|
|
|
$
|
—
|
|
|
$
|
(182
|
)
|
|
$
|
334,053
|
|
|
$
|
129,321
|
|
|
$
|
204,732
|
|
|
December 31, 2017
|
||||||||||||||||||||||
|
Amortized Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash Equivalent
|
|
Investments
|
||||||||||||
Money market funds
|
$
|
358,859
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
358,859
|
|
|
$
|
358,859
|
|
|
$
|
—
|
|
Certificate of deposits
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
10,000
|
|
|
—
|
|
||||||
Corporate bonds
|
74,868
|
|
|
—
|
|
|
(220
|
)
|
|
74,648
|
|
|
—
|
|
|
74,648
|
|
||||||
U.S. treasury securities
|
189,310
|
|
|
—
|
|
|
(430
|
)
|
|
188,880
|
|
|
—
|
|
|
188,880
|
|
||||||
|
$
|
633,037
|
|
|
$
|
—
|
|
|
$
|
(650
|
)
|
|
$
|
632,387
|
|
|
$
|
368,859
|
|
|
$
|
263,528
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
||||||||||||
Developed technology
|
$
|
39,984
|
|
|
$
|
(30,817
|
)
|
|
$
|
9,167
|
|
|
$
|
29,984
|
|
|
$
|
(29,984
|
)
|
|
$
|
—
|
|
Content library
|
4,700
|
|
|
—
|
|
|
4,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
44,684
|
|
|
$
|
(30,817
|
)
|
|
$
|
13,867
|
|
|
$
|
29,984
|
|
|
$
|
(29,984
|
)
|
|
$
|
—
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023 and thereafter
|
||||||||||
Estimated remaining amortization expense
|
$
|
4,188
|
|
|
$
|
4,188
|
|
|
$
|
3,355
|
|
|
$
|
855
|
|
|
$
|
1,281
|
|
7.
|
OTHER BALANCE SHEET AMOUNTS
|
|
Useful Life
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||||
Computer equipment and software
|
3 – 5 years
|
|
$
|
52,055
|
|
|
$
|
38,838
|
|
Build to suit property
|
25 years
|
|
51,058
|
|
|
—
|
|
||
Furniture and fixtures
|
7 years
|
|
4,367
|
|
|
3,855
|
|
||
Leasehold improvements
|
2 – 6 years
|
|
9,987
|
|
|
10,046
|
|
||
Renovation in progress
|
n/a
|
|
1,984
|
|
|
58
|
|
||
|
|
|
119,451
|
|
|
52,797
|
|
||
Less: accumulated depreciation and amortization
|
|
|
(42,197
|
)
|
|
(31,980
|
)
|
||
Total property and equipment, net
|
|
|
$
|
77,254
|
|
|
$
|
20,817
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Accrued compensation
|
$
|
31,799
|
|
|
$
|
23,056
|
|
Accrued commissions
|
13,856
|
|
|
12,401
|
|
||
Other accrued expenses
|
14,051
|
|
|
19,071
|
|
||
Accrued interest
|
$
|
8,625
|
|
|
$
|
3,000
|
|
Total accrued expenses
|
$
|
68,331
|
|
|
$
|
57,528
|
|
8.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
•
|
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has 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.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||
Cash equivalents
|
$
|
129,172
|
|
|
$
|
129,172
|
|
|
|
|
|
$
|
—
|
|
|
$
|
368,859
|
|
|
$
|
358,859
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
Corporate bonds
|
58,033
|
|
|
—
|
|
|
58,033
|
|
|
—
|
|
|
74,648
|
|
|
—
|
|
|
74,648
|
|
|
—
|
|
||||||||
U.S. treasury securities
|
138,726
|
|
|
—
|
|
|
138,726
|
|
|
—
|
|
|
188,880
|
|
|
—
|
|
|
188,880
|
|
|
—
|
|
||||||||
Commercial paper
|
7,973
|
|
|
—
|
|
|
7,973
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
|
$
|
333,904
|
|
|
$
|
129,172
|
|
|
$
|
204,732
|
|
|
$
|
—
|
|
|
$
|
632,387
|
|
|
$
|
358,859
|
|
|
$
|
273,528
|
|
|
$
|
—
|
|
9.
|
DEBT AND OTHER FINANCING ARRANGEMENTS
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Principal amount
|
$
|
300,000
|
|
|
$
|
553,000
|
|
Unamortized debt discount
|
(4,348
|
)
|
|
(10,190
|
)
|
||
Net carrying amount before unamortized debt issuance costs
|
295,652
|
|
|
542,810
|
|
||
Unamortized debt issuance costs
|
(6,685
|
)
|
|
(9,617
|
)
|
||
Net carrying value
|
$
|
288,967
|
|
|
$
|
533,193
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Contractual interest expense at 1.50% and 5.75% per annum
|
$
|
19,147
|
|
|
$
|
4,897
|
|
|
$
|
3,795
|
|
Amortization of debt issuance costs
|
3,086
|
|
|
1,472
|
|
|
1,263
|
|
|||
Accretion of debt discount
|
5,843
|
|
|
8,360
|
|
|
7,867
|
|
|||
Total
|
$
|
28,076
|
|
|
$
|
14,729
|
|
|
$
|
12,925
|
|
10.
|
STOCKHOLDERS
’
EQUITY
|
Period
|
|
# of Shares Repurchased
|
|
Average Price per Share
|
|
Total Expenditures
|
|||||
November 8, 2017 - December 31, 2017
|
|
635
|
|
|
$
|
35.55
|
|
|
$
|
22,599
|
|
January 1, 2018 - March 31, 2018
|
|
423
|
|
|
$
|
37.84
|
|
|
16,024
|
|
|
April 1, 2018 - June 30, 2018
|
|
444
|
|
|
$
|
46.66
|
|
|
20,718
|
|
|
July 1, 2018 - September 30, 2018
|
|
300
|
|
|
$
|
53.82
|
|
|
16,143
|
|
|
October 1, 2018 - December 31, 2018
|
|
484
|
|
|
$
|
50.59
|
|
|
24,516
|
|
|
Total
|
|
2,286
|
|
|
$
|
43.71
|
|
|
$
|
100,000
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|||||
Outstanding, December 31, 2017
|
5,432
|
|
|
$
|
32.73
|
|
|
5.3
|
|
$
|
42,282
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(1,472
|
)
|
|
32.48
|
|
|
|
|
|
|||
Forfeited
|
(132
|
)
|
|
44.59
|
|
|
|
|
|
|||
Outstanding, December 31, 2018
|
3,828
|
|
|
32.41
|
|
|
4.1
|
|
70,436
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|||||
Exercisable at December 31, 2018
|
3,777
|
|
|
$
|
32.38
|
|
|
4.0
|
|
$
|
69,658
|
|
Vested and expected to vest at December 31, 2018
|
3,826
|
|
|
32.41
|
|
|
4.1
|
|
70,405
|
|
(1)
|
Based on the Company’s closing stock price of $50.43 on December 31, 2018 and $35.33 on December 31, 2017.
|
|
Options Outstanding
at December 31, 2018
|
|
Options Exercisable
at December 31, 2018
|
||||||
|
Number of Options
|
|
Weighted
Average
Remaining
Contractual
Term (in
years)
|
|
Number of Options
|
|
Weighted
Average
Remaining
Contractual
Term (in
years)
|
||
Range of Exercise Prices
|
|
|
|
|
|
|
|
||
$0.34 to $1.65
|
29
|
|
|
1.2
|
|
29
|
|
|
1.2
|
$5.93 to $8.88
|
618
|
|
|
1.9
|
|
617
|
|
|
1.9
|
$12.54 to $15.41
|
119
|
|
|
2.7
|
|
119
|
|
|
2.7
|
$16.24 to $18.82
|
223
|
|
|
3.0
|
|
223
|
|
|
3.0
|
$20.85 to $23.94
|
398
|
|
|
3.4
|
|
398
|
|
|
3.4
|
$27.55 to $31.44
|
129
|
|
|
4.7
|
|
129
|
|
|
4.7
|
$31.64 to $36.15
|
546
|
|
|
5.5
|
|
495
|
|
|
5.5
|
$38.03 to $45.76
|
656
|
|
|
4.9
|
|
656
|
|
|
4.9
|
$46.20 to $56.05
|
1,110
|
|
|
4.8
|
|
1,110
|
|
|
4.8
|
|
3,828
|
|
|
4.1
|
|
3,776
|
|
|
4.0
|
|
Number of Shares
|
|
Weighted
Average Grant Date
Fair Value
|
|||
Outstanding at December 31, 2017
|
3,790
|
|
|
$
|
37.22
|
|
Granted
|
2,227
|
|
|
46.17
|
|
|
Forfeited
|
(530
|
)
|
|
39.07
|
|
|
Vested
|
(1,370
|
)
|
|
36.87
|
|
|
Outstanding at December 31, 2018
|
4,117
|
|
|
$
|
41.94
|
|
Grant Date
|
|
Performance Measures
|
|
Vesting Term
|
|
Performance Period
|
|
# of Shares at Target
|
|
# of Shares at Maximum
|
|
Grant Date Fair Value per share
|
|
# of Shares Outstanding at Target
|
|
# of Shares Outstanding at Maximum
|
||||||
July 2016 (1)
|
|
(a) the Company meeting certain revenue and cash flow targets through December 31, 2018 and (b) the recipient continuing to provide services to the Company through the end of June 2019
|
|
Three years
|
|
Fiscal years 2016, 2017 and 2018
|
|
166,600
|
|
|
499,800
|
|
|
$
|
38.67
|
|
|
—
|
|
|
—
|
|
March 2017
|
|
(a) the Company meeting certain revenue and cash flow targets through December 31, 2019 and (b) the recipient continuing to provide services to the Company through the end of March 2020
|
|
Three years
|
|
Fiscal years 2017, 2018 and 2019
|
|
185,270
|
|
|
555,810
|
|
|
$
|
41.73
|
|
|
149,490
|
|
|
448,470
|
|
February 2018
|
|
(a) the Company meeting certain combined subscription revenue and unlevered cash flow margin targets for the year ending December 31, 2020 and (b) the recipient continuing to provide services to the Company through the end of February 2021
|
|
Three years
|
|
Fiscal year 2020
|
|
121,764
|
|
|
304,410
|
|
|
$
|
40.64
|
|
|
121,764
|
|
|
304,410
|
|
February 2018
|
|
(a) the Company meeting certain combined subscription revenue and unlevered cash flow margin targets for each of the years ending December 31, 2020, December 31, 2021, and December 31, 2022 and (b) the recipient continuing to provide services to the Company through each respective vest date at the end of February 2020, 2021 and 2022
|
|
Five years
|
(2)
|
Fiscal years 2020, 2021 and 2022
|
|
411,412
|
|
|
1,028,530
|
|
|
$
|
40.64
|
|
|
411,412
|
|
|
1,028,530
|
|
April 2018
|
|
(a) the Company meeting certain combined subscription revenue and unlevered cash flow margin targets for the year ending December 31, 2020 and (b) the recipient continuing to provide services to the Company through the beginning of April 2021
|
|
Three years
|
|
Fiscal year 2020
|
|
3,572
|
|
|
8,930
|
|
|
$
|
39.54
|
|
|
3,572
|
|
|
8,930
|
|
April 2018
|
|
(a) the Company meeting certain combined subscription revenue and unlevered cash flow margin targets for each of the years ending December 31, 2020, December 31, 2021, and December 31, 2022 and (b) the recipient continuing to provide services to the Company through each respective vest date at the beginning of April 2020, 2021 and 2022
|
|
Five years
|
(2)
|
Fiscal years 2020, 2021 and 2022
|
|
53,572
|
|
|
133,930
|
|
|
$
|
39.54
|
|
|
53,572
|
|
|
133,930
|
|
(1)
|
In December 2018, based on the performance of the Company’s results for certain revenue and cash flow targets, the Company determined it had not achieved the required performance level for the performance-based awards granted in July 2016, which resulted in none of the shares being issued.
|
(2)
|
One-third of the total eligible shares shall vest on each of the third, fourth and fifth anniversaries of the grant date. This award is a one-time equity award intended to cover expected grant levels over a three-year period. In exchange, the Compensation Committee does not plan to grant any additional equity awards to recipients of this award until 2021.
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
$
|
4,218
|
|
|
$
|
4,904
|
|
|
$
|
4,732
|
|
Sales and marketing
|
24,440
|
|
|
28,427
|
|
|
25,642
|
|
|||
Research and development
|
11,800
|
|
|
9,630
|
|
|
7,586
|
|
|||
General and administrative
|
19,872
|
|
|
22,869
|
|
|
16,739
|
|
|||
Restructuring
|
6,227
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
66,557
|
|
|
$
|
65,830
|
|
|
$
|
54,699
|
|
12.
|
INCOME TAXES
|
|
Years Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
United States
|
$
|
(21,174
|
)
|
|
$
|
(32,853
|
)
|
|
$
|
(39,107
|
)
|
Foreign
|
(10,073
|
)
|
|
(26,736
|
)
|
|
(26,523
|
)
|
|||
Loss before provision for income taxes
|
$
|
(31,247
|
)
|
|
$
|
(59,589
|
)
|
|
$
|
(65,630
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current income tax provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
204
|
|
|
114
|
|
|
105
|
|
|||
Foreign
|
2,514
|
|
|
1,580
|
|
|
1,838
|
|
|||
Total current income tax provision
|
2,718
|
|
|
1,694
|
|
|
1,943
|
|
|||
Deferred income tax benefit:
|
|
|
|
|
|
||||||
Federal
|
—
|
|
|
—
|
|
|
—
|
|
|||
State
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign
|
(123
|
)
|
|
52
|
|
|
(736
|
)
|
|||
Total deferred income tax benefit
|
(123
|
)
|
|
52
|
|
|
(736
|
)
|
|||
Total income tax provision (benefit)
|
$
|
2,595
|
|
|
$
|
1,746
|
|
|
$
|
1,207
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
U.S. Federal tax benefit at statutory rates
|
$
|
(6,562
|
)
|
|
$
|
(20,260
|
)
|
|
$
|
(22,310
|
)
|
State income taxes, net of federal tax benefit
|
(248
|
)
|
|
(806
|
)
|
|
(855
|
)
|
|||
Foreign rate differential
|
2,764
|
|
|
5,220
|
|
|
3,711
|
|
|||
Stock based compensation
|
3,029
|
|
|
3,182
|
|
|
4,467
|
|
|||
Other permanent differences
|
280
|
|
|
(494
|
)
|
|
(750
|
)
|
|||
Deferred adjustments / U.S. rate change
|
1,430
|
|
|
7,811
|
|
|
—
|
|
|||
Other
|
130
|
|
|
262
|
|
|
1,494
|
|
|||
Valuation allowance
|
1,772
|
|
|
6,831
|
|
|
15,450
|
|
|||
Total income tax (benefit) provision
|
$
|
2,595
|
|
|
$
|
1,746
|
|
|
$
|
1,207
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Accrued expenses
|
$
|
2,353
|
|
|
$
|
2,371
|
|
Long-lived intangible assets and fixed assets — basis difference
|
22,947
|
|
|
19,884
|
|
||
Net operating loss carryforwards
|
82,017
|
|
|
80,615
|
|
||
Stock-based compensation
|
15,172
|
|
|
16,886
|
|
||
Deferred revenue
|
2,861
|
|
|
2,739
|
|
||
Convertible note hedge
|
—
|
|
|
1,467
|
|
||
Other
|
4,557
|
|
|
2,721
|
|
||
Total deferred tax assets
|
129,907
|
|
|
126,683
|
|
||
Valuation allowance
|
(117,058
|
)
|
|
(118,606
|
)
|
||
Deferred tax assets, net of valuation allowance
|
12,849
|
|
|
8,077
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Prepaid expenses and deferred commissions
|
(10,831
|
)
|
|
(5,672
|
)
|
||
Convertible note discount
|
—
|
|
|
(1,074
|
)
|
||
Other
|
(976
|
)
|
|
(410
|
)
|
||
Total deferred tax liabilities
|
(11,807
|
)
|
|
(7,156
|
)
|
||
Net deferred tax assets (liabilities)
|
$
|
1,042
|
|
|
$
|
921
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at January 1
|
$
|
1,271
|
|
|
$
|
276
|
|
|
$
|
276
|
|
Additions for tax positions related to the current year
|
131
|
|
|
995
|
|
|
—
|
|
|||
Balance at December 31
|
$
|
1,402
|
|
|
$
|
1,271
|
|
|
$
|
276
|
|
13.
|
RESTRUCTURING COSTS
|
|
At or For Year Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Subscription revenue
|
$
|
473,052
|
|
|
$
|
396,764
|
|
|
$
|
339,756
|
|
Percentage of subscription revenue to total revenue
|
87.9
|
%
|
|
82.3
|
%
|
|
80.3
|
%
|
|||
Professional services revenue
|
$
|
64,839
|
|
|
$
|
85,221
|
|
|
$
|
83,368
|
|
Percentage of professional services revenue to total revenue
|
12.1
|
%
|
|
17.7
|
%
|
|
19.7
|
%
|
|||
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
|
Years Ended December 31,
|
||||||||||
|
2018 *
|
|
2017
|
|
2016
|
||||||
Revenue
|
|
|
|
|
|
||||||
United States
|
$
|
343,205
|
|
|
$
|
313,729
|
|
|
$
|
284,657
|
|
All other countries
|
194,686
|
|
|
168,256
|
|
|
138,467
|
|
|||
Total revenue
|
$
|
537,891
|
|
|
$
|
481,985
|
|
|
$
|
423,124
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Property and equipment, net
|
|
|
|
|
||||
United States
|
|
$
|
69,550
|
|
|
$
|
16,468
|
|
United Kingdom
|
|
3,558
|
|
|
3,378
|
|
||
All other countries
|
|
4,146
|
|
|
971
|
|
||
Total property and equipment, net
|
|
$
|
77,254
|
|
|
$
|
20,817
|
|
15.
|
401(K) SAVINGS PLAN
|
16.
|
COMMITMENTS AND CONTINGENCIES
|
|
Operating Leases (1)
|
||
2019
|
$
|
11,576
|
|
2020
|
14,162
|
|
|
2021
|
14,277
|
|
|
2022
|
14,823
|
|
|
2023
|
14,710
|
|
|
Thereafter
|
17,961
|
|
|
Total minimum lease payments
|
$
|
87,509
|
|
17.
|
RELATED PARTY TRANSACTIONS
|
18.
|
SUBSEQUENT EVENTS
|
19.
|
SELECTED QUARTERLY DATA (UNAUDITED)
|
|
Quarter Ended
|
||||||||||||||||||||||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||||||||||||||
|
Mar. 31,
2017 |
|
June 30,
2017 |
|
Sept. 30,
2017 |
|
Dec. 31,
2017 |
|
Mar. 31,
2018 * |
|
June 30,
2018 * |
|
Sept. 30,
2018 * |
|
Dec. 31,
2018 * |
||||||||||||||||
Revenue
|
$
|
111,582
|
|
|
$
|
116,651
|
|
|
$
|
121,796
|
|
|
$
|
131,956
|
|
|
$
|
133,113
|
|
|
$
|
132,517
|
|
|
$
|
134,014
|
|
|
$
|
138,247
|
|
Cost of revenue
|
33,949
|
|
|
35,321
|
|
|
35,708
|
|
|
37,889
|
|
|
37,020
|
|
|
36,365
|
|
|
36,171
|
|
|
34,793
|
|
||||||||
Gross profit
|
77,633
|
|
|
81,330
|
|
|
86,088
|
|
|
94,067
|
|
|
96,093
|
|
|
96,152
|
|
|
97,843
|
|
|
103,454
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Sales and marketing
|
56,894
|
|
|
62,073
|
|
|
60,554
|
|
|
60,750
|
|
|
59,245
|
|
|
59,821
|
|
|
53,215
|
|
|
52,354
|
|
||||||||
Research and development
|
13,411
|
|
|
14,684
|
|
|
16,389
|
|
|
17,491
|
|
|
15,984
|
|
|
16,325
|
|
|
19,705
|
|
|
24,967
|
|
||||||||
General and administrative
|
20,476
|
|
|
23,141
|
|
|
21,249
|
|
|
19,723
|
|
|
21,985
|
|
|
22,101
|
|
|
23,128
|
|
|
23,535
|
|
||||||||
Restructuring
|
—
|
|
|
—
|
|
|
—
|
|
|
1,539
|
|
|
7,725
|
|
|
1,000
|
|
|
221
|
|
|
—
|
|
||||||||
Total operating expenses
|
90,781
|
|
|
99,898
|
|
|
98,192
|
|
|
99,503
|
|
|
104,939
|
|
|
99,247
|
|
|
96,269
|
|
|
100,856
|
|
||||||||
(Loss) income from operations
|
(13,148
|
)
|
|
(18,568
|
)
|
|
(12,104
|
)
|
|
(5,436
|
)
|
|
(8,846
|
)
|
|
(3,095
|
)
|
|
1,574
|
|
|
2,598
|
|
||||||||
(Loss) income from operations per share, basic and diluted
|
$
|
(0.23
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest income (expense) and other income (expense), net
|
(2,492
|
)
|
|
(2,333
|
)
|
|
(2,248
|
)
|
|
(3,260
|
)
|
|
(6,837
|
)
|
|
(8,376
|
)
|
|
(3,499
|
)
|
|
(4,767
|
)
|
||||||||
Loss before income tax provision
|
(15,640
|
)
|
|
(20,901
|
)
|
|
(14,352
|
)
|
|
(8,696
|
)
|
|
(15,683
|
)
|
|
(11,471
|
)
|
|
(1,925
|
)
|
|
(2,169
|
)
|
||||||||
Income tax provision
|
(571
|
)
|
|
(364
|
)
|
|
(503
|
)
|
|
(308
|
)
|
|
(533
|
)
|
|
(536
|
)
|
|
(522
|
)
|
|
(1,004
|
)
|
||||||||
Net loss
|
$
|
(16,211
|
)
|
|
$
|
(21,265
|
)
|
|
$
|
(14,855
|
)
|
|
$
|
(9,004
|
)
|
|
$
|
(16,216
|
)
|
|
$
|
(12,007
|
)
|
|
$
|
(2,447
|
)
|
|
$
|
(3,173
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.29
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.05
|
)
|
Weighted average common shares outstanding, basic and diluted
|
56,642
|
|
|
56,935
|
|
|
57,627
|
|
|
57,826
|
|
|
57,425
|
|
|
57,844
|
|
|
58,699
|
|
|
58,649
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
|
Item 9B.
|
Other Information
|
|
Target Bonus Amount
|
||||
Named Executive Officer
|
($)
|
|
% of Base Salary
|
||
Brian Swartz, Chief Financial Officer
|
$
|
297,500
|
|
|
70
|
Mark Goldin, Chief Technology Officer
|
$
|
262,500
|
|
|
70
|
(1
|
)
|
This amount represents the total performance-based commissions that will be earned under the Belliveau Commission Plan if Mr. Belliveau achieves the sales quota established under the Belliveau Commission Plan.
|
(2
|
)
|
Mr. Belliveau's target bonus is €20,000, which has been converted into U.S. Dollars at a rate of $1.14 Dollars per Euro, the exchange rate in effect on February 25, 2019. The target bonus of €20,000 represents the amount that Mr. Belliveau is eligible to receive if he meets all milestone sales targets by the dates specified in the Belliveau Commission Plan.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
1.
|
Consolidated Financial Statements:
|
2.
|
Financial Statement Schedules:
|
3.
|
Exhibits:
|
|
Exhibit Description
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
8-K
|
|
001-35098
|
|
3.1
|
|
June 20, 2018
|
||
8-K
|
|
001-35098
|
|
3.2
|
|
June 20, 2018
|
||
8-K
|
|
001-35098
|
|
4.1
|
|
June 17, 2013
|
||
8-K
|
|
001-35098
|
|
4.1
|
|
December 8, 2017
|
||
S-1/A
|
|
333-169621
|
|
10.1
|
|
December 17, 2010
|
||
S-1
|
|
333-169621
|
|
10.2
|
|
September 29, 2010
|
||
S-1
|
|
333-169621
|
|
10.3
|
|
September 29, 2010
|
||
S-1/A
|
|
333-169621
|
|
10.3A
|
|
December 17, 2010
|
||
S-1/A
|
|
333-169621
|
|
10.4
|
|
December 17, 2010
|
||
S-1/A
|
|
333-169621
|
|
10.5
|
|
December 17, 2010
|
||
S-1/A
|
|
333-169621
|
|
10.6
|
|
November 9, 2010
|
||
S-1
|
|
333-169621
|
|
10.11
|
|
September 29, 2010
|
||
10-Q
|
|
001-35098
|
|
10.1
|
|
August 5, 2016
|
||
S-1/A
|
|
333-169621
|
|
10.9
|
|
November 9, 2010
|
|
Exhibit Description
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
10-Q
|
|
001-35098
|
|
10.1
|
|
May 6, 2016
|
||
10-Q
|
|
001-35098
|
|
10.1
|
|
May 5, 2017
|
||
10-K
|
|
001-35098
|
|
10.11
|
|
February 27, 2018
|
||
S-1/A
|
|
333-169621
|
|
10.10
|
|
February 11, 2011
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
August 7, 2014
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
May 8, 2015
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
May 6, 2016
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
May 5, 2017
|
||
10-Q
|
|
001-35098
|
|
10.4
|
|
August 7, 2018
|
||
|
|
|
|
|
|
|
||
10-K
|
|
001-35098
|
|
10.14
|
|
February 27, 2018
|
||
10-Q
|
|
001-35098
|
|
10.1
|
|
May 8, 2018
|
||
10-Q
|
|
001-35098
|
|
10.4
|
|
August 7, 2013
|
||
10-K
|
|
001-35098
|
|
10.16
|
|
February 27, 2018
|
||
8-K
|
|
001-35098
|
|
n/a
|
|
March 9, 2017
|
||
8-K
|
|
001-35098
|
|
n/a
|
|
March 2, 2018
|
||
S-1
|
|
333-169621
|
|
10.17
|
|
September 29, 2010
|
||
S-1
|
|
333-169621
|
|
10.18
|
|
September 29, 2010
|
||
10-K
|
|
001-35098
|
|
10.16
|
|
March 6, 2012
|
||
10-Q
|
|
001-35098
|
|
10.1
|
|
May 9, 2013
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
May 9, 2013
|
||
10-Q
|
|
001-35098
|
|
10.1
|
|
August 7, 2018
|
||
10-Q
|
|
001-35098
|
|
10.2
|
|
August 7, 2018
|
|
Exhibit Description
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
10-Q
|
|
001-35098
|
|
10.3
|
|
August 7, 2018
|
||
10-K
|
|
001-35098
|
|
10.24
|
|
February 27, 2018
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
101.INS
|
XBRL Instance Document
|
|
|
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
*
|
Indicates a management contract or compensatory plan or arrangement.
|
†
|
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K, 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 Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
|
Item 16.
|
Form 10-K Summary
|
|
CORNERSTONE ONDEMAND, INC.
|
|
|
|
|
|
By:
|
/s/ Adam L. Miller
|
|
Name:
|
Adam L. Miller
|
|
Title:
|
Chief Executive Officer
|
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ Adam L. Miller
|
|
Chief Executive Officer and Director (principal executive officer)
|
February 26, 2019
|
Adam L. Miller
|
|
|
|
|
|
|
|
/s/ Brian L. Swartz
|
|
Chief Financial Officer (principal financial and accounting officer)
|
February 26, 2019
|
Brian L. Swartz
|
|
|
|
|
|
|
|
/s/ Elisa Steele
|
|
Chair of the Board of Directors
|
February 26, 2019
|
Elisa Steele
|
|
|
|
|
|
|
|
/s/ Harold W. Burlingame
|
|
Director
|
February 26, 2019
|
Harold W. Burlingame
|
|
|
|
|
|
|
|
/s/ Dean Carter
|
|
Director
|
February 26, 2019
|
Dean Carter
|
|
|
|
|
|
|
|
/s/ Robert Cavanaugh
|
|
Director
|
February 26, 2019
|
Robert Cavanaugh
|
|
|
|
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ Richard Hadrill
|
|
Director
|
February 26, 2019
|
Richard Hadrill
|
|
|
|
|
|
|
|
/s/ Joe Osnoss
|
|
Director
|
February 26, 2019
|
Joe Osnoss
|
|
|
|
|
|
|
|
/s/ Marcus Ryu
|
|
Director
|
February 26, 2019
|
Marcus Ryu
|
|
|
|
|
|
|
|
/s/ Kristina Salen
|
|
Director
|
February 26, 2019
|
Kristina Salen
|
|
|
|
|
|
|
|
/s/ Steffan Tomlinson
|
|
Director
|
February 26, 2019
|
Steffan Tomlinson
|
|
|
|
EMPLOYEE NAME:
|
Vincent Belliveau
|
TYPE:
|
Team
|
EMPLOYEE TITLE:
|
Executive Vice President & GM EMEA
|
DIVISION:
|
EMEA
|
EFFECTIVE DATE:
|
1/1/2019
|
TERM:
|
Effective Date through 31 Dec 2019
|
1)
|
Definitions.
|
a)
|
“
Portfolio
” means the territory and/or accounts assigned to you by your manager.
|
b)
|
“
SKU
” means a product or service offered for sale by Cornerstone which you are approved to sell. For clarity, certain Overlay Roles may only be approved to sell certain products or services.
|
c)
|
“
Sale
” means a written agreement, order, amendment, addendum, and/or statement of work with approved pricing between Cornerstone and a customer/distributor in your Portfolio for a SKU, duly executed on behalf of Cornerstone by its CEO or an authorized designee. For clarity, each SKU sale shall be deemed a separate Sale.
|
d)
|
“
Approved Sale
” means a Sale that occurs during the Term.
|
e)
|
“
Prior Sale
” means a Sale that occurred prior to the Term and is being renewed by an Approved Sale.
|
f)
|
“
Costs
” means amounts owed by Cornerstone to third parties directly resulting from the sale of software and/or services (i.e., inbound referral fees, content fees, etc.). Inbound referral fee rates that are either: (i) 20% or lower; or (ii) owed to ADP, will not be counted as Costs; referral fee rates above 20% will be counted as Costs in their entirety.
|
g)
|
“
Revenue
” means the total fee(s) contractually committed in a Sale (i.e., across all years) at the time of its execution, less Costs (except in cases where Cornerstone at its discretion has waived the discount for Costs).
|
h)
|
“
Content Revenue
” means, for a given Approved Sale, fifty percent (50%) of total eLearning course and/or related content fee(s) contractually committed in the Approved Sale at the time of its execution. Notwithstanding the foregoing, if the duration of the Approved Sale is one (1) year or longer, Content Revenue will be calculated as fifty percent (50%) of total eLearning course and/or related content fee(s) contractually committed in the Approved Sale at the time of its execution, divided by the number of days in the Approved Sale, multiplied by three hundred sixty-five (365).
|
i)
|
“
Recurring
” means Revenue, excluding Content Revenue, invoiced on a recurring basis during the applicable Sale, whether or not the exact same amount is invoiced for each period (i.e., a “ramping” deal).
|
j)
|
“
One-Time
” means Revenue, excluding Content Revenue, invoiced on a non-recurring basis that Cornerstone determines is eligible for Commissions. For clarity, no One-Time Revenue will count toward Quota. Refer to Sales Wiki for a list of all SKUs eligible for One-Time Revenue Commissions.
|
k)
|
“
Annual Recurring Revenue
” or “
ARR
” means, for a Sale with a duration of: (A) one (1) year or longer, total Recurring Revenue, divided by the number of days in the Sale, multiplied by three hundred sixty-five (365); (B) shorter than one (1) year, total Recurring Revenue.
|
l)
|
“
Year
” means each 12-month period of an Approved Sale, with Year 1 beginning on the Approved Sale start date.
|
m)
|
“
Co-Terminous
” means an Approved Sale set to co-terminate with another Sale.
|
n)
|
“
Equivalent Full-Year Value
” means, for an Approved Sale of less than one (1) year, the annualized value of Recurring Revenue.
|
o)
|
“
Baseline
” means, for a Prior Sale, the greater of its: (i) ARR; or (ii) total Recurring Revenue in the last full Year of the Prior Sale.
|
p)
|
“
Incremental
” means incremental ARR of an Approved Sale in excess of the aggregate Baseline of all Prior Sales, if any.
|
q)
|
“
Quota
” means the combined Incremental ARR and/or Content Revenue value, as set forth in Section 3.
|
r)
|
“
Commission
” means incentive compensation relating to procurement of an Approved Sale, calculated as a percentage of applicable Revenue, and paid one time (i.e., there are no multi-year commission payments).
|
s)
|
“Split”
means dividing the Revenue (for both Quota and Commission purposes) for an Approved Sale among two or more individuals.
|
t)
|
“Overlay Role”
means employment as a member of Cornerstone’s a) solution consultant, b) recruiting solution sales, c) alliances, d) content sales, or e) Extended Enterprise / Cornerstone for Salesforce teams.
|
u)
|
“Innovation Index”
means an automatic, annual price increase (as a fixed percentage of ARR) set forth in an Approved Sale.
|
v)
|
“Quarry”
means Cornerstone’s internal online repository of sales enablement information.
|
2)
|
Quota
|
3)
|
Commissions
|
a)
|
Regular Commission Rates
. Commissions rates for the following Revenue types are as follows:
|
If the initial term* of the Approved Sale for a given SKU is:
|
The Commission rate for:
|
|||||||
Year 1
|
Year 2
|
Year 3
|
||||||
Incremental:
|
Baseline:
|
Content:
|
Incremental:
|
Baseline:
|
Content:Incremental:
|
Baseline:
|
||
2 + years
|
1.107%
|
0.310%
|
1.107%
|
0.554%
|
0.190%
|
0.221%
|
0.330%
|
0.060%
|
1-2 years
|
1.107%
|
0.190%
|
0.277%
|
0.443%
|
0.060%
|
|
||
1 year or less **
|
1.107%
|
0.060%
|
0.277%
|
|
b)
|
Accelerated Commission Rates
.
|
When Quota attainment reaches:
|
Commissions on Incremental Revenue exceeding the applicable Quota threshold shall be paid according to the following, mutually exclusive accelerated rate (applies only to Year 1 Commissions):
|
100%
|
1.661%
|
125%
|
1.937%
|
4)
|
Bonuses
|
a)
|
Quota Achievement Bonus (cumulative)
.
|
If your Quota attainment is at least:
|
By the following date:
|
You will be eligible for a bonus of:
|
$4,880,000
|
End of Q1
|
5,000 EUR
|
$11,895,000
|
End of Q2
|
5,000 EUR
|
$19,215,000
|
End of Q3
|
5,000 EUR
|
$30,500,000
|
End of Q4
|
5,000 EUR
|
b)
|
Outbound Referral Bonus
. If you refer a client to one of Cornerstone’s referral partners, resulting in a sale by that partner on which Cornerstone earns a referral fee, you will be eligible for a bonus (“
Referral Bonus
”) equal to four percent (4%).if you are a Content Sales Representative, and the partner is LinkedIn or Pluralsight you will be eligible for twenty percent (20%), of the referral fee Cornerstone receives. Cornerstone shall at its sole discretion determine whether a given referral is eligible for a Referral Bonus. In addition, if Cornerstone determines that multiple individuals made or assisted with the referral, the Referral Bonus shall be split proportionally among those individuals, as Cornerstone decides.
|
5)
|
Earning of Commissions and Bonuses
|
a)
|
Commissions are deemed to be earned for a given Approved Sale if and when
al
l of the following conditions have been satisfied. Cornerstone may waive any of these conditions on a case-by-case basis at its sole discretion:
|
i)
|
There is a valid Approved Sale in place marked “closed/won” in Cornerstone’s customer relationship management (CRM) system (currently, Salesforce), which includes the Revenue upon which the Commission is based.
|
ii)
|
Either you (or, in the case of a manager, your team) were/was primarily responsible for procuring (or, in the case of an Overlay Role, primarily responsible for supporting) the Approved Sale, or else Cornerstone in its sole discretion has predetermined you are eligible for a Split. (Split criteria may be found in the Quarry)
|
iii)
|
You are employed by Cornerstone on the applicable Payment Date (defined below).
|
b)
|
Bonuses are deemed to be earned if and when:
|
i)
|
All applicable bonus attainment conditions as set forth in section 4 have been satisfied.
|
ii)
|
You are employed by Cornerstone on the applicable Payment Date (defined below).
|
6)
|
Payment of Commissions and Bonuses
|
a)
|
Cornerstone will pay earned Commissions and bonuses in the second calendar month following the month in which the Commission/bonus was earned (the “
Payment Date
”). For exact Payment Dates, see Cornerstone’s payment calendar in the Quarry
.
|
b)
|
Notwithstanding the Payment Date, Cornerstone reserves the right at its sole discretion to delay payment of Commissions in case of non- standard billing and/or contractual terms, including without limitation delayed invoicing and/or subscription start date, early termination clauses, non-standard billing terms, and/or an excessively “ramped” sale, where the cost of the final Year is more than four times the cost of the first Year. For more information, please see Cornerstone’s booking policy in the Quarry.
|
c)
|
To the extent permitted by applicable law, Cornerstone may recover Commission and bonus amounts paid to you (each an “
Overpayment
”) if:
|
i)
|
The Revenue upon which the applicable Commission or bonus is based is no longer contractually committed to Cornerstone (e.g., the underlying Approved Sale has been cancelled, etc.);
|
ii)
|
The applicable Commission or bonus amount was paid to you in error.
|
d)
|
To the extent permitted by applicable law, Overpayments may be used to offset future Commissions, bonuses, wages, expense reimbursements, accrued vacation, or any other liability Cornerstone may incur to you.
|
7)
|
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/bonuses earned on or prior to the date of your termination or transfer.
|
8)
|
Miscellaneous.
|
a)
|
Nothing in this document obligates Cornerstone to enter into any Approved Sales 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 and replaces any all prior commission and bonus plans, as well as 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).
|
1.
|
|
I have reviewed this Annual Report on Form 10-K 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
|
Chief Executive Officer
|
1.
|
|
I have reviewed this Annual Report on Form 10-K 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/ Brian L. Swartz
|
Brian L. Swartz
|
Chief Financial Officer
|
/s/ Adam L. Miller
|
Adam L. Miller
|
Chief Executive Officer
|
/s/ Brian L. Swartz
|
Brian L. Swartz
|
Chief Financial Officer
|